Reserve Bank interest rates Australia: Aussies’ great fear revealed - we can’t pay the bills
More than 11 million Aussies are worried about how they will afford rising household costs as the price of petrol and groceries surge. But, this is only the tip of the iceberg.
A majority of Ausssies are worried about their ability to pay household bills, amid the skyrocketing cost of living, and a possible interest rate hike just months away.
As many as 11 million Australians are preparing to tighten their belts with increased mortgage rates expected as soon as June, alongside a rise in rental costs, petrol prices and grocery bills.
A survey of 34 economists and financial experts found 88 per cent expected the Reserve Bank to hike interest rates this year, with some forecasting a cash rate rise as early as June.
The report from comparison site Finder comes on the heels of the RBA’s monetary policy decision for April, which saw the cash rate stay at its record low of 0.1 per cent ahead of Easter.
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This was welcome news for families facing higher costs at the checkout and bowsers.
A survey from financial comparison group Canstar found that 56 per cent of Australians were concerned about their ability to afford household bills amid skyrocketing living costs.
Canstar said this equated to about 11 million Australians.
About a third of participants reported mortgage and rental costs as their biggest concern, followed by petrol and grocery prices.
Canstar’s group executive, Financial Services, Steve Mickenbecker said a cash rate rise would exacerbate the higher household costs faced by Australians.
“Costs keep rising for households with petrol prices reaching an eight-year high and supermarket shoppers reporting higher grocery bills, but the sting is about to get worse for some,” Mr Mickenbecker said.
“Anyone with a mortgage will likely feel financial pain when the Reserve Bank raises the cash rate this year as predicted by some of the major banks.”
“With demand in the economy driven by government spending rather than wages growth, the federal budget leaves the Reserve Bank in a conundrum. If the Reserve Bank lifts the cash rate in response to inflation before wages take off, widespread household stress will follow.”
PropTrack Economist Paul Ryan said the RBA was being patient in its approach.
“The RBA is waiting to see evidence of sustained demand in the economy consistent with inflation within its target over the medium run,” he said.
“The RBA cannot look through temporary inflation forever, so there remains the possibility strong supply-shock driven inflation will force the RBA’s hand.”
He said house price growth had already slowed in anticipation of a rate rise.
“The outlook for housing prices later in the year is one of a balance between higher mortgage rates and the higher income growth the RBA is looking to see before raising rates.”
AMP economist Shane Oliver said the conditions were right for a rate rise in the coming months.
“The RBA’s objective of full employment has been reached,” Mr Oliver said.
“Wages growth is picking up and inflation is pushing well above target with a rising risk that inflation expectations will start to rise, in which case it will become self-feeding, and the Budget will add in more stimulus this year. So the conditions for a rate hike will be in place by June.”
Ben Udy of Capital Economics agreed that a June rate rise was likely.
“Inflation is surging and the labour market is approaching full employment,” he said.
“The RBA, therefore, needs to act.”
But Leanne Pilkington of Laing+Simmons said there was “a case to be made” for the RBA to keep rates on hold “given the delicate cost of living factors and global uncertainty.”
Noel Whittaker of QUT agreed.
“This is such a tough question,” he said.
“I can’t see how they can raise rates when the price of petrol and food and rents are going through the roof. It would produce unnecessary pain.”
“But I guess they will take the lead from the USA and raise it at some stage.”
“It’s a quandary.”
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Originally published as Reserve Bank interest rates Australia: Aussies’ great fear revealed - we can’t pay the bills
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