One of Anthony Albanese’s most senior ministers has issued a grim warning about mortgage strains in Australia’s most unaffordable cities.
Unemployment in January rose from 3.9 percent to a two-year high of 4.1 percent after just 500 new jobs were created during the month.
Treasurer Jim Chalmers blamed higher interest rates, after the Reserve Bank in November raised the cash rate for the 13th time in 18 months to a 12-year high of 4.35 per cent.
“This is also the inevitable consequence of higher interest rates, persistent inflation and global economic uncertainty,” he said.
One of Anthony Albanese’s most senior ministers has issued a warning about mortgage stress and Treasurer Jim Chalmers (left) points this out
Dr Chalmers also issued a warning about borrowers in cities such as Sydney, where the median house price is $1.395 million.
“Firstly, it is not unusual for the makeup of a slowing economy to look different in different parts of Australia,” he said.
“Certainly those parts of Australia that are most exposed to mortgage pressures disproportionately feel the pain when interest rates rise.”
When Labor came to power in May 2022, banks offered variable rates starting with a “two”, but they have since risen to well above six per cent, leading to a 69 per cent rise in payments monthly mortgage payments.
Borrowers with an average mortgage of $600,000 have seen their payments increase from $2,300 to $3,900.
But in New South Wales, the average new loan is $785,405, meaning someone with a 20 per cent deposit would be paying for a $981,756 house.
Dr Chalmers blamed higher interest rates for Australia’s rising unemployment rate
That means borrowers in Sydney’s southwest, in places like Liverpool, would have seen their monthly payments rise from $3,000 to $5,100.
New South Wales also had the second largest increase in unemployment in Australia, with the unemployment level rising from 3.4 per cent in December to 4.1 per cent in January.
Tasmania’s unemployment rate rose to 4.5 per cent, up from 3.6 per cent, in a state where incomes are lower than the rest of Australia.
Credit rating agency Moody’s Analytics is particularly concerned, and economist Sarah Tan predicts that high immigration will no longer result in strong job growth.
“Cracks are emerging in the Australian labor market,” he said.
Since May 2022, borrowers have seen a 69 per cent increase in their monthly mortgage payments, impacting areas of south-west Sydney where homes typically cost around $1 million (file image) .
‘We expect employment to increase in 2024.
‘However, population growth is likely to offset these gains, resulting in a higher unemployment rate.
“We expect the unemployment rate to reach 4.5 percent by the end of 2024.”
If that prediction comes to fruition, Australia would have 666,086 unemployed in a workforce of 14.8 million.
The number of unemployed rose by 22,300 in January to 600,600, Australian Bureau of Statistics figures released on Thursday showed.
Australia’s net overseas migration level reached a record 518,000 in 2022-23, spanning the year to June.
It slowed to 447,790 in the year to December, but was still double the pre-pandemic level of 194,400.