Are corporations untouched?

On 29 September 2026 the Reserve Bank raised the cash rate by 25 basis points to 4.60 per cent, unanimously: the fourth rise of 2026 ¹. Its statement recorded that housing prices have fallen in most capital cities and that new housing loans have declined noticeably. Two sentences later, in the same paragraph, it said: “Meanwhile, growth in business investment and debt is strong.” ¹ That is a juxtaposition of the Bank’s own sentences, not a Bank finding on who bears the burden of its decision. It raises the question this article takes up: if the rises squeeze borrowers, are corporations affected at all, and which ones?

The blanket claim that corporations are not affected is not supported by the record. The economy-wide profits share peaked at 33.1 per cent in June 2022 and was 27.1 per cent in June 2026, below its December 2019 level of 27.9 per cent ². “Corporations” is not one group. Between the June quarters of 2022 and 2026, financial corporations’ operating surplus rose 36.6 per cent while private non-financial corporations’ fell 9.4 per cent (THE RORT’s calculation from ABS levels) ².

This article sets out what the record shows about who in the corporate sector has gained, who has paid, what the Reserve Bank has found about margins, and what its decision statements leave out. Each charge is set beside the Bank’s own research and the other side of the record. It does not say that corporate profits caused the 2026 inflation, and it does not say they did not.

01The income split, 2022 to 2026

The Australian Bureau of Statistics national accounts, released on 2 September 2026, show the wages share of total factor income at 54.3 per cent in the June quarter 2026, up from 49.0 per cent in the June quarter 2022 ². Over the same four years the economy-wide profits share fell from its June 2022 peak of 33.1 per cent to 27.1 per cent, below its December 2019 level of 27.9 per cent. The path in between, in seasonally adjusted terms, was 30.4 per cent in June 2023, 28.8 in June 2024 and 27.0 in June 2025 ².

The split inside “corporations” is where the story is. From the June quarter 2022 to the June quarter 2026, financial corporations’ operating surplus rose 36.6 per cent, from $25.3 billion to $34.6 billion a quarter (the percentage changes here are THE RORT’s calculation from ABS levels). Compensation of employees rose 31.6 per cent. Private non-financial corporations’ operating surplus fell 9.4 per cent, from $157.3 billion to $142.5 billion a quarter ².

The ABS gives its own account of the latest quarter. Financial corporations’ surplus rose 2.4 per cent in the June quarter 2026, “driven by growth in balances and margins, particularly for dwelling and business loans”. The ABS adds: “Margins rose as effective interest rates on loans rose more than interest rates on deposits.” Through the year the surplus rose 10.2 per cent, against 6.0 per cent for compensation of employees ³.

That is a statement about a whole sector, not about banks alone, and it covers business loans as well as dwelling loans. The Reserve Bank’s own tables show something narrower for one product. The average rate charged on outstanding owner-occupier variable loans rose 0.7 points, from 5.5 per cent to 6.2 per cent, between December 2025 and July 2026. The average rate paid on household deposits rose the same 0.7 points, from 2.8 per cent to 3.5 per cent, so the gap between the two was 2.7 points in both months (against all deposits, 2.5 points and then 2.6). At the one-decimal precision published, it did not measurably widen over the rises. This compares one loan type with deposits and is not a bank margin, and a change of up to about 0.1 to 0.2 points could be hidden by rounding ⁴.

In the June quarter 2026, compensation of employees rose 1.5 per cent (6.0 per cent through the year). Private non-financial corporations’ operating surplus rose 2.5 per cent (5.1 per cent through the year), which the ABS says was “led by Mining with increased sales and higher prices particularly for coal, crude oil and lithium” ³.

02Big firms and small firms

The Reserve Bank’s own account is that a rate rise does not reach every firm in the same way or at the same speed.

Pass-through from a higher cash rate is likely to be quicker for small businesses than larger corporates. This is in part because many smaller businesses take out variable-rate business loans secured with a residential property mortgage.

The same review said: “Larger companies are expected to remain resilient to higher interest rates and cost pressures.” Its reasoning is that many small firms borrow at variable rates secured on a home, while larger firms issue fixed-rate debt or hedge ⁵.

The Reserve Bank’s Table F7 shows the size of the difference. New business loans in July 2026 cost small businesses 7.44 per cent, medium businesses 6.26 per cent and large businesses 5.54 per cent: a gap between small and large of 1.90 percentage points (THE RORT’s subtraction from the table) ⁶. On outstanding loans, the 2026 rises reached all three sizes about equally. Between January and July 2026 the outstanding rate rose 0.61 points for small businesses (6.85 to 7.46 per cent), 0.70 for medium (5.51 to 6.21) and 0.67 for large (5.07 to 5.74) ⁶. The difference is chiefly in the level of the rate, not in the size of the 2026 increase.

Advertised rates moved in step with the cash rate. Two advertised small business variable rates in Table F5 rose 0.75 points, in the months of the three rises to May (25 basis points each in February, March and May): from 8.25 per cent to 9.00 per cent, and from 10.01 per cent to 10.76 per cent ⁷.

There are signs of strain in parts of the small-business sector. The Bank’s March 2026 review found that company insolvencies “have stabilised at around longer run averages at an economy-wide level, although the share of companies entering insolvency remains elevated in the hospitality and construction sectors, where the operating environment has been more challenging, particularly for smaller firms” ⁸. The Australian Securities and Investments Commission’s figures show fewer insolvencies overall: first-time company insolvencies were 14,153 in 2025-26, down from 14,722 in 2024-25 (11,053 in 2023-24 and 7,942 in 2022-23). In February to June 2026, the five months from the first 2026 rise, there were 6,106 against 6,509 a year earlier. Construction was the largest industry among companies entering external administration in the first 11 months of 2025-26 (24.4 per cent). ASIC’s figures do not show rate-driven corporate stress in 2026 ⁹. Business non-performing loans rose slightly over 2025, partly from sole traders and partnerships in hospitality and construction, and remain well below the highs of the global financial crisis ¹⁰.

03Investment and debt

The Reserve Bank’s 29 September statement recorded falling house prices and a noticeable drop in new housing loans. Two sentences later: “Meanwhile, growth in business investment and debt is strong.” ¹ The pairing is the Bank’s own, and it is not a finding on who bears the burden.

It is not a one-off. In June the Bank wrote: “Growth in business investment is strong and credit is readily available to both households and businesses.” In August: “growth in business debt and investment is strong.” ¹¹ The March statement said business investment “was above expectations” while consumption “was below expectations” ¹².

The Australian Bureau of Statistics shows the same. Private business investment fell 0.5 per cent in the June quarter 2026 but rose 10.4 per cent through the year, and the ABS noted: “Business investment remained elevated with an increase in new building construction associated with data centres.” ³ Through the year, at least, business investment is up.

The Bank does not expect this to last. Its forecasts have business investment growth slowing from 6.5 per cent (June 2026) to 0.2 per cent by December 2028, which is consistent with firms feeling the rises with a lag ¹¹. In October 2023 Assistant Governor Christopher Kent said Bank models implied that the 4 percentage point rise in the cash rate “might contribute to business investment being around 4 per cent lower than otherwise after two to three years”, while saying there is “mixed evidence” on how far interest rates affect business investment directly ¹³.

04Firms raising prices

The Bank’s liaison with firms, reported in the 29 September statement, finds that “firms are experiencing cost pressures and are either increasing the prices of their goods and services or looking to do so”. It adds: “Short-term measures of inflation expectations remain elevated.” ¹ In May the Bank flagged “early signs that many firms experiencing cost pressures are looking to increase prices of their goods and services” ¹⁴.

On 11 August Governor Michele Bullock said: “Some firms have passed these cost pressures through to the prices of their goods and services, and others are looking to do so.” Her remedy was to cool demand. Judging the economy to be in excess demand, she said, “our concern is that it will be easier to pass that on than it might otherwise be. And that’s why we need to get supply and demand back into better balance.” ¹⁵

On 18 September, to the House Economics Committee, she said inflation “partly reflects capacity pressures in the Australian economy, and the conflict in the Middle East has added to these inflation pressures”, and that “many firms have passed input cost pressures arising from elevated fuel prices through to the prices of other goods and services.” She added that “the full effects of recent rate increases are yet to be felt.” ¹⁶

The Bank’s own record is therefore that firms are raising prices or looking to, and the causes it names are cost pressure from fuel, strong demand and capacity limits. Whether margins belong on that list is the dispute taken up in the next section.

05Margins: what the Bank found, and what others say

The Reserve Bank has looked at margins directly, in research and in testimony, and its findings should be stated before any charge against it.

In May 2023, its analysis found “little evidence that there has been a broad-based increase in domestic non-mining profit margins, suggesting that changes in domestic profit margins have not been a significant independent cause of the increase in aggregate CPI inflation.” The rise in the profit share came largely from mining at global prices. But the same box also said: “Among the 200 largest firms, some highly profitable firms have been able to gradually increase their margins over this period.” It dated that trend from 2016. Its data ran to December 2022 ¹⁷.

simple narratives in which margins are said to have ‘driven’ inflation can be misleading

In May 2026 a Bulletin article by Bank staff found that margin squeezes in retail and home building pushed inflation down in early 2025 and that their unwinding was “accentuating the pick-up in aggregate inflation in the latter part of 2025”, the pick-up behind the 2026 rises. Overall, it judged that “changes in margins had only a modest impact on inflation dynamics overall.” It treats changes in competition as “generally less relevant” over the horizon in which monetary policy operates ¹⁸.

An August 2026 staff article (Isobel McKay, 27 August; a staff view, not the Board’s) looked at where consumer price growth came from. From 2023 to early 2026, it found, growth in the household consumption deflator was increasingly accounted for by domestic factors, labour costs and rents, while “the contribution from import prices and business owner returns moderated significantly. In fact, business owner returns have dragged on aggregate consumer price growth a little in some quarters.” Immediately after the pandemic, though, import prices and business owner returns “accounted for a larger share”. The article’s window ends in early 2026, before the war’s effects are in it ¹⁹.

Assistant Governor Sarah Hunter, answering an audience question on 8 July 2026, said that looking across the whole economy the Bank hasn’t “found much evidence for substantial moves in the profit metrics that we track”. Rates, she said, “are a blunt tool, but they work because they go everywhere in the economy.” ²⁰ In February 2024 Bullock told Senate Estimates that “there probably are firms” using “the circumstances of lack of competition, strong demand and, as you mentioned, the cover of higher inflation”. But in the non-mining sector in aggregate, “there’s not evidence of a wholesale increase in margins across the board”, and that “to the extent that there are competition issues here”, it is “very relevant that the ACCC is engaged and involved” ²¹. The Bank also sees a labour-cost component: unit labour costs, “the measure of labour costs most relevant for firms’ cost of production”, are forecast to ease gradually from elevated levels ²².

Others read the same period differently, and each should be read beside the Bank’s findings above, not in place of them.

The Australia Institute claims that rising corporate profits made up more than half of the inflation above the Reserve Bank’s target range, and that big companies earned some $100 billion above pre-pandemic margins, over December 2019 to June 2023. That is the Institute’s claim, about that period, published in November 2024, not a 2026 finding ²³. It also reported OECD data attributing 51 per cent of the rise in Australia’s GDP deflator, over five quarters to the end of 2022, to unit profits and 21 per cent to unit labour costs. The GDP deflator is not consumer inflation; the Reserve Bank notes that it rose 3¼ percentage points more than consumer prices over the two years to December 2022, largely on mining export prices ²⁴.

Beside those claims sit the Bank’s May 2023 finding ¹⁷ and its August 2026 staff finding that, after the pandemic, import prices and business owner returns did account for a larger share of growth in the household consumption deflator before moderating ¹⁹. The Institute’s figures and the Bank’s are on different measures, and this article does not resolve between them.

In February 2026 the Institute’s chief economist Greg Jericho wrote that “non-wage factors like massive corporate profits are driving inflation, not the meagre wage growth of workers” ²⁵. On 27 July 2026 he wrote that the OECD Employment Outlook 2026 found profits, not labour costs, drove the rise in Australian inflation in late 2025 and early 2026 ²⁶. Those are Jericho’s claims. The OECD’s own words were not read: THE RORT could not open the report, so only his account of it is given. Against them are the Bank’s staff finding that business owner returns “dragged on aggregate consumer price growth a little in some quarters” from 2023 to early 2026 ¹⁹, and the Bank’s forecast that unit labour costs, now elevated, ease only gradually ²².

The Fels inquiry, run with the ACTU and reporting in February 2024 after more than 750 submissions and with 35 recommendations, concluded: “Not only are many consumers overcharged continuously but ‘profit push’ pricing has added significantly to inflation in recent times.” It said that claims that the rise in the profit share is explained by mining “do not hold up”, and that “Price-gouging by the banks has only exacerbated the consequences of restrictive monetary policy” ²⁷. On the Reserve Bank’s figures for that cycle, the major banks’ spread between lending rates and funding costs fell 60 basis points to about 190, and their margins, after rising modestly in 2022, later fell below pre-pandemic levels ³⁴. The Fels report’s finding differs from the Bank’s in 2023 ¹⁷. This article reports both as findings.

In March 2025 the Australian Competition and Consumer Commission’s supermarkets inquiry found that “ALDI, Coles and Woolworths are some of the most profitable supermarket businesses among global peers and their average product margins have increased over the past five financial years”, and made 20 recommendations. According to The Conversation, it did not allege price gouging or recommend divestiture ²⁸.

06Tax paid

Australian Government company tax receipts were $141.2 billion in 2023-24, $138.8 billion in 2024-25 and $149.2 billion in 2025-26, up about 7.5 per cent on the year (THE RORT’s calculation from the Final Budget Outcome figures) ²⁹. These are Budget receipts, not profits. They do not show how any group of companies has fared under the 2026 rises, or how much any one company paid.

07What the statements do not mention

None of the Reserve Bank’s six 2026 decision statements, its 11 August press conference transcript or the Outlook chapter of its August Statement on Monetary Policy contains the words “profit” or “markup”. The five statements before September do not contain “margin” either (the September statement uses it once, in the phrase “at the margin”) ³⁰. That is a scoped absence: the Minutes, the other chapters of the Statement, speeches and research papers were not searched in that count.

The March and May Minutes were searched separately. Neither discusses corporate profits or margins arising from the war. “Profit” appears once in March, as “corporate profitability” of AI-exposed US equities, and not at all in May. The nearest material is liaison on pricing: “members acknowledged the information from liaison that some firms were actively considering whether to raise prices and that some expected workers would begin to seek higher nominal wages.” ³¹

A word missing from a decision statement shows what the Board chose to put in its reasons, not what it knows. The Bank’s research on margins, above, addresses the question directly, and its Assistant Governor has said the Bank has not found much evidence for substantial moves in the profit metrics it tracks ²⁰. The charge that stands is narrower: the decision statements do not use the word profit, and what evidence the Bank holds on how the burden of tightening is shared between households and firms was not established in this round.

08The other side

The record argues against the blanket claim, and it also argues against its opposite. The economy-wide profits share is 27.1 per cent, below its December 2019 level of 27.9 per cent ². Private non-financial corporations’ operating surplus is 9.4 per cent below its June 2022 level ². First-time company insolvencies fell in 2025-26 ⁹. The Bank’s March 2026 review said: “The strong financial positions of most Australian households and businesses means that they are unlikely to be a source of instability, though financing pressures will increase for some if inflation is higher for longer than currently forecast.” ⁸

The Nightly reported on 24 September that Morgan Stanley had cut its FY2027 profit forecasts for the major banks by an average 7 per cent since May, citing rate rises, costs and property tax changes ³⁵. The Bank’s March 2026 review found that lending competition “does not appear to have ... substantially reduced their profitability” ¹⁰. The ASX 200 rose over the 2025-26 financial year. It rose 2.8 per cent in price terms, and 5.9 per cent in total return, which CommSec, a bank-owned broker, summarised as containing “a war, an interest rate cut before three rate rises, an AI boom”. The weakest sectors fell on company and AI concerns, not rates ³².

Where corporate earnings have jumped, world prices explain some of it. Rio Tinto reported on 29 July 2026 that underlying earnings for the half to 30 June rose 43 per cent to US$6.9 billion, and its interim dividend rose 43 per cent, with about US$3.6 billion of EBITDA growth from world copper, gold and aluminium prices ³³. Those are prices set on world markets, not at home.

The Bank’s own research has three lines that a fair reading must carry. Margins “had only a modest impact on inflation dynamics overall” ¹⁸. Bank staff research finds business owner returns “dragged on aggregate consumer price growth a little in some quarters” between 2023 and early 2026 ¹⁹. And Kent’s October 2023 model estimate is that the 4 percentage point rise in the cash rate up to that date may leave business investment around 4 per cent lower than otherwise after two to three years, though he said the evidence on that direct effect is “mixed” ¹³.

What the record supports is this. The corporate sector is not one group. Finance has gained on the ABS’s measure and private non-financial corporations have not, since June 2022, and on the Bank’s own account small firms face the highest rates and feel a rise sooner. The Bank has recorded strong business investment and debt and firms raising prices or looking to in the same statement as falling house prices. It has published research that finds margins had only a modest impact overall, and the Fels inquiry found, and the Australia Institute claims, that they mattered more. Neither side’s figures settle the other’s, and what evidence the Bank holds on how the burden of tightening is shared between households and firms was not established in this round.

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