Australians are now spending more than they earn with some regions facing particular hardship as the Reserve Bank of Australia has suddenly raised interest rates, according to Nationwide News.
Citing high inflation, the RBA board met yesterday and decided to raise the official rate by 25 basis points to 4.35 per cent, the highest level in 12 years.
Data compiled by Kos Samaras, director of research firm RedBridge Group Australia, reveals that 100 per cent of mortgage holders are now in negative cash flow, spending more than they earn, in the Pyrenees Shire in Victoria’s west, both Narrandera and Carrathool in the Riverina in New South Wales, and Bogan in Orana in NSW.
99 per cent of borrowers in the Campbeltown area of western Sydney have negative cash flow, as do 96 per cent of householders in Weddin Shire in the state’s central west. Half of all mortgage households in New South Wales are experiencing negative cash flows, with the so-called “mortgage belt” in Sydney’s west being particularly affected.
Data compiled by Digital Financial Analytics (DFA) revealed that a further 200,000 households across the country were were in the red yesterday as a result of the RBA’s decision.
“How are they managing? They’re eating into savings, living off credit, cutting down on other essentials, ignoring bills that do not result in the loss of basic utilities, and relying on food banks. They’re unable to keep up with repayments, including bills, with income alone. It’s hard to see how these Australians are contributing to inflation.”
Associate Professor Ben Phillips from the Centre for Social Research and Methods at Australian National University stated that many people were struggling with the cost of living, but for some it felt more acute.
“Homeowners with a mortgage turn out to have experienced a very large cost increase over the past two years of 17.5 per cent. First homebuyers who bought within the past three years faced the biggest living cost increase, of 20.5 per cent.”
The number of Australians experiencing mortgage stress is on the rise, with more than 48 per cent of borrowers expected to be under financial stress by the end of the year.
Michele Levine, CEO of research firm Roy Morgan, claimed that a further 1.5 million mortgage holders were now considered to be at risk of falling into stress.
This represents a substantial increase of 766,000 mortgage holders since the RBA began a record-breaking series of interest rate increases nearly 18 months ago.
Data from credit reporting agency Equifax reveals that credit card applications rose 6.9 per cent in the June quarter compared to the same period last year. Applications for consumer loans rose 8.2 per cent over the same period.
Since the RBA began raising rates in May last year, interest rates have risen by 4.25 per cent, with most lenders waiving each of those increases entirely. Consequently, the average Australian borrower now spends $3,990 a month, or $1,534 more than before. In a year, that amount adds up to an extra $18,400.
The Opposition is firmly placing the blame on the government, with its finance spokesperson Jane Hume stating that Prime Minister Anthony Albanese is “gambling with Australians’ money and with our economy.”
This rate rise is the consequence of a government that has spent the past 17 months with the wrong priorities, without a plan to tackle inflation and without a plan to lower the cost of living.
Tim Lawless, executive research director at data firm CoreLogic, believes the latest rate hike will contribute to a “drag” on housing markets.
“The lift in rates combined with ongoing cost of living pressures and alarming geopolitical environment is likely to weigh on consumer sentiment, which is already in deeply pessimistic territory.”
The NAB economists forecast national house price growth of five per cent, with prices increasing five per cent in Sydney and 5.5 per cent in Melbourne. The ANZ expects national growth to range between three and four per cent, with prices rising four per cent higher in Sydney and three per cent higher in Melbourne.
