In the midst of Australia’s cost-of-living crisis, Treasurer Jim Chalmers (pictured above) has issued a stark warning for homeowners grappling with mortgage stress, especially in the nation’s least affordable cities.
Chalmers pointed to recent interest rate hikes by the Reserve Bank—13 increases in 18 months, reaching a 12-year high of 4.35%—as a primary driver of mounting mortgage stress.
This surge in rates, coupled with persistent inflation and global economic uncertainty, is impacting homeowners, with those in cities like Sydney facing disproportionate pain due to their higher median house price of $1.395 million.
“First of all, it's not uncommon for the composition of a slowing economy to look different in different parts of Australia,” Chalmers said. “Certainly, those parts of Australia which are more exposed to mortgage pressures feel the pain disproportionately when interest rates go up.”
The transition from variable mortgage rates starting with a “two,” when Labor came into power in May 2022, to now exceeding 6% has led to a dramatic 69% increase in monthly mortgage repayments.
Homeowners with an average mortgage of $600,000 have seen their repayments jump from $2,300 to $3,900. In New South Wales, where the average new loan is $785,405, borrowers are experiencing even steeper increases, pushing monthly repayments from $3,000 to $5,100.
With unemployment rising to 4.1% in January and the number of jobless Australians increasing to 600,600, the economic outlook appears grim.
Moody’s Analytics voiced considerable concern, projecting an uptick in the unemployment rate by the end of 2024, notwithstanding anticipated gains in employment.
“Cracks are emerging in the Aussie labour market,” said Sarah Tan, Moody’s Analytics economist. “We expect employment to make gains in 2024. However, a rising population is likely to outweigh those gains, resulting in a higher unemployment rate. We expect the unemployment rate to reach 4.5% by the end of 2024.”
Australia's net overseas migration soared to a record 518,000 in the 2022-23 fiscal year ending in June, then moderated to 447,790 by December, yet remained twice the pre-pandemic figure of 194,400.
If Moody’s Analytics’ prediction comes to pass, Australia could see its number of unemployed individuals reach 666,086 within a labour force of 14.8 million, Daily Mail Australia reported.
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