Finding productivity in a stagflationary environment

Quick answer: When costs keep rising, customers are stretched and interest rates are at an 18-year high, putting prices up again gets harder. The money has to come from inside the business. Small, steady improvements in output, direct costs and overheads can lift profit far more than most owners expect, and faster invoicing frees up cash you would otherwise have to borrow.

The Melbourne Cup is the race that stops the nation. On Cup Day this year, I saw someone on LinkedIn call the RBA's announcement "the rate decision that stopped the nation."

I didn't laugh, because it's true. It is painful out there. I've never seen so many posts on community pages from people doing it tough. Parents asking if anyone has leftover party supplies so they can throw their child a birthday party.

Those families are your customers, your staff and your neighbours. So here's what the latest rate rise means for running a business, and where the money can come from when prices can't keep going up.

What did the RBA actually say in November?

On 3 November 2026, the Reserve Bank lifted the cash rate by 0.25 percentage points to 4.85%. It's the fifth rise this year and the highest rate since late 2008. Read past the headline and the RBA's statement says five things every business owner should hear:

• Inflation is stubborn. It's broadly based and isn't expected to get back to the top of the 2 to 3% target range until late 2027, about three quarters later than the RBA forecast in August.
• Businesses are passing costs on. The RBA's conversations with firms show many are facing cost pressures and are putting prices up, or planning to.
• The economy is slowing. Unemployment has risen and is expected to rise further than previously forecast.
• Households are pulling back. Higher rates and falling house prices are expected to weigh on household spending.
• Productivity is still weak, and that keeps holding back how fast the economy can grow.

The Board was split six to three, so a pause may be coming. Either way, I wouldn't plan the next 12 months around rate cuts.

Is this stagflation?

It's starting to look a lot like it. Stagflation is when prices keep rising while growth stalls and unemployment goes up, all at the same time.

In plain terms: prices keep going up, but we're not getting any more done for the money.

The RBA hasn't used the word, and employment is still growing, so we're not in textbook stagflation yet. But stubborn inflation, rising unemployment and weak productivity in the same statement is close enough that I'd plan for it.

Here's the catch. Interest rates can slow spending down, but they can't fix productivity or bring down energy costs. That part is up to us, inside our own businesses.

Why not just put prices up again?

Because many businesses already have, once or twice, and their customers are feeling it.

Putting prices up can help for a while. But the people paying are the same families asking for party supplies. As households pull back, every price rise becomes harder to make stick, and easier for a competitor to undercut.

There's a bigger picture too. Every price rise adds a little more to the inflation that's keeping rates high. If everyone keeps passing costs on, rates stay higher for longer, and we all pay for it.

That doesn't mean never touching price. Sometimes a price is simply wrong, or you're doing work you've never charged for. But when you've already been to that well, the next dollar of profit has to come from somewhere else.

Where does the money come from instead?

From getting more done with what you already have, and cutting out the waste. In most businesses I work with, it hides in three places.

1. Output. How much paid work your team gets through in a week. How many hours go unbilled, or get written off? How much time is lost waiting on approvals, chasing information or fixing handovers? Is your best person spending half their day on work someone else could do?

2. Direct costs. What it costs to deliver what you sell. Where's the rework, the wastage, the job quoted one way and delivered another? Which processes are still there because "that's how we've always done it"? What are you doing every week that nobody has reviewed in years?

3. Overheads. What it costs to keep the lights on. Which subscriptions and services is nobody actually using? Are lots of small orders each copping their own delivery fee, when one bulk order would do? Do you really need four kinds of milk in the staff fridge?

None of these will make headlines on their own. That's the point. They add up quietly, and they're fixable.

What can 1% actually be worth?

For one real business, nearly 39% more profit, without putting up a single price.

This business turns over about $23 million. Its profit before interest and tax (EBIT) is about $938,000, roughly 4 cents in every dollar. That's typical of a lot of businesses right now: big revenue, thin margin, very little room for error.

We ran the Power of One on their real numbers, using three levers only, each improved by 1%:

• Output up 1% (more paid work from the same team): +$145,864
• Direct costs down 1% (less rework, wastage and overruns): +$82,586
• Overheads down 1% (fewer unused subscriptions, smarter ordering): +$136,482
• Total extra profit: $364,932

That takes EBIT from about $938,000 to about $1.3 million. Operating cash flow rises by a similar amount, about $365,000 a year.

When your margin is thin, small moves aren't small. And because buyers pay a multiple of profit, every one of those dollars also lifts what the business is worth.

Figures from a client's Power of One analysis, shared anonymously. Results will differ for every business.

What about cash?

Cash is where you feel a rate rise first. Every day you wait to get paid is a day you might be funding the gap with the bank, at the highest rates in 18 years.

Three questions to start with:

1. How quickly does the invoice go out? Not when the job's finished, but when the invoice actually lands with the customer. A week's delay at the start is a week's delay at the end.
2. Are you billing correctly? Missed variations, unbilled extras and old rates still sitting in the system all leak cash.
3. How long until the money lands? Chasing politely and early beats chasing hard and late.

As a rough guide, a business turning over $10 million that gets paid one day faster brings about $27,000 back into the bank. Ten days faster is about $274,000. That's money you don't need to borrow.

Put together, you're shortening the gap between paying for the work and getting paid for it. Accountants call it the cash conversion cycle. The shorter it is, the less you need the bank.

One honest caveat: cash freed up this way isn't extra profit. It's your own money, back sooner. But in a squeeze, that's often what keeps you breathing.

Isn't this just cost-cutting?

No. This isn't about cutting people. It's about getting more out of the people and money you already have.

The difference matters. Slash-and-burn cost-cutting saves money this quarter and costs you your best people next quarter. They see what's happening, they lose faith in the plan, and they leave.

The better path is to ask your team where the waste is. They already know. They're the ones re-entering the same data twice, waiting on the same approval every week, and fixing the same mistake. Bring them into the fix, and they'll find things you never would.

And when you free up time, decide on purpose what to do with it. Take on more work with the same team. Cut back the overtime or agency costs. Hold off on the next hire. Freed-up hours only turn into money when someone makes that call.

Ten questions to ask this week

1. How many days after a job finishes does the invoice go out?
2. How many days until we actually get paid?
3. What work did we do last month that we didn't bill for?
4. Are we charging current rates, or are old rates still in the system?
5. Where does our team spend time waiting, chasing or redoing work?
6. Which processes haven't been reviewed in the last two years?
7. Where are we losing money to rework, wastage or overruns?
8. Which subscriptions, services or suppliers could go tomorrow without anyone noticing?
9. Could we combine orders to cut delivery and handling costs?
10. If we freed up 10% of our team's time, what would we do with it?

Pick the two that made you wince. That's where to start.

Benn Lim is a certified Scaling Up coach and the founder of Ikigai Impact, based in Wollongong and working with CEOs across Sydney and Australia. A former financial adviser at UBS and former COO of a global B Corp investment group, he starts with the cash, then works with the people.

Sources

• Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (3 November 2026)
• ABC News, RBA lifts interest rates to highest level in 18 years (3 November 2026)
• Savings.com.au, RBA November cash rate decision: live updates (3 November 2026)