“A small but rising share of borrowers are on the cusp,or in the early stages,of financial stress. While almost all borrowers have been able to make adjustments that have allowed them to continue servicing their debts and cover essential spending,the share falling behind on their mortgage payments has begun to pick up from a low level,” it said.
“Most borrowers have been able to make adjustments to their finances as required,including by restraining their discretionary consumption,reducing their savings rates or even drawing down their stock of savings,and increasing hours worked.
“Incidences of severe financial stress are expected to increase but remain limited to a small share of housing borrowers.”
The bank said there was growing evidence of people making relatively small withdrawals from their accounts,a sign they were using the money for regular bills rather than spending on large discretionary items such as holidays.
The Reserve Bank board held official interest rates at 4.1 per cent at its meeting this week,which was the first held under new governor Michele Bullock. The bank believes most borrowers could withstand another half percentage point lift in their borrowing costs.
According to the bank’s report,the nation’s strong jobs market – with unemployment at 3.7 per cent – is providing key support to financially stretched borrowers.
The Reserve is expecting unemployment to drift up to 4.5 per cent by the end of next year as higher interest rates affect the economy.
The bank said about a third of all home buyers had sufficient financial buffers to cover their mortgage payments and essential expenses if they lost their job. But 40 per cent of borrowers would run out of cash within three months if they were made unemployed.
The Reserve’s report also highlights a growing risk to the federal government’s plans to boost home construction across the country.
Loading
Almost 30 per cent of insolvent companies are in the construction sector,with a similar percentage suffering from negative cash flow. The number of builders falling behind paying their bills to suppliers has also increased over recent months.
Treasurer Jim Chalmers said the report was a reminder of the ongoing pressures facing the global financial system and world economy.
“In the face of the challenges coming at us from around the world,Australia’s resilient labour market and well-regulated financial system are among our strengths,” he said.
Separate figures released by the Finance Department on Friday revealed the federal budget has slipped back into deficit after a $22.1 billion surplus across the 2022-23 financial year.
For the first two months of the current financial year,the budget was in the red by $7.1 billion. Despite the deficit,on a pro-rata basis it is $4.4 billion ahead of what was expected to the end of August.
Personal income tax collections are $3.3 billion better so far this year,while indirect tax collections are $1.3 billion ahead of expectations.
In May,Chalmers forecast a deficit of $13.9 billion for 2023-24.
Cut through the noise of federal politics with news,views and expert analysis.Subscribers can sign up to our weekly Inside Politics newsletter.