On Tuesday the Reserve Bank of Australia lifted the cash rate to 4.6%, its highest level in 15 years. The same morning, figures from the Australian Bureau of Statistics showed household spending went nowhere in August.

This is the fourth rise of 2026, after February, March and May, according to Nikkei Asia. The decision was unanimous. In its statement, the Reserve Bank of Australia points to three pressures. Energy prices are much higher since the Middle East conflict broadened. AI demand is pushing up global prices for technology goods. And firms are passing their own costs on to customers.

Fuel is eating the rest of the budget

Total household spending was flat at 0.0% for the month, according to the Australian Bureau of Statistics. Economists had forecast a 0.4% rise, Bloomberg reported. Inside that flat number, the money moved.

Fuel spending jumped 8.1% after the government restored the full fuel excise, the tax on petrol and diesel. That figure comes from Bloomberg's report of the ABS data. Take fuel out and total household spending fell 0.3%. Discretionary spending also fell 0.3%. The ABS put the drop in recreation down to months of spending on major sporting events coming to an end.

Here is why that matters to you. Your customer has a set amount of money each week. When the petrol bill rises, something else gets cut, and it is usually the gym membership, the new jacket or the weekend away. Households are changing what they buy too. The ABS reported a notable rise in electric vehicle sales as people respond to fuel prices. In Victoria, household spending fell 0.4% for the month.

The petrol bowser is now your competitor.

A catch-22 with no easy exit

My take on this? It is a catch-22. Rates go up, so landlords pass on their repayments and rents rise. Rents rise, so workers need pay rises to keep up. Those pay rises feed into prices, and the Reserve Bank lifts rates again. Every step makes sense on its own. Together they form a loop.

The Reserve Bank can see the loop. Its statement says firms are feeling cost pressures and are either raising prices or planning to. It says the economy appears to be slowing, while inflation is still too high. ANZ expects another rise in November, according to Nikkei Asia, and the other three big banks expect a hold. Saul Eslake, an independent economist, told Nikkei Asia the Reserve Bank made a mistake cutting rates in 2025.

Housing is where small business feels it first. The Reserve Bank says house prices have fallen in most capital cities and new housing loans have dropped noticeably. A slow housing market means a quiet run for renovations, new kitchens and moving trucks. Every tradie, supplier and local marketer who lives off those jobs is already seeing it in the diary.

Money is tight for lenders too

On Monday, Bloomberg reported that Metrics Credit Partners, a major Australian private lender, had cut the value of three listed funds. The cut came to about A$169 million, and trading in the funds was halted. Metrics manages around A$40 billion. The corporate regulator, ASIC, has been scrutinising how private credit funds value their loans and says several enforcement investigations are under way. It has not suggested any wrongdoing at Metrics.

Private credit matters to small business because it steps in when banks say no. Australia's private credit market is worth about A$200 billion, and most of that lending has gone to real estate, according to Bloomberg. When those funds pull back, builders feel it first. The tradies, suppliers and marketers who work for builders feel it next.

Who is still spending

Here is the twist. The Reserve Bank says growth in business investment and business debt is strong. Big companies are still spending, even as households hold back. The Bank also says growth in Australia's major trading partners has been stronger than expected. The boost from AI investment has outweighed the damage from the Middle East conflict.

The rest of my view is blunt. Australia is being squeezed from every side. Jobs are getting scarce, with unemployment at 4.6% in August, up from around 4%. Much of our IT work has moved offshore. We make very little here. We lean on mining and international students, and both of those can turn.

What to do this week

Sell to the budget your customer has now. Discretionary spending fell in August. Lead with value, payment plans or a small starter product, so buying from you fits inside a tight week.

Follow the business spending. The Reserve Bank says business investment is strong. If you sell to households and to businesses, move some of this quarter's marketing budget toward the business side.

Ask your lender the awkward question. Your business, or a big customer, may borrow from a private credit fund. If so, ask how the fund values its loans and what happens if trading pauses. Get the answer before you need it.

Households are cutting back. Businesses are still buying. Market to the side with the money.