Interest Rates Are at an 18-Year High. What That Means for an Ecommerce Brand's Fixed Costs

Where the cash rate is now

On 3 November 2026 the Reserve Bank lifted the cash rate by 25 basis points to 4.85%. It was the fifth increase of the year, after February, March, May and September, and it takes the rate to its highest level since late 2008, when the RBA was cutting sharply as the global financial crisis hit.

The decision was not unanimous. Six board members voted to raise and three voted to hold, according to the RBA's statement. The board's reasons: inflation remains elevated and broadly based, global oil supply disruption from the Middle East conflict is keeping fuel and energy prices up, and inflation is not expected to reach the top of the 2 to 3 per cent target range until late 2027.

The same statement says the economy is slowing, housing prices have fallen significantly and unemployment has risen. Unemployment is now 4.7%, and the RBA expects it to keep climbing. For an online brand, that is the line worth reading twice: costs are still rising while customers are being squeezed.

Economists are split on what comes next. BetaShares chief economist David Bassanese expects another rise in February 2027. EY chief economist Cherelle Murphy says that with the rate at its highest in almost two decades, policy is likely already restrictive enough. The next decision is on 8 December. Neither camp expects rates to fall soon.

Five rises in ten months

The cash rate started 2026 at 3.60%, after three cuts in 2025. Five increases of 25 basis points have added 1.25 percentage points since February. The major banks have passed each rise through to variable business loan and overdraft rates within a few weeks of the decision.

Small businesses were already paying more than large ones. The average rate on new small business loans was 7.23% in August 2026, against 5.54% for large businesses, and that was before the September and November rises. Unsecured business loans from the major banks start above 12%.

Fixed costs and variable costs

A fixed cost is one you pay whatever happens to orders this month: the warehouse lease, permanent staff, repayments on racking, a forklift and packing benches, insurance and software. A variable cost moves with volume: packaging, postage and any per-order fee. Running your own warehouse is mostly fixed cost. Using a fulfilment provider that charges per order is mostly variable cost.

Interest rates reach a fixed-cost operation in two ways. The first is direct: repayments on anything financed go up. The second is indirect and usually larger. Higher mortgage and credit card repayments leave customers with less to spend, so the orders that pay for the fixed costs fall. When volume drops, the same rent and wages are spread over fewer orders, and the cost of every order rises at the point where margin is hardest to protect.

The direct cost is smaller than most founders expect

Take a brand that has fitted out its own unit with $150,000 of racking, a forklift, packing benches and scanners, financed over five years. Starting from the August small business average and adding this year's movements, the rate on that loan has gone from roughly 6.5% at the start of the year to roughly 7.7% now. The monthly repayment rises from about $2,934 to about $3,022. That is $89 a month.

Stock is where the direct cost adds up. A brand holding $250,000 of inventory on an overdraft or trade finance facility pays about $3,125 a year more interest for the 1.25 points added in 2026. Holding less stock, or holding it for a shorter time, is the lever that matters most for this part of the bill.

Neither number will sink a business on its own. The rate rise matters more for what it does to the orders coming in.

The real exposure: orders fall, costs stay

The chart below models the same brand. It leases 300 square metres in Western Sydney at $228 per square metre a year, close to the Q1 2026 average prime face rent, which is $5,700 a month before outgoings. It employs two full-time packers at $28 an hour plus super, about $10,330 a month. Fit-out repayments are about $3,020 at today's rates, and power, insurance and software another $1,200. That is about $20,250 a month before a single order ships, plus $2.40 per order in packaging.

Against it is a per-order rate of $6.50 covering pick, pack, packaging and storage, inside the $4.50 to $7.00 range in the true cost of self-fulfilment. Postage is left out of both sides because it is paid either way.

At 3,000 orders a month the in-house cost is about $9.15 per order. If a weak quarter takes orders down 25% to 2,250, it rises to about $11.40, because the rent and wages have not changed. The per-order rate stays at $6.50. Move the slider to see your own volume.

On these assumptions the in-house unit only becomes cheaper per order above roughly 4,900 orders a month, and only while volume stays there. Your figures will differ. The shape will not: the fixed-cost line falls as volume grows and climbs steeply as it shrinks.

What a 25% drop in orders does to the monthly bill

In the same example, the in-house bill goes from about $27,450 at 3,000 orders to about $25,650 at 2,250. Revenue falls by a quarter while the cost of fulfilling it falls by about 7%. The per-order bill goes from $19,500 to $14,625, falling by the same 25% as the orders.

That is the argument for variable costs when rates are high. Outsourcing is not always cheaper per order, and at high, steady volume your own warehouse can win. The point is that a cost which falls with orders cannot leave you paying for space and people you are not using.

When running your own warehouse still makes sense

Some brands should keep their own space: those well above their break-even volume with steady demand, those with products that need handling no provider offers, and those already on a long lease at a good rate.

If you need space, the Sydney market is more open to negotiation than it has been for years. Industrial vacancy reached 3.9% in the third quarter, and Western Sydney incentives are around 22%, a record. An incentive lowers the cost of a fixed commitment. It does not make it variable. A five-year lease signed on late-2026 volume is a bet on your demand from 2027 to 2031.

What to do before the next decision

Work out your break-even volume. Add up every cost that would still be due in a month with no orders, then divide it by the difference between a per-order provider's rate and your own variable cost per order. If your normal month is not comfortably above that number, a slow quarter will cost you more than any rate rise.

Reduce the stock you finance. Ordering more often in smaller quantities costs more in freight per unit, but at 7 to 12% interest, three months of cover held on credit is often the more expensive choice.

Do not sign or renew a lease on your best quarter's volume. Size space for your average month and plan the peak separately.

If you move to a provider, check that its costs actually fall when your orders do. A minimum monthly spend or a fixed account fee turns part of a variable cost back into a fixed one. Cryologix bills per warehouse event, itemised per order, set out in a written rate card before any stock moves. If you are still deciding whether you are ready to stop packing your own orders, start with when a Shopify brand should move to a 3PL.