Brendan Giles

The government's fuel crisis response is moving fast. And so far they appear to have learned from the mistakes of the COVID response.

As the PM said yesterday:

"This will not be like COVID. Partly because the nature of this global crisis is very different, but also because we have learned from that time — and we are deliberately taking a different approach."

That framing matters enormously for business owners and their advisers planning their way through this crisis.

𝗪𝗵𝗮𝘁 𝘁𝗵𝗲 𝗴𝗼𝘃𝗲𝗿𝗻𝗺𝗲𝗻𝘁 𝗵𝗮𝘀 𝗱𝗼𝗻𝗲 so far:

🙂 Halved the fuel excise from 52.6c/L to 26.3c/L for three months. 🙂 Suspended the heavy vehicle road user charge for three months 🙂 Announced $1 billion of zero-interest loans (not grants) for fuel producers, fertiliser producers, and critical supply chain businesses. 🙂 Targeted ATO fuel response payment plans with limited GIC remission for businesses that can demonstrate fuel-specific cost impact, keep lodgements current, and show they could have paid if prices hadn't increased. 🙂 ATO compliance action will be "limited" in hard-hit industries, some debt collection "may be paused where appropriate" 🙂 The banking sector has flagged voluntary payment deferrals and emergency credit facilities for impacted industries. 🙂 Introduced the Fair Work Amendment (Fairer Fuel) Bill to accelerate cost-recovery for transport operators.

These are a range of quite limited and well targeted interventions.

What they haven’t done is the wide ranging, non-targeted interventions we saw during COVID:

🫥 No insolvent trading moratorium 🫥 No increase to the statutory demand threshold or extension to statutory demand response times 🫥 No changes to bankruptcy notice thresholds or timeframes 🫥 No broad based subsidies like JobKeeper 🫥 No blanket ATO enforcement moratorium 🫥 No commercial rent relief 🫥 No mandated lockdowns, WFH mandates, or business closures

In 2020, those COVID measures created a zombie company pandemic and an explosion in ATO debt that the economy is still recovering from today.

This time the government is explicitly avoiding that playbook. The $1 billion loan facility is lending, not grants and while the ATO is softening its posture, it’s not abandoning debt collection. Directors retain their ordinary obligations. Creditors can still enforce. Safe harbour still requires active engagement with a restructuring adviser.

Meanwhile the RBA is hiking into this crisis — cash rate at 4.10%, likely 4.35% by May (and over 4.5% by mid-year on some forecasts). There are no rate cuts coming. Businesses that were marginal before the fuel shock, particularly in transport, construction, and hospitality, are going to face a difficult few months.

If you're running or advising a business under pressure, the message from government is pretty clear: do not wait for a moratorium. It is not coming. The current measures are clearly designed for businesses that were viable before the fuel shock hit. If a business was already under pressure, the loan facility and ATO flexibility aren't going to bridge the gap and they're not designed to.

This time the solution for navigating the crisis will be early engagement and clever use of existing restructuring tools to protect and preserve impacted businesses until the crisis ends.

This morning, Treasurer Jim Chalmers announced that the ATO had agreed to use its existing administrative discretion to ease the burden on businesses hit by fuel supply disruptions. The specific measures flagged are:

📍 More generous payment plans for outstanding tax debts

📍 Remission of interest and penalties for late payments

📍 Support with PAYG instalment variations where taxable income has dropped (so businesses aren't paying instalments based on pre-crisis income levels)

📍 Limiting compliance actions in the worst-affected industries

📍 Pausing some debt collection actions where appropriate

There will be a threshold for eligibility that has not yet been announced, and the duration of the relief will be closely monitored. “Obviously, where there’s been some concessional treatment… that will be, in most instances, recovered down the track,” he said.

This is promising news for impacted businesses, however, there are two key points to keep in mind:

✨ The devil will be in the detail of how these administrative changes are applied and what the thresholds are as this will dictate how much support businesses receive.

✨ It’s important for businesses that receive relief to realise that its temporary and taxes still need to be paid in time. Far too many businesses got caught out post-COVID after they took advantage of concessions but didn’t have a plan in place to pay those taxes when the ATO came knocking.

It will also be interesting to see if the ATO’s change in approach extends to their assessment of DOCAs and Restructuring Plans. The ATO has slowly tightened their assessment criteria for proposals since COVID. A return to a more reasonable, commercial approach would allow many struggling businesses to resolve their tax issues, rather than just kick the can down the road.

The ATO has signaled it may soften its approach to debt collection as businesses deal with rising fuel costs and supply challenges.

“The business community, including small businesses, can be assured that the ATO will take a practical and proportionate approach to administering the taxation law,” a spokesman said.

“The ATO understands some small businesses may be facing challenges associated with rising fuel costs and uncertainty around supply. Where a business is genuinely experiencing cash flow difficulties, we encourage them to contact their bank or credit provider, speak to us, or speak with their registered tax professional early.”

“Early engagement gives the ATO the best chance to work with viable businesses to help them meet their obligations while managing short-term challenges.”

This is a very measured statement from the ATO. While I suspect that they won't make the same mistakes they did through COVID, and go too soft, there is plenty of scope for them to loosen requirements around payment plans, restructuring plans, and DOCAs to make a material difference to businesses that do the right things and engage with formal processes to manager their tax debts early.

Australian Financial Review ATO signals COVID-style relief for small businesses hit by fuel crisis

Ther Federal Government announces this afternoon that it will be reducing the fuel excise by 50% for a period of three months as a cost-of-living measure to address higher fuel prices.

While is get the desire to ‘do something’ in a crisis and cutting fuel excise makes a nice headline, it’s probably not the most effective move they could have made.

The issues with the approach are numerous:

⛽ Dampened prices signals: In a supply side crisis, higher prices play an important role by reducing demand and helping balance demand to supply. Lowering the price with a tax cut is likely to increase demand, exacerbating the current shortages.

⛽ Incomplete passthrough: As we saw with the last excise cut, the pass through of an excise cut to consumers is never clean and much of the cut gets consumed as additional margin through the supply chain.

⛽ Its regressive: The biggest winners are high-consumption users, which aren't always the vulnerable households that most need cost-of-living relief.

⛽ It makes the RBA’s job harder: A cut to excise masks inflation in the near term and then causes excess inflation when it expires (just as we saw with the recent electricity subsidies).

A better approach to cost-of-living support is direct transfers. It’s more efficient, can be better targeted to those most in need, and doesn’t distort price signals which are vital to matching supply and demand.

Inflation eased ever so slightly in February, which would have been seen with cautious optimism if we didn’t have a middle-east crisis hanging over the economy:

For the month of February 2026:

📉 Headline CPI was 3.7% YoY (down 0.1%)

📉 Trimmed mean CPI was 3.3% YoY (unchanged)

📉 Non-tradables inflation was 5.0% (up 0.1%)

📉 Tradables inflation was 1.3% (down 0.6%)

Electricity and housing where the two big movers, with electricity prices in particular up a whopping 37% as government subsidies roll out of the data set.

There isn’t much point in analysing these numbers too closely, as we already know that the March print will be a blow out off the back of dramatically higher petrol prices.

However, one key dynamic to note is the continued upward pressure on domestic prices (non-tradeable inflation) which has been offset over the last year by declines in import prices (tradeable inflation). However, the tradeable honeymoon may be over. bunker fuel prices have almost doubled since the start of the month, container freight prices are up 18%, and the Australian Dollar is trending weaker.

While the long-term picture is volatile and heavily dependent on when oil supplies return to normal, in the short term we are likely to see inflation well north of 5.0%.

We received some rough prints on the Australian economy this morning which provide early indicators that the ongoing war in the Middle East, and the RBA’s recent rate increase is starting to weigh on the economy.

💫 ANZ Roy Morgan consumer confidence printed its lowest figure since records began in 1973, down a whopping 5.4 points to 63.1.

💫 In the same survey, consumer inflation expectations are up to 6.9%, up a concerning 1.6% since the start of March.

💫 Flash PMI was down a significant 5.4 points to 47, well into contraction territory. However, it’s key to note that service industries accounted for all of the contraction.

💫 Australian businesses reported the highest rate of input cost growth in more than three years.

Taken together this doesn’t paint a pretty picture, with early indicators that growth will take a hit at the same time as inflation picks up. Pretty much a worst-case scenario. It's still early days and lots of uncertainty remains, but these certainly aren’t the kind of numbers we’d like to be seeing.

We received a slightly misleading labour force report for February. While headline unemployment was up, the report was pretty much all good news:

For February 2026:

🧑🏻‍🚒 Headline unemployed was up to 4.3%.

🧑🏻‍🚒 Participation was up to 66.9%

🧑🏻‍🚒 48,900 more Australians found jobs.

🧑🏻‍🚒 Underemployment stayed flat at 5.9%

The increase in the headline unemployment rate was entirely a case of the denominator growing faster than the numerator. While the economy added 48,900 new jobs (a very strong result) but was unable to absorb all of the 83,900 people that joined the labour force. Both of these stats are good signs, we want both more people in work, and a higher proportion of the population participating in the labour force.

It’s also encouraging that while total hours work fell (noting it was a short month), the underemployment rate remained steady.

What this does represent is a small loosening of the labour market. While one print doesn't mean much on its own, we will see over the next few months if the market can soak up the extra workers, or if we start to see a trend toward labour supply materially exceeding demand.

As expected, the RBA increased rates to 4.1% in a lineball decision.

Between the SMP and press conference, the Board provided some good detail around the basis for their decision:

📍 The decision was not as close at the 5 to 4 vote would imply, with all board members agreeing on the direction of rates, and the dispute only being around the timing of the increase.

📍 Inflation picked up materially in the second half of 2025 and was already too high before the Middle East conflict. An increase now was prudent risk mitigation.

📍 Demand is outstripping supply, with GDP growth of 2.6% well above the RBA's 2% potential growth estimate.

📍 The labour market has tightened slightly over the last quarter, rather than stabilising as expected.

📍 The Middle East conflict has already driven fuel and energy prices sharply higher, adding further upside risk to inflation.

📍 There is a high risk of second-round effects if excess demand isn't curtailed — higher costs will get embedded into pricing.

The announcement and follow up comes across as a Board genuinely concerned about inflation getting away from them again. There was much criticism of the RBA for moving too slowly after COVID, and this board seems determined to sidestep that criticism this time around.

The focus now needs to be on the next move and while markets are locked in on anther hike in May, I am less certain. If energy prices remain elevated, which seems the most likely path, the RBA is going to find itself in a difficult position trying to balance rising prices against and economy that will start to show signs of real weakness.

The RBA will be back with another rate decision this afternoon and rates should be going up again to 4.10%.

Even if we ignore the recent supply shock to energy markets, the ground was ripe for another interest rate increase:

✨ Inflation is running far too hot at 3.8% (headline) and 3.4% (Trimmed mean)

✨ Unemployment remains very low at 4.1%, with no signs of weakness

✨ Employee earnings continue to grow faster than inflation (at 5.7%)

✨ Household spending continues to grow strongly at 4.6% YoY

✨ Lending continues to grow strongly at 13.4% YoY

Taken together, all of these indicators point towards an economy out of balance, with demand exceeding supply and putting upward pressure on prices. The RBA needs to take active steps to cool the economy before inflation gets out of hand again.

The recent energy supply shock only makes the need to move now more urgent. While the trajectory of energy prices over the next couple of months is uncertain, there is a clear risk that we see strong growth in energy prices that flows through to prices and pushes already high inflation even higher.

The balance of risk is on the side of move early.

Household spending dipped a bit in December, however, this is more to do with the ABS’s seasonal adjustment playing catch up with reality than any real slowdown in spending.

For the December 2025:

🏘️ Household spending was down 0.4% MoM

🏘️ Household spending was up 5.0% YoY

🏘️ Total spending in December was $78.9 billion

As noted above, while spending was down slightly on the ABS’s seasonally adjusted numbers, the trend series continues to show growth.

This has been an issue with the seasonally adjusted numbers over the last couple of years, as the peak household shopping season have been pulled forward by sales events like Black Friday and Cyber Monday.

Of most interest will be whether we see a real drop in spending in January, and if so, how big the drop is. That will give us a much clearer picture of how strongly household demand is pumping.

The RBA are back at it this afternoon, with the consensus that we are back to rate, with markets pricing it at over a 70% chance, and most economists tipping an increase.

While an increase would certainly be justified, I think the RBA will find enough excuses to sit on their hands today:

🙈 While inflation missed the RBA’s forecasts, the miss was relatively small (being only 0.2% on headline, and 0.1% on quarterly inflation).

🙈 Inflation does appears to be slowing on a monthly, trimmed mean, basis (0.33% in Oct, 0.26% in Nov, 0.23% in Dec)

🙈 The AUD had risen significantly over the past couple of months against the USD and on a trade weighted basis. This will do some work to slow tradable inflation.

🙈 A single increase isn’t really an option, moving now effectively locks in a second hike over the next few months, which could be excessive when other factors already appear to be slowing inflation.

We will find out this afternoon which way the RBA moves, and it will be interesting see how they justify their decision, whichever way they go.

Interesting release from the ASIC today, announcing that our already opaque corporate registry will be even less open. Various director information will now be withheld from searches done through ASIC Connect. Forcing everyone to now search via a more expensive data broker to get full access to company data.

This will make it both harder and more expensive for SME business to undertake searches and know who they are dealing with.

In my opinion, ASIC should be going in the other direction, providing free access to all of their registers to improve transparency. Properly linking Director IDs to the ASIC register and rolling out a beneficial interest register should (both with free open access) be high on their to-do list.

ASIC updates information available through purchased extracts | ASIC

December inflation came in well above the RBA’s forecasts, putting the sword to the “narrow path” narrative and bringing forward the risk of rate hikes.

For December 2025:

🔔 Headline inflation: 3.8% YoY

🔔 Trimmed mean: 3.3% YoY

🔔 Tradables: 2.1%

🔔 Non‑tradables: 4.6%

With inflation and wages both running hotter than expected and the labour market still relatively tight the board will have to perform some pretty impressive gymnastics to justify not increasing rates. A U-turn is starting to look inevitable.

That being said, I think the RBA will hold next week. A hike now effectively commits the RBA to a follow‑up move, and they can point to mitigating factors like the stronger AUD as justification to sit on their hands until March.

A key concern for the RBA as we roll into their first meeting of 2026 will be getting a solid gauge on the strength of Australia's labor market.

With inflation currently outside the RBA's target range, a key factor for whether the RBA will move to increase rates is the second limb of their mandate.

So how is the labour market looking at the moment:

💫 Employment Growth remain strong.

The economy had added 165,000 jobs over the last year. This represents growth of 41,250 per quarter, well ahead of the long run average of 9,800 per quarter.

💫 Unemployment fell to 4.1% last quarter, well below the long-term average of 6.5%

💫 While vacancies have declined recently, (they are down 31% from their mid-2022 peak), they remain 40% above 2019 levels and 32% above the long-term average. Demand still outstrips supply for labour.

💫 Wage Growth remain right in-line with the long-term average of 3.2% in nominal terms, and when adjusted for substantial falls in productivity, is well above the long-term average in output terms. Employees are comparatively expensive and getting more so.

💫 Trouble finding suitable staff remains one of the top challenges sighted by business leaders in early 2026.

Taken together, we have a picture of significant labour shortage in the economy that isn’t likely to improve in 2026. I think the RBA's recent call that they labour market is 'a little tight' is an understatement. This gives the RBA plenty of scope to increase rates to deal with excess inflation, while still meeting their dual mandate.

I still think the RBA will be cautious. Reversing course and returning to increases this soon would be a significant embarrassment that I think the board would like to avoid if at all possible.

I am a bit late to the party, but we kicked off the year with an inflation update from the ABS.

For November 2025:

☑️ Headline Inflation was 3.4% YoY

☑️ Core inflation was 3.5% YoY

☑️ Tradeable inflation was 1.8% YoY

☑️ Non-tradeable inflation was 4.3% YoY

Inflation remains well outside the RBA’s target range, despite being essentially flat month on month over the last two months. I expect it to remain above 3% for atleast the first half of 2026, for a number of reasons:

💡 Government energy rebates are slowly expiring, and this will have both a direct impact on inflation and flow on impacts on other prices.

💡 Housing costs will continue to rise. While there has been a slight pause in prices over the last few months, nothing has fundamentally changed in the supply demand balance in that market, so prices are certain to keep rising.

💡 The November figures were clearly impacted by retailer discounting as the traditional discount shopping season moves earlier in the year, depressing prices.

💡 Household spending remains very robust, growing are more that 6% YoY, meaning there is plenty of spare demand in the economy to fuel price increases.

The balance in the economy is still towards excess demand and while cost pressures on businesses remain strong, it's a clear recipe for more inflation.

Happy New Year 🎉

Back at it for 2026 and hope everyone is looking forward to a big year.

A few predictions is always a fun way to kick of a new year, so looking at the first half of 2026.

• Inflation stays stubbornly above 3%

While we have had a couple of relatively benign prints over the last few months, price pressure remains significant, and government subsidies are due to roll off.

• RBA won’t increase rates

While I expect inflation to remain outside the target range, I think the RBA will talk tough but do nothing. Growth is still soft and they have a clear bias toward supporting the labour market.

• Unemployment remains below 4.5%

Hiring demand has cooled but not collapsed which should be enough to maintain employment, especially with the RBA sitting on its hands.

• Growth and Productivity remains weak

We haven’t seen any significant reforms coming out of the productivity round table and nothing appears to be on the cards for 2026. Without substantial reforms to boost productivity (and thus growth) the economy will stay in the doldrums.

• Insolvency appointment number will be similar to last year

The pipeline remains steady as businesses work through higher input costs, ATO/creditor pressure and refinancing hurdles. However, the bias will shift from SBRs back to CVLs and VAs.

Finally, three quick thoughts for businesses rolling into 2026:

• Protecting cashflow and proactive budgeting will be more important this year as the impact of payday super will result in a significant cashflow impost in the middle of the year.
• With growth remaining slow, it's time to double down on practical productivity. Simplifying operations, tightening up processes, and investing where payback is clear.
• You can no longer ignore AI. At this point, while some of the hype may be overdone, it does have clear use cases where it can improve efficiency.