RBA governor warns some Australians will have to sell their homes.
Reserve Bank governor Michele Bullock has warned some Australians will have to sell their homes to cope with high inflation and interest rates amid business fears they may have to restructure their operations and lay off staff to survive.
Lower-income Australians were likely to have to dip into their savings or buy lower-quality goods to help make ends meet. She said the bank believed about 5 per cent of people with a variable-rate mortgage were already facing a “cash-flow shortage” as their essential spending and loan repayments were more than their income.
GDP?figures this week revealed the economy's annual growth of just 1 per cent, is its worst performance since the 1990-91 recession.
Bullock said the bank is hearing from charities that people were seeking support for the first time because of the financial pressure they were under.
“Lower-income earners have had to make quite painful adjustments to avoid falling behind on their mortgage repayments,” she said. “Younger people were the most at risk as they had lower savings to act as a financial buffer”.
“The role of interest rates is to try and temper demand. That’s what monetary policy does, and it’s working,” she said. “If we don’t get inflation down, that’s bad for everyone, absolutely everyone. So that’s the job I’m focusing on.
Australian Industry Group chief executive Innes Willox warned the business sector was struggling, The Reserve bank’s interest rate settings combined with high inflation are biting with Creditor Watch’s measure of business insolvencies now being above its pre-COVID average.
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This article is not intended to provide specific legal or financial advice, and the content contained therein is subject to change.
Martin Bailey is a Credit Representative (522104) of Buyers Choice Licencing Pty Ltd ACN 626 172 281 (Australian Credit Licence Number: 509484)
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