After working my way through the minutes of the Reserve Bank’s August get-together it became obvious that money was about to get cheaper in Australia - so the September rate cut was no surprise. That’s the good news for Australian borrowers.

But it also means the Australian dollar weakens against other world currencies – especially the U.S. dollar that’s been firming up in recent months. A weakening Australian dollar translates into lower revenues for businesses marketing goods and services overseas.

Central bank board members stated in their report that, “ Given there had been a significant change in borrowing behaviours, confidence was weaker, asset prices had declined and slower overall growth was in prospect, tighter financial conditions were not warranted.” With the cash rate at its 12-year high of 7.25%, I think the Reserve is markedly understating the case.

Many of my clients have been forced to delay plans for expansion and upgrade due to the high cost of borrowing in Australia. Of course, we all function in a world economy that’s been decelerating for about a year now.

The American Federal Reserve Bank has indicated in the notes of its last meeting, that we shouldn’t expect further declines in rates on American dollars. With the U.S. dollar gaining strength against the Euro and other currencies, Fed Chair, Ben Bernanke sees no reason to lower the cost of borrowing in the States, despite the continued real estate meltdown across the U.S. where many homeowners live in homes worth less than the outstanding mortgage – if they can stay in their homes at all.

What does all this mean for small business owners?

Don’t borrow yet. Expect another rate cut in the next couple of months.