Reserve Bank governor Michele Bullock has acknowledged the bleak reality of households struggling with high interest rates, and conceded some may “make the difficult decision to sell their homes”.
In a speech to the Anika Foundation fundraising lunch in Sydney on Thursday, Ms Bullock said the board was “very conscious” of how interest rates, currently at 13-year-high of 4.35 per cent, were affecting households and business.
She said about 5 per cent of borrowers were struggling with a “cash flow shortfall,” where essential spending and mortgage repayments were in excess of their income, with Ms Bullock admitting this group would need to make “quite painful adjustments”.
“This includes things like cutting back on their spending to the more essential items, trading down to lower quality goods and services, dipping into their savings or working extra hours.
Some may ultimately make the difficult decision to sell their homes,” she said.
“A really important point to note here, is that lower income borrowers are over-represented in the group of people who are really struggling.”
RBA governor Michele Bullock has acknowledged many are doing it tough under high interest rates but is staying firm against a cut before inflation moderates. Picture: NewsWire / Max Mason-Hubers
However, she said “inflation causes hardship too,” especially for vulnerable Australians.
“Our experience of how costly inflation can be is the reason that getting inflation back to the target range is our priority,” she said.
Inflation is currently 3.8 per cent, above the RBA’s target range of 2-3 per cent.
