Five Key Trends Reshaping Australia's Commercial Lending Market

As 2027 approaches, commercial lending in Australia is undergoing significant changes, driven by higher interest rates, cautious SME sentiment, and federal budget policies. James Sheehan, executive of specialist banking at NAB, and Sam Turri, who manages NAB's broker relationships in New South Wales and the Australian Capital Territory, highlighted five key trends shaping the market.

The Reserve Bank of Australia (RBA) raised the cash rate to 4.6% in September 2026, its highest level since 2011. Sheehan noted that the RBA is focused on controlling inflation while maintaining low unemployment. He does not expect rates to return to pandemic-era lows, emphasizing the need for sustainable rates. Commercial borrowers, often tied to the bank bill swap bid rate (BBSY), feel market moves more immediately than home loan borrowers.

SMEs are adopting a more defensive stance, consolidating rather than expanding. The average SME loan size fell 20% in the June 2026 quarter, but Sheehan believes lending growth will continue into 2027. Brokers are focusing on retaining existing clients through account reviews and connecting them with potential buyers or discounted equipment.

The role of commercial brokers has evolved into that of trusted advisers, with market penetration estimated at over 35%. Turri noted that successful brokers understand their clients' businesses and markets, and know when to bring in specialists. Sheehan highlighted the importance of managing all input costs and risks, not just debt.

Trade finance is facing challenges due to rising transport costs and shipping delays, exacerbated by geopolitical conflicts. Sheehan emphasized the need for flexible working capital facilities to adapt to changing conditions. The federal budget has also redrawn the property investment map, with significant policy decisions impacting the market.