‘Millions of Aussies are under significant financial stress’: Experts warn personal debt could soar

Experts have issued a warning as shocking figures expose just how hard it is for Aussies to get ahead during the cost-of-living crisis.

Experts have warned that personal debt could soar following the decision to keep the cash rate steady at 4.35 per cent as data reveals Australia’s major savings struggle.

The Reserve Bank held the cash rate at 4.35 per cent following its board meeting on Tuesday, flagging that inflation is “still too high”.

The seventh consecutive hold was widely tipped by economists and investors and means homeowners will be slugged with the 13-year high cash rate until at least November 5, Melbourne Cup Day, when the board is slated to meet next.

In a statement, the RBA acknowledged inflation had “fallen substantially” but was still beyond the “midpoint” of the board’s target band of 2 to 3 per cent.

Experts have now warned that household personal debt will likely rise as household savings plummet, with households saving just 0.9 per cent of income over the past year – the lowest annual savings since 2006-07 – according to the Australian Bureau of Statistics.

About 40 per cent of Aussies have less than $1000 in savings according to data from Finder. Picture: NewsWire / Nicholas Eagar

About 40 per cent of Australians have less than $1000 in savings, while the national average for cash savings is $39,407, according to research by Finder.

Finder head of consumer research Graham Cooke said Australians were well and truly feeling mortgage pressure.

“Due to the sharp and rapid rise in mortgage repayments, millions of Aussies are under significant financial stress,” Mr Cooke said.

“A whopping 40 per cent of homeowners say they are struggling to pay their home loan in September, according to Finder’s Consumer Sentiment Tracker.

“The good news is that a rate cut is looking much more likely this side of Christmas following the US Federal Reserve slashing American interest rates by 50 basis points.”

Mr Cooke said less savings might lead people to rely on credit cards, loans, and buy-now-pay later products “to get by”.

“These products can be great if used properly; however, they can quickly get out of hand if relied on for everyday expenses,” he said.

The RBA on Tuesday indicated further rate rises could be in play.

“The board is not ruling anything in or out. Policy will need to be sufficiently restrictive until the board is confident that inflation is moving sustainably towards the target range,” the RBA statement said.

It warned there was a “high level of uncertainty” on future rate decisions, and while other central banks had begun cutting rates, the RBA remained “alert to risks” and “geopolitical uncertainties remain pronounced”.

The board reiterated “returning inflation to target within a reasonable timeframe” was its highest priority, stating underlying inflation, currently at 3.7 per cent, was still too high.

Originally published as ‘Millions of Aussies are under significant financial stress’: Experts warn personal debt could soar