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Why households are shrinking

The cost of new homes has also risen 3.3%.

“Construction input costs, such as timber, have increased due to supply disruptions and shortages,” said Michelle Marquardt, head of price statistics at ABS. “Coupled with a high level of building activity, this saw the rise in prices communicated to consumers.”

The better news is that food prices are up only 1.3% and fruits are cheaper (down 8.3%). Buying clothes is also cheaper (down 5.5 percent) as struggling retailers try to sell excess inventory.

Reserve Bank of Australia Governor Philip Lowe explains that the rise in the annual consumer price index is due to changes in household spending patterns during the blockade.

“Rather than traveling, going to the gym, or eating out, I bought home-use products, such as setting up a home office and buying home exercise equipment.

“As a result, consumption patterns have changed unprecedentedly and are resonating with the global economy as a whole,” says Rowe.

However, Matt Gourdnov, senior economist at the Australian Institute, expects supply chain problems to be resolved next year and overall inflationary pressures to ease.

“Price pressure is temporary and it is unlikely that a bottleneck will continue in the supply chain,” he says.

“The best scenario is to return to the pre-pandemic situation where wage stagnation was seen for eight years,” he says.

Still, there is growing concern that the discount rate may need to be raised to put a brake on rising inflation in the RBA. If a bank’s interest rates rise in line with the hike, it can put mortgage stress on homeowners with a lot of heavy debt.

“There are a lot of people [property] In today’s market, where interest rates are very low, we will have a hard time if interest rates rise in the future, “Grudnov said.

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Financial regulars are already intervening to require banks to demonstrate that new borrowers can make higher mortgage repayments if interest rates rise.

More than one-fifth of new mortgages approved in the June quarter account for more than six times the borrower’s income, increasing medium-term risk to financial stability, according to Australian health regulators. Indicates that you are.

Gross agrees that mortgage stress can occur, but points out that the RBA is reluctant to raise interest rates while wage growth remains weak. He also hopes that the real estate market boom will ease.

“After all, if wages aren’t growing and borrowing capacity remains limited, there will be a shortage of people willing to pay $ 1 million for homes, and eventually real estate prices will be limited,” he said. Says.

Why households are shrinking

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