ABS

Nearly nine in 10 older Australians believe they’ll still be paying off a mortgage when they retire, and most are preparing for lifestyle downgrades, as new AMP research shows rising household debt levels are threatening the “Australian dream”.

The value of Australian’s superannuation pool rose to a record high of $3.62 trillion in the June quarter, a highlight of the managed funds industry’s surging overall performance over the past year as rising rates and rebounding markets improved asset values.

Australian consumers are showing real signs the largest and longest rate hiking cycle in 30 years is starting to bite. It might be the proof the RBA needs to see that its fight against inflation is working, adding further weight to the theory that rate rises are behind us.

One of the most surprising outcomes from the better-than-expected August reporting season was the strong performance of consumer discretionary retailers, as Australians continued to weather higher interest rates and inflation better than many analysts had feared.

Recently released wages data increased the likelihood the RBA will pause its rate hiking campaign for the near term, economists say. Meanwhile, an increase in full-time employment, and the wages they earn for it, has helped narrow Australia’s gender wages gap to its lowest-ever level.

Corporate profit growth is expected to moderate, especially in sectors focussed on consumer sales, and mining companies have seen large downgrades. Meanwhile, markets are still not fully pricing in the high risk of recession, some analysts say.

Rate hikes are causing anxiety for Australian mortgage holders, with new research showing seven out of 10 worry about missing repayments. As large numbers of fixed-rate mortgages expire, analysts say distressed property selling is likely to pick up from its thus-far benign levels.

The March quarter’s Selected Living Cost Indexes – which include mortgage costs, giving a fuller view of inflation’s real impact than the Consumer Price Index – show employee households and mortgage holders both saw record increases in their cost of living. And with rate hikes continuing to flow through the economy, more pain is on the horizon.

Most borrowers have continued to service their debts despite rising interest rates, while the strong labour market has underpinned income growth. However, as debt levels rise, the share of Australian mortgage holders with disposable income is dropping, according to a new report.

Recent buyers of homes are at the greatest risk of negative equity, and the rising interest rate environment increases the likelihood that some homebuyers will default on their loans. With Australia’s large cohort of new homeowners, that could lead to losses for the big banks.