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Research shows Aussies’ confidence in the economy remains stagnant  - featured image
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Research shows Aussies’ confidence in the economy remains stagnant 

key takeaways

Key takeaways

46% of Australian adults are not confident in the Reserve Bank and government’s ability to ease inflation this year.

In November 2022 the results were similar with 44% of Australians having a vote of no confidence showing Aussies’ confidence in the economy remains stagnant despite inflation easing slightly and a steady cash rate.

Mortgage holders and renters are bearing the brunt of inflation with confidence in their own financial position lacking compared to homeowners who own their home outright.

Australians are showing no signs of improved optimism about the Reserve Bank of Australia (RBA) and the government’s ability to ease inflationary pressures and the cost of living this year, according to new research from Canstar.

The sentiment survey conducted in August 2023 canvassed the opinions of over 2,600 Australian adults finding 46% have no confidence in the RBA and Government being able to ease inflation and bring down the cost of living this year.

In November 2022 the results were similar with 44% of Australians having a vote of no confidence showing Aussies’ confidence in the economy remains stagnant despite inflation easing slightly and two consecutive months of a steady cash rate.

Canstar’s Group Executive for Financial Services and finance expert, Steve Mickenbecker says,

“The last couple of months’ inflation figures have given the Reserve Bank a level of confidence that it can at least pause cash rate increases.”

In spite of the good news of slowing inflation, 46 percent of Australians are not confident that the Reserve Bank and government can bring inflation under control.

That level of confidence is even lower amongst mortgage holders with one in two doubting the government and Reserve Bank’s power to ease cost of living pressures.

With annual inflation falling below five percent in July and the June quarter results released a month earlier showing a 0.8 rate, it suggests another few quarters of similar results will have inflation on track to reach the Reserve Bank’s target two to three percent band.

There are still inflationary pressures and borrowers understandably are still fearful that interest rate shocks can still emerge, and with each 0.25 percent hike lifting the repayment on a $500,000 loan by around $80 the fear is well justified.

Repayments have already gone up by $1,217 to $3,320 and there are high levels of stress.”

Change in Home Loan Monthly Repayment Due to Cash Rate Rises

Apr-2022

Aug-2023

Total Change

+0.25%

Potential Total Change

$500,000

$2,103

$3,320

+$1,217

$3,404

+$1,301

$750,000

$3,154

$4,980

+$1,826

$5,106

+$1,952

$1,000,000

$4,205

$6,640

+$2,435

$6,808

+$2,603

Source: www.canstar.com.au. Monthly repayment calculations based on a loan repaid using principal & interest repayments over a total loan term of 30 years. Calculations assume a pre-May cash rate average variable rate of 2.98% (based on owner occupier, variable loans on Canstar's database, available for a loan amount of $500,000, 80% LVR and principal & interest repayments; excluding introductory and first home buyer only loans), with increases in rate based on applying the applicable increase in cash rate.

Mortgage holders and renters bearing the brunt of inflation

One-third (33%) of Australians say they feel stressed or uneasy about their own personal finances right now, however, it is mortgage holders and renters who are feeling the least confident about their situation.

Mortgage holders are bearing the brunt of the rate rises with 32% saying they currently feel uneasy or stressed about their finances, yet even more renters are feeling the pinch with close half (49%) of them reporting uneasiness or stress when it comes to their finances.

The interest rate storm has bypassed homeowners without a mortgage with just 18% feeling any uneasiness or stress about money.

“Stress levels amongst mortgage holders have intensified, with 28 percent of borrowers saying they are living beyond their means and 32 percent saying they are stressed or uneasy about their personal finances,” comments Mickenbecker.

“The cracks are starting to appear, with lenders reporting higher thirty-day arrears in loan repayments, and with close to one-third of borrowers reporting that they are living beyond their means, the problems are only just starting.

“The housing crisis is finding victims at all levels, with renters feeling the pain even more as four in ten report that they are living beyond their means.

“Relief may be on the way with each of the big four banks forecasting at least one cash rate cut next year. This should flow through quickly to mortgage holders and provide much-needed stress relief, however, renters may be feeling the pinch for longer as they have to await the expiry of their current lease to see any rent reduction.”

Some tips to boost confidence in your own personal finances

Canstar suggest:

  1. Renegotiate or switch - Cutting your household bills can add up to substantial savings. It comes down to asking for a lower rate or discount on your home loan, electricity and gas bill, insurances, and more. If your provider doesn’t come to the table with a better offer then shop around for a better deal.

  2. Consolidate your debts - Move all your debts to one manageable place that’s going to cost you less, whether that’s a 0% balance transfer offer on a credit card, a personal loan with a lower interest rate or if you have equity in a property you could merge your debts into your home loan. It’s a good idea to continue to clear the debt as quickly as you can so it doesn’t cost more in interest over the longer term.

  3. Build an emergency fund - Canstar’s research shows that one in two Australians worry about their debt every month. Having a backup plan by way of an emergency fund can help alleviate the stress when times get tough so you’re not having to resort to putting expenses on the credit card. A good rule of thumb is to have the equivalent of three months’ worth of regular expenses saved.

About Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.
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