Australia’s central bank raised the interest rate for the second month in a row on March 17. The decision follows fears of inflation all while the intensifying conflict in the Middle East ramps up oil prices with businesses and consumers bearing the brunt.

The Reserve Bank of Australia (RBA) raised its main cash rate by 25 basis points up to 4.1%, according to Reuters, a 10-month high that undoes two of the three cuts made last year. Ahead of the meeting a rate cut seemed likely, with inflation wavering above the 2%-3% target band.

The decision follows recent data that shows the nation’s economy grew at the fastest annual pace in three years in the fourth quarter of 2025, according to Reuters. While the positive data shows the nation’s strength, concerns over inflation are mounting.

Recent data suggests that Australia’s GDP grew around 2.5% in the fourth quarter of 2025, per the Wall Street Journal, which may be meager growth in historical terms, but it is enough to heighten the RBA’s concerns for inflation. Additionally, the third quarter of 2025 saw the economy growing at an annual rate of 2.1%, a rate fast enough to prompt concern from the RBA.

“The RBA is already ⁠of the view that the economy is operating above its potential,” said Stephen Smith, partner at Deloitte Access Economics, per Reuters. “Combined with elevated inflation, today’s data will keep the RBA on ​high alert and increase the likelihood of a rate hike in May.”

Despite the positive economic data, consumers are still cautious. Inflation increased to 3.8% in January with the unemployment rate staying at a historic low of 4.1%, but the RBA’s rate hike in February is likely to temper demand.

In the fourth quarter, inventories made the biggest contribution to growth with an added 0.4%. Government spending, largely focused on defense spending, added 0.2% with household spending contributing a meager 0.1%.

While the growth is positive, the brewing conflict in the Middle East will weigh on the outlook moving forward. With the Strait of Hormuz shut down, oil prices in Australia have increased more than 10%, weighing on consumers and businesses.

“The conflict in the Middle East could trigger a larger shock that destabilizes the global economy, particularly if supply disruptions to oil and other commodity markets are prolonged,” the central bank warned,” the RBA warned, per ABC News.  

Credit managers with customers in Australia largely offer 1-30-day terms (36%) or 31-60-day terms (36%), with 27% offering 61-90-day terms, according to FCIB’s Credit and Collections Survey. Customers in Australia are eight days beyond terms on average, with delays mostly attributed to customer payment policy (43%), cash flow issues (43%) billing disputes (29%) and regulatory issues (29%).

“Customers often request extended payment terms, including end-of-month,” one respondent wrote. “It’s important to push back early. These requests are usually negotiable and often accepted when challenged.”

“Verify the customer’s legal entity structure thoroughly,” another respondent wrote. “Including any trusts or related entities.” “Communication is generally straightforward, but customers often have numerous front-end requirements before completing a purchase,” another respondent wrote.