Australia’s population growth has reached a striking rate of 2.52% in the September 2023 quarter, surpassing the two-decade average of 1.51%, as revealed by the Australian Bureau of Statistics. This surge, predominantly driven by a robust migration policy post-pandemic, reflects a significant ‘catch-up effect’ after years of restricted movement.
This demographic expansion raises critical concerns about the sustainability of current immigration levels, sidelining many from homeownership due to escalating rents and house prices.
Expert Diana Mousina points out the dire need for sufficient housing and infrastructure to accommodate this growth. Without it, the strain on the rental market continues to fuel inflationary pressures, posing challenges to economic stability.
Recent reports by Reuters indicate that RBA economists have adjusted their outlook, now expecting consumer inflation to rise from 3.6% to 3.8% by mid-year, contradicting earlier projections of a decrease to 3.2% by the end of 2024. This upward revision suggests that inflationary pressures are more persistent than previously anticipated.
The financial strain is acutely felt by younger Australians, particularly those in their late twenties. CommBank iQ’s Latest Cost of Living Insight underscores a 5.1% drop in spending among the 25-29 age bracket, reflecting the broader economic constraints impacting both essential and discretionary spending. Despite this, investment in entertainment and experiences among this group has climbed by 13%, illustrating a shift in spending priorities amidst tightening budgets.
On the other hand, older Australians, particularly those over 70, exhibit a different financial demeanour. This group has shown an ability to maintain and even increase their spending levels, which have risen above the rate of inflation. This divergence in spending habits underscores the varying impacts of economic pressures across different age groups.
Looking forward, some economists maintain a cautiously optimistic view that interest rates might be lowered towards the end of 2024, specifically ANZ and Westpac suggesting a cut in November. While such a move could potentially ease the financial pressures currently felt by many Australians, especially younger homeowners and renters, there remains a risk that there could be more rate increases on the horizon.
What do you need to do?
Consider reviewing your financial plans. It’s important to understand how changes in interest rates could impact various aspects of your finances, including mortgages, loans, and investments.
At FWD Financial, we provide you with expert guidance and strategic insights to navigate these changes effectively. Reach out for a chat.
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