We all agreed that finding skilled labour is a challenge for both large and small business, and it’s getting in the way of economic recovery and growth. There is no quick fix, but we’re beginning to see innovative collaborations between corporates and the education sector to co-create courses that close specific skills gap – especially in digital and cyber.

Markets are pricing Australia as facing the biggest interest rate increase among the rich nations of the world, but we’re also among those who are the most sensitive to interest rates changes.

That backdrop says that financial markets are suggesting life is going to get tougher for this sector:  think falling house prices, increasing lending costs and pressure on share prices. All of these will be affected by interest rate changes and will affect economic growth.

It’s also important to note we face the risk of a recession if we increase interest rates too quickly – this is something both government and business need to be mindful of.

Yet there’s another risk in play here too: if the Reserve Bank acts too slowly, inflation could get baked in, and this would be compounded by those skills shortages mentioned earlier.

One thing is certain: interest rates have to rise, and we will continue to lean into an ongoing headwind for credit growth for Australian businesses in Australia. Just saying this is why everyone hates economists!

Anna Bligh rightly acknowledged that there are lots of headwinds out there, but there are also clear signs of optimism. First and foremost we need to acknowledge that the banking sector will never return to its former status because the way banking gets done has changed forever. It’s changing quickly and will continue to do so. I think this is good for business, and good for the economy.

The biggest opportunity lies in Government, the banking sector and business and retail customers to work together more together than ever before. And this has already begun. Customers’ accelerating behaviour change in the last two years is impacting the way banks function: banks need more tech skills to meet this demand, further reinforcing skills shortages in the Australian market.

No matter how you look at it, one way or another money will become more expensive. Because it can’t become less expensive than it has been. As a result, emerging economies will be under the most pressure. Locally, small business is potential more at risk than most. When the pressure is on, when we’re talking about funding the recovery, small business is at the wrong end of the queue. As are the million families who have bought homes most recently before interest rates begin to rise.

The good news is that stiff competition in the banking sector will temper the price increases that are about to happen which will benefit small business who need to borrow money for growth.

Two factors drive the size of any sector, and the same is true for the world of banking. First, growth in the total banking pie – in Australia, the economy is close to the fastest growth we have experienced in many decades. And secondly, the cost of the future – that is, the cost of credit. We need to find the right balance to remain resilient.

Overall, it’s important that when reflecting on the last few years, let’s recognise that the Australian economy performed beautifully during the pandemic. We shouldn’t get lost in the detail. And let’s celebrate that we have the lowest unemployment rate since ABBA won Eurovision!