Four hikes, but spending still grows

Interest rates have risen to fifteen year highs and are pushing up mortgage default risks. Yet household spending is still growing, surprising economists who expected the opposite.

The RBA's goal: cut spending and prices

The Reserve Bank increased its key cash rate to cut household spending and discourage businesses and workers from seeking higher prices and wages. It aims to bring inflation back under three percent.

Eight months in, spending accelerated

Eight months on from the year's first rate rise in February, Australian household spending has accelerated, up nearly seven percent compared with a year ago, according to Australian Bureau of Statistics estimates.

Offset accounts are massive buffers

Warren Hogan, managing director of EQ Economics, says offset accounts have reduced rates' effect on cashflow. Australians now hold nearly three hundred fifty billion dollars in total in offset balances.

“You just didn't have the same amount of capacity to pay off earlier and have offsets accounts and all that sort of thing.”

Debt free homeowners are spending more

One in three households own their home debt free and benefit from higher interest on their savings. Commonwealth Bank data shows older Australians and debt free homeowners have steadily increased spending this year.

House price falls should slow spending

A ten percent fall in housing prices, expected by mid twenty twenty seven, will cut consumption by one point five percent, according to RBA research.

“We're probably not seeing a major effect yet, but in theory, it should be starting to happen.”

Currency gains are being offset

The Reserve Bank says higher interest rates push up the Australian dollar, making imports cheaper.

“We're raising rates, but so is everybody else.”

Jobs market remains surprisingly strong

Interest rate rises aim to push up unemployment, but the hikes have had little effect this year. Health and care sectors have rapidly hired thanks to bigger demand and government subsidies.

RBA governor wants jobless rates to rise

Michele Bullock has said she wants to see a small increase in jobless rates so there is less pressure from wages on prices, drawing criticism from unions.

More rate rises may be coming

Markets expect only one more rate rise and not until May twenty twenty seven. But Deutsche Bank strategist Lachlan Dynan warns rate rises' weaker effects add to the risk of another hike.

“Risks to RBA rates are back to being skewed to the upside in our view.”