We are a proud member of the Financial Services Online network!
Connect with us on your favourite social media platform for the latest financial news, views, tips, tricks, resources and information.
A significant contributor to this decline has been the household sector. By the second quarter of 2024, there was a notable 2.4% reduction in real per capita household consumption from its peak level.
Alarmingly, real per capita household disposable income experienced an even steeper drop, plunging by approximately 8%, as shown in national accounts data. This marks the largest recorded decrease in Australia’s history.
In its latest economic outlook, encapsulated in the Red Book for October, Westpac predicts a slow recovery process from this recession. They highlight the harsh fall in per capita disposable income, which their analysis pegs at a dramatic 10% drop.
According to Westpac, “The combined effect of rising income tax payments, higher interest and the surge in inflation has produced a 4.8% drop in aggregate terms since Sep 2021 and an eye-watering 10% plunge in per capita terms.”
Westpac draws a stark comparison to the early 1990s recession, stating, “That is about double the size of the decline seen during the recession in the early-1990s (when the average mortgage interest rate was 15% and the unemployment rate spiked 4ppts on its way to an eventual peak of over 11%).”
There is a slightly improving consumer mood, bolstered by tax cuts and other governmental aid, and an optimistic shift in expectations for interest rates. “The consumer mood has become considerably less bleak, buoyed on the one hand by the additional cash in hand as tax cuts and other support measures flow through, and on the other by turning expectations for interest rates.”
Commenting on consumer sentiment, Westpac notes, “The most striking sentiment shift over the last three months has again been around consumer expectations for interest rates. The Westpac-Melbourne Institute Mortgage Rate Expectations Index fell by a third between July and October.”
Despite these modest shifts in consumer sentiment, Westpac cautions that full economic recovery may proceed at a gradual pace. “The medium-term recovery process looks likely to be a slow one,” they warn.
Factors contributing to this sluggish recovery include a gentle easing cycle by the Reserve Bank of Australia, the slow rebound of household disposable incomes, and reduced use of savings reserves accrued during the COVID-19 pandemic. Additionally, deceleration in population growth poses another challenge.
Ultimately, Westpac concludes that despite some encouraging developments, the path to consumer recovery remains extensive. “Despite some more promising signs, the consumer recovery still has a long way to go.”
These insights and forecasts, grounded in Westpac’s research and national data, highlight the complex road to recovery facing Australia today, encouraging consumers and policymakers alike to brace for a protracted economic landscape.
Published:Friday, 1st Nov 2024
Source: Paige Estritori
| Overheads on Enhanced Vetting Could Ratchet Up Wholesale Fund Costs 07 Nov 2024: Paige Estritori The prospect of intensified scrutiny in confirming wholesale investor status could potentially tip the balance of competitiveness away from wholesale funds. According to recent commentary from the Financial Services Council (FSC), implementing added verification processes might impact these funds' ability to compete effectively. - read more |
| RBA Chief Under Fire: Decision on Rate Cuts in the Spotlight 07 Nov 2024: Paige Estritori Reserve Bank of Australia (RBA) Governor Michele Bullock is set to face intense scrutiny over the central bank's conservative approach to cutting interest rates, as apprehensions about inflation persist in Australia. During a regular parliamentary session, Bullock’s policies will draw pointed questions from lawmakers. - read more |
| The Dwindling Australian Dream: Home Ownership Beyond Reach? 06 Nov 2024: Paige Estritori Recent insights from PropTrack have painted a bleak picture of Australian housing affordability, reaching unprecedented lows. In a market where a typical household makes just over $112,000 annually, a mere 14% of homes sold are within their budget. This dwindling accessibility starkly highlights the challenges for would-be homeowners today. - read more |
| CFS Launches New Advisory Initiative with Viridian 05 Nov 2024: Paige Estritori Colonial First State (CFS) is reshaping personal finance support by engaging with Viridian Advisory. This initiative aims to aid FirstChoice superannuation, pension, and investment members seeking guidance without ongoing financial advisement. The collaboration brings a novel approach to receive one-time, topic-focused advice tailored to individual needs. - read more |
| NSW Takes Decisive Steps Against Unlawful Merchant Fee Practices 04 Nov 2024: Paige Estritori The New South Wales (NSW) Government is taking robust measures to rectify years of unlawful merchant fee surcharges on customer transactions. Despite ongoing legal concerns, these fees persisted for nearly a decade, a legacy of policy directives laid out by the former Liberal-National government. - read more |
| Planning for a Better Future: Exploring Refinancing Options for Aussie Homeowners As a homeowner in Australia, it is essential to stay informed about the current mortgage interest rate and inflation situation. This knowledge is crucial for effective financial planning and making informed decisions regarding your home loan. Understanding the impact of rising interest rates on Australian homeowners is particularly important. - read more
|
| Unlocking the Hidden Value of Your Mortgage Offset Account A mortgage offset account is a financial product that allows homeowners to use their savings to reduce the interest charged on their mortgage. It is a transaction account linked to your mortgage, and the balance in this account is offset against your outstanding mortgage balance when calculating interest charges. - read more
|
| Interest Rates and Investment Properties: What Aussie Investors Need to Know For potential and seasoned investors alike, the Australian property landscape offers a plethora of opportunities. Investment properties have long been a favored asset class in Australia due to the potential for capital growth and rental yield. However, diving into the property market without a solid understanding of the financial mechanics, specifically interest rates, can be akin to sailing without a compass. - read more
|
| Top 10 Mistakes First-Time Home Buyers in Australia Should Avoid Embarking on the journey to buy your first home is both an exciting and significant milestone in Australia. However, the process is also complex, and the learning curve can be steep for first-time home buyers. Being thoroughly informed is key to navigating the housing market's intricacies and can help elude the common missteps that befall many novices. - read more
|
| The Investor's Toolkit: Managing Risks in Investment Property Financing Welcome to our comprehensive guide on navigating the complexities of investment property financing. In Australia, property investment has long been regarded as a favoured strategy for wealth creation and financial security. However, this path comes with its unique set of challenges and risks that must be carefully managed to ensure a successful investment journey. - read more
|
|
Take Back Control: Mortgage Refinance and Debt Consolidation Tips for Aussie Homeowners As mortgage interest rates continue to rise in Australia, it's becoming more important than ever for homeowners to take control of their finances. This article will provide valuable tips on mortgage refinance and debt consolidation for Aussie homeowners. With the potential for future rate increases by the Reserve Bank of Australia due to inflation concerns, many homeowners are feeling the financial burden. However, by exploring options like refinancing and consolidating debt, homeowners can regain control of their financial situation. - read more
|
|
|
Top 10 Mistakes First-Time Home Buyers in Australia Should Avoid Embarking on the journey to buy your first home is both an exciting and significant milestone in Australia. However, the process is also complex, and the learning curve can be steep for first-time home buyers. Being thoroughly informed is key to navigating the housing market's intricacies and can help elude the common missteps that befall many novices. - read more
|
|
The Insider’s Guide to Reducing Mortgage Stress and Staying on Track Mortgage stress is a common concern among homeowners worldwide, with the potential to cause significant financial and emotional strain. It often occurs when mortgage repayments consume a large portion of your income, leaving little room for other expenses and causing anxiety over financial security. The impact of not managing this stress can be far-reaching, affecting not only one's financial health but also overall wellbeing. - read more
|
|
Avoiding Common Pitfalls: How to Streamline Your Home Loan Pre-approval Stepping into the realm of homeownership begins with a critical financial milestone: securing home loan pre-approval. This inaugural step paves the way for homebuyers to gain a clear understanding of their borrowing capacity, directly influencing their purchasing decisions. In Australia, where the real estate market teems with competitive energy, effective navigation through the pre-approval process offers a competitive edge. - read more
|
|
|
Interest Rates and Investment Properties: What Aussie Investors Need to Know For potential and seasoned investors alike, the Australian property landscape offers a plethora of opportunities. Investment properties have long been a favored asset class in Australia due to the potential for capital growth and rental yield. However, diving into the property market without a solid understanding of the financial mechanics, specifically interest rates, can be akin to sailing without a compass. - read more
|