There’s no denying that our pockets are expanding and this is most obvious when you fill up the car at the bowser. From biscuits to meat, eggs and cleaning products, will we see a brief spike or is this finally where we see inflation rise?

The answer matters a lot in economics. It could determine whether the current inflationary pressures fade over time, or we enter into a spiral of progressively rising prices and wages.

The official inflation rate out of the US last month rose to 8.5 percent with the UK currently at 7 percent.  While nowhere near this in Australia, our inflation rate is rising.

Yesterday, the Reserve Bank of Australia rose the interest rate to 0.35%, the first rate hike to be made since late-2010. With this, banks have followed through with increased rates on home loans. This represents the first increase in repayments that majority of borrowers will have ever experienced on their current loans. So what does that mean for business?

For years, the RBA has been suggesting that a penny-pinching approach by business was a key reason why wage growth has been so miserable. It has said firms were too worried about losing business to put up their prices, and therefore were also reluctant to raise wages for their staff.

With prices now rising sharply, it’s possible businesses could change their attitude and start thinking they can get away with raising their prices more aggressively. If prices start rising more generally, at a time when job vacancies are already at record highs and unemployment is at its lowest level since 2008, businesses may also be pushed into paying bigger wage increases.

Whether the warnings of surging prices eventuate will partly depend on events out of our control, such as the war in Ukraine and its impact on oil and other commodities. But it will also depend on whether businesses change long-standing habits in how they set prices and pay their staff.

Now might be the time to refinance your business loans before inflation rises – talk to our Enterprise team today about how we can help assess your financial needs