Paying a high cost just to be alive now
IT is rare to live through a once-in-a-generation crisis but within the space of 12 years, most Australians have lived through the global financial crisis as well as the most recent Covid-19 pandemic.
The strategy to fight an impending apocalypse follows a ‘whatever it takes’ approach of aggressive government spending and central banks lowering interest rates with a strong emphasis on the real estate sector.
It has been a strategy that has worked as property prices have boomed with hardware sales soaring.
Cost-of-living and wage pressure has been relatively subdued over the same period despite so much cheap money circulating throughout the economy.
However, it has been hard not to notice in the past 12 month, the cost of meat, fuel, electricity, rents and fresh food all creeping higher and the same increase in wages not matching the most recent cost-of-living march.
The spectre of paying more has only added to economist speculation that the Reserve Bank of Australia will have to lift official interest rates sooner rather than later.
This will present somewhat of a shock for new entrants into the mortgage market and especially those with a variable rate loan.
The average mortgage size in Sydney for example at $770,000 ($200,000 higher than pre-covid) is now a proverbial ‘bridge too far’ in terms of affordability for most Australians.
Add in higher fuel prices at $2 per litre, supply chain shortages and heightened international tension between China, the United States and Russia, there is enough there to unsettle most households seeking a return to normality.