Corporate regulator Joe Longo has warned of the risk that rising interest rates and any sharp deterioration in the economy could cause some highly leveraged companies to collapse, while also squeezing consumers.
“For businesses, there’s pressure on them, too. The costs of doing business are going up, supply chain disruption,” he said. “Their costs of servicing that debt are going to up, and if there’s pressure on their revenue or their business model, then that may very well lead to some failures and job losses, so that’s worth worrying about.”The comments show how regulators are closely eyeing the financial risks associated with rising interest rates, which have jumped from 0.1 per cent to 2.85 per cent since May, as the Reserve Bank seeks to rein in the highest rate of inflation in more than three decades.