Real disposable income per person has fallen 7 per cent since early 2022,when the RBA started lifting interest rates,in effect wiping out the gains most households had enjoyed due to pandemic-era government stimulus,low inflation and record-low borrowing rates.
The bank this weekheld official interest rates at 4.35 per cent,saying the economic and inflation outlook was balanced in comments analysts interpreted to mean more rate rises were off the RBA’s agenda. But that changed afterstronger than expected jobs figures on Thursday,which showed the unemployment rate falling sharply to 3.7 per cent.
Despite the tight jobs market,the economy has been slowing.Growth in the December quarter was just 0.2 per cent,while in per capita terms the economy has been in recession for the past nine months.
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In its financial stability report,the Reserve Bank admitted that higher interest rates on top of inflation and a growing tax take were making life difficult for many borrowers,but said this would come to an end.
“Much of this year will remain challenging for borrowers already under pressure. The expected decline in the share of borrowers with a cash-flow shortfall only occurs later in 2024,” it said.
“The cumulative effect of moderating inflation,higher real wages and a lower cash rate over the next two years will help to ease pressure on borrowers with stretched finances.”