Invest
ANZ expects income growth to ‘cushion’ interest rate hikes
Increased household incomes will partly offset the impacts of rising interest rates, the bank has predicted.
ANZ expects income growth to ‘cushion’ interest rate hikes
Increased household incomes will partly offset the impacts of rising interest rates, the bank has predicted.
The strong outlook for employment and wage growth moving forward will cushion the anticipated lift in rates, new analysis from ANZ has predicted.
“We expect wages to continue to accelerate through the impending cash rate hiking cycle, as they did during the 2002–08 cycle,” said ANZ senior economist Adelaide Timbrell.
“Moreover, we expect that unemployment will continue to fall, reaching a five-decade low of 3.3 per cent later this year.
“This means that some of the impact of higher interest payments and reduced borrowing capacity will be offset by higher household incomes as interest rates rise.”
Ms Timbrell explained that while higher interest rates have a negative impact on house prices, rate hikes do not always lower prices.
For example, house prices rose by more than 50 per cent during the tightening cycle of 2002-08 or an average of 8 per cent year-on-year.
“While we don’t expect to see such a strong run of housing prices through the impending tightening cycle, we do expect the correction in housing prices to be a moderate one, especially when compared with the rapid housing price growth over the last two years,” she said.
High levels of household savings are also expected to lower the risk of forced selling as interest payments rise.
ANZ has predicted that the average share of household income that services interest will remain below the long-term average even as the cash rate hits 2 per cent, which the bank expects will take place by the end of next year.
Another key distinguishing factor of the impending tightening cycle identified by ANZ is the introduction of stronger regulation that reduces financial stability risk.
“The current mortgage serviceability buffer requires prospective borrowers to prove that they can afford a mortgage at 3 ppt higher than the advertised rate,” explained Ms Timbrell.
“This equates to twelve 25bp cash rate hikes and should reduce the risk of forced selling or financial instability as the cash rate rises.”
Notably, Ms Timbrell said that a small percentage point increase would have a greater impact on interest payments than seen previously, with owner occupier variable mortgage rates poised to rise by 75 per cent as the cash rate hits 2 per cent.
“This may lead to a payment shock across some households. Though for most households, strong savings and wage growth should offset this for the most part,” she said.
RELATED ARTICLES
Property
From signals to settlements: A case study in turning property insight into investable action
Investor confidence is rebuilding, first-home buyers are edging back, and governments are pushing supply — yet most property players still struggle to convert signals into decisive movesRead more
Property
Australia’s rental choke point: why record-low vacancies are now a boardroom issue
A tightening rental market is no longer just a housing story—it’s a macro risk, a labour challenge and a strategic opening for capital. With vacancies near historic lows and rents still rising, ...Read more
Property
Rents are rewriting the inflation playbook: what record‑low vacancies mean for Australian business
Australia’s rental market is so tight that housing costs are now a primary transmission channel for inflation and interest rates. This isn’t just a property story; it’s a business risk story—affecting ...Read more
Property
Off-market real estate is going mainstream — and changing the rules of dealmaking
With public listings tight and sales still climbing, Australia’s investors are shifting to off-market channels that reward speed, networks and data advantage. The playbook is closer to private equity ...Read more
Property
Australia’s rental squeeze is now a business problem: inflation, capacity and the new growth calculus
Record-low rental vacancies are no longer just a social headline – they’re reshaping cost structures, wage dynamics and capital allocation across corporate Australia. With economists warning of a ...Read more
Property
Rents Are Repricing Australia Inc: What record‑low vacancies mean for inflation, talent and strategy
Australia’s rental market has slipped into a vacancy desert, and it’s not just tenants feeling the heat. Persistently tight supply is pushing up rents, embedding services inflation and complicating ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From signals to settlements: A case study in turning property insight into investable action
Investor confidence is rebuilding, first-home buyers are edging back, and governments are pushing supply — yet most property players still struggle to convert signals into decisive movesRead more
Property
Australia’s rental choke point: why record-low vacancies are now a boardroom issue
A tightening rental market is no longer just a housing story—it’s a macro risk, a labour challenge and a strategic opening for capital. With vacancies near historic lows and rents still rising, ...Read more
Property
Rents are rewriting the inflation playbook: what record‑low vacancies mean for Australian business
Australia’s rental market is so tight that housing costs are now a primary transmission channel for inflation and interest rates. This isn’t just a property story; it’s a business risk story—affecting ...Read more
Property
Off-market real estate is going mainstream — and changing the rules of dealmaking
With public listings tight and sales still climbing, Australia’s investors are shifting to off-market channels that reward speed, networks and data advantage. The playbook is closer to private equity ...Read more
Property
Australia’s rental squeeze is now a business problem: inflation, capacity and the new growth calculus
Record-low rental vacancies are no longer just a social headline – they’re reshaping cost structures, wage dynamics and capital allocation across corporate Australia. With economists warning of a ...Read more
Property
Rents Are Repricing Australia Inc: What record‑low vacancies mean for inflation, talent and strategy
Australia’s rental market has slipped into a vacancy desert, and it’s not just tenants feeling the heat. Persistently tight supply is pushing up rents, embedding services inflation and complicating ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
