Why is Australian business borrowing growing at 11% despite higher interest rates?

Australia's business borrowing is accelerating despite the Reserve Bank's efforts to slow the economy.

New RBA figures show business credit increased 11.3% over the year to September 2026, compared with 9.4% a year earlier. That is considerably faster than housing credit growth of 7.0% and personal credit growth of 4.8%.

With the cash rate at 4.60%, why are businesses borrowing so heavily?

What does the increase mean?

Business credit measures outstanding lending to non-financial businesses by financial institutions operating in Australia.

An increase does not necessarily mean businesses are borrowing to expand production.

Companies borrow for several reasons: purchasing equipment, building new facilities, financing inventories, managing cash flow or refinancing existing debts.

The distinction matters.

Borrowing to build productive assets can increase future economic output. Borrowing to cover higher operating costs may instead signal financial pressure.

Could investment explain the growth?

Australia is experiencing substantial investment in infrastructure, renewable energy and data centres.

These projects require construction services, equipment and working capital, potentially supporting credit demand even when household consumption weakens.

But the aggregate RBA figures cannot establish how much business borrowing is financing these activities.

Nor does 11.3% credit growth imply an equivalent increase in business investment.

What about monetary policy?

Higher interest rates increase the cost of borrowing, but companies do not respond uniformly.

A business expecting strong investment returns may continue borrowing despite higher rates. Others may delay projects or reduce debt.

Business credit also responds to lending terms, refinancing arrangements and the availability of alternative funding.

The competition question

Rapid business lending growth raises another issue: which banks are providing the credit?

If major banks are capturing most additional lending, their competitive position may be strengthening. If regional and smaller banks are gaining share, the implications are different.

The crucial question is not simply why business credit is growing, but whether that borrowing is financing future productivity or increasing financial vulnerability.