At the Westpac annual general meeting yesterday, Kelly flagged the bank would take a tougher line on interest rate decisions, after bowing to political and media pressure to pass on the last two rate cuts.
"We are very mindful of the impacts of interest rate decisions but these must be balanced with what is economically responsible," Kelly said.
She added that "as a direct result of the turmoil going on around the world, funding has become a more difficult issue".
"Right at the moment term markets are effectively closed."
"And when they open up, our estimation is that the cost of raising money will actually be more than it was at any point during the global financial crisis."
Matthew Circosta, economist at Moody's Analytics, says small businesses would be exposed if Australian banks face further funding difficulties.
"It would affect small- to medium-sized business the hardest; the large enterprises have the capacity to pay to get the credit and are therefore more insulated," Circosta says.
More expensive or further difficulties in accessing finance would compound pressures already faced by SMEs in the slow lane of the multi-speed economy, Circosta adds.
Still, Circosta is optimistic the worst case scenario – seized up global markets, rising unemployment, slowing wage growth, tumbling house prices – won't occur, putting the likelihood at 30%.
Instead, he says it's more likely European policymakers would muddle along for the next six months and try to restore confidence to the markets.
Circosta adds that even if there was a repeat of the dark days in 2008, Australia's relatively low unemployment rate and strong mining industry would provide some buffer.
Kelly's comments on interest rates have raised speculation the big banks are breaking away from revising their rates after the monthly Reserve Bank meeting.
ANZ recently announced it would announce its rates for retail and small business customers on the second Friday every month.
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