Households keep falling behind as rate increases bite

Many mortgage-holders are struggling to make repayments as households are hit with rising costs. (Lukas Coch/AAP PHOTOS)

Australian borrowers are feeling the squeeze with more mortgage-holders falling behind on their monthly repayments, albeit from low levels.

Yet even with higher interest rates and elevated living costs, the Council of Financial Regulators said most mortgage-holders were able to stump up the money each month by adapting their spending habits.

Treasurer Jim Chalmers said the economy was clearly under pressure from higher interest rates and that's why his government did not deliver a "slash and burn" federal budget, as the opposition called for austerity.

"People are under the pump and that’s why our budget and our economic plan is all about easing cost-of-living pressures with tax cuts for every taxpayer and energy rebates for every household and for a million small businesses," he said.

Woman in a supermarket
Cost-of-living increases continue to hamper the spending ability of Australians.

After the May budget, the government faced criticism for adding too much new spending and broad-based cost-of-living relief into the economy at a time when the central bank was trying to slow it down to tame inflation. 

Dr Chalmers said the weak growth report for the March quarter, as well as a statement from the quarterly meeting of the financial regulators, proved the budget strategy to "fight inflation without smashing the economy was right".

Shadow treasurer Angus Taylor said the government was spending too much and "slamming the accelerator" while the RBA "has its foot firmly on the brake".

"(Prime Minister) Anthony Albanese and Jim Chalmers need to take responsibility for their economic mismanagement," he said.

"Unfortunately, we continue to see them blaming everyone but themselves."

Business confidence
Business confidence has slumped as consumers tighten their belts.

With households tightening their belts and weighing on retail and other consumer-facing sectors, business confidence as tracked by National Australia Bank was knocked back into a negative reading in May from already weak levels.

NAB chief economist Alan Oster said the survey contained warning signs for weak growth but also the inflation outlook, with costs borne by firms seemingly re-accelerating.

:We have been wary for some time that the path of inflation from here is likely to be gradual and uneven and the survey results really reinforce this message," he said.

Business conditions softened further in May, reflecting sluggish economic activity as seen in the March quarter national accounts.

Mr Oster said the Reserve Bank would likely keep interest rates on hold at 4.35 per cent, where it has been for several months, "for some time yet" as it navigates these "contrasting risks".

A generic photograph of homes.
Debate continues to rage about when interest rates will be cut.

NAB, along with Westpac and the Commonwealth Bank, expect interest rates to stay on hold until cuts start late this year while ANZ revised its call on Tuesday and is pencilling in a February 2025 start for an easing cycle.

ANZ head of Australian economics Adam Boyton said there were several reasons behind the revision, including strength in the jobs market, robust government spending and more resilience in the household sector.

Mr Boyton said higher interest rates were clearly working to slow the economy but it was taking longer than expected to temper demand enough to bring it into better balance with supply, which is needed for inflation to come back to target.

Westpac economist Ryan Wells said the business survey showed little had changed from a big-picture perspective, with firms cautious about the future and feeling the impact of a slowing economy.

License this article

What is AAPNews?

For the first time, Australian Associated Press is delivering news straight to the consumer.

No ads. No spin. News straight-up.

Not only do you get to enjoy high-quality news delivered straight to your desktop or device, you do so in the knowledge you are supporting media diversity in Australia.

AAP Is Australia’s only independent newswire service, free from political and commercial influence, producing fact-based public interest journalism across a range of topics including politics, courts, sport, finance and entertainment.

What is AAPNews?
The Morning Wire

Wake up to AAPNews’ morning news bulletin delivered straight to your inbox or mobile device, bringing you up to speed with all that has happened overnight at home and abroad, as well as setting you up what the day has in store.

AAPNews Morning Wire
AAPNews Breaking News
Breaking News

Be the first to know when major breaking news happens.


Notifications will be sent to your device whenever a big story breaks, ensuring you are never in the dark when the talking points happen.

Focused Content

Enjoy the best of AAP’s specialised Topics in Focus. AAP has reporters dedicated to bringing you hard news and feature content across a range of specialised topics including Environment, Agriculture, Future Economies, Arts and Refugee Issues.

AAPNews Focussed Content
Subscription Plans

Choose the plan that best fits your needs. AAPNews offers two basic subscriptions, all billed monthly.

Once you sign up, you will have seven days to test out the service before being billed.

AAPNews Full Access Plan
Full Access
AU$10
  • Enjoy all that AAPNews has to offer
  • Access to breaking news notifications and bulletins
  • Includes access to all AAPNews’ specialised topics
Join Now
AAPNews Student Access Plan
Student Access
AU$5
  • Gain access via a verified student email account
  • Enjoy all the benefits of the ‘Full Access’ plan at a reduced rate
  • Subscription renews each month
Join Now
AAPNews Annual Access Plan
Annual Access
AU$99
  • All the benefits of the 'Full Access' subscription at a discounted rate
  • Subscription automatically renews after 12 months
Join Now

AAPNews also offers enterprise deals for businesses so you can provide an AAPNews account for your team, organisation or customers. Click here to contact AAP to sign-up your business today.

SEVEN DAYS FREE
Download the app
Download AAPNews on the App StoreDownload AAPNews on the Google Play Store