“It’s always a clear and present danger for banks they could end up [in the political crosshairs] because they are so central to people’s lives,” she said.

After falling into a hole after the Hayne banking royal commission, Ms Bligh – a former Queensland premier – said banks had worked hard to climb out and foster a “fragile” positive attitude in the community.

“I think their ability to hang on to that is going to very much depend on how they deal with those individuals, those families and those businesses who will find the next 12 to 18 months very, very stressful,” she said.

The Reserve Bank of Australia this month increased its cash rate from a record low 0.1 per cent to 0.35 per cent – the first rise since November 2010 – and indicated many more rate movements were on the way.

Financial markets are pricing in a cash rate of 3.2 per cent over the cycle, while economists are tipping rises at each RBA meeting in coming months, but aren’t tipping the same terminal rate as investors.

Mr Richardson echoed National Australia Bank chief executive Ross McEwan that the RBA had a difficult task in balancing the risks.

“[If] we go too hot and too fast, that could bring a recession risk,” he said, but added if the RBA moves too slow it increases the risk of stagflation.

“I’m very hopeful we don’t end up in either of those mistakes,” he said, adding that the market’s pricing for interest rates would be a mistake.

“I don’t think it’s going to happen. Question: what stops something stupid happening? Answer: it’s stupid,” he said.

‘Profitless boom’

Either way, Alexi Boyd, chief executive of the Council of Small Business Organisations, said rising interest rates, combined with material and labour shortages and large debts accrued during the pandemic, had left many small businesses owners “exhausted” and considering exiting viable businesses.

While most economists view the 48-year low 3.9 per cent jobless rate as a positive, Ms Boyd said the incredibly tight labour market was “not good news” and was causing a strain on businesses unable to compete for skills.

“Economists are saying things are going gangbusters, but small businesses can’t take advantage because they don’t have the workers and issues with supply chain constraining their ability to grow and to innovate,” she said.

“It’s a contraction, that’s a real concern. We’re seeing it across business sectors, they can’t take advantage. It’s almost like a profitless boom.

“In a lot of cases, those small businesses are completely overwhelmed and may very well, through sheer exhaustion, walk away from strong, viable businesses because they’re just getting to that tipping point.”