Young Australians are being “crushed” by rising interest rates, while baby boomers are enjoying a new payday, a leading real estate agent has claimed.
The Reserve Bank last week raised its interest rate for the 13th time in 18 months, to 4.35 per cent, its highest level in 12 years, leaving many mortgage holders struggling to meet their refunds.
It came in the same week that two of Australia’s big banks posted record profits of more than $7 billion each.
Michael Pallier, director of Sydney Sotheby’s International Realty, said “the younger generation is really hit hard at the moment”.
“It’s not the old generation,” Mr. Pallier told 60 Minutes.
“The older generation benefits because a lot of them have money in the bank and are living off their investments – they have a pay rise. The younger generation is really struggling.
Young Australians are being ‘crushed’ by rising interest rates, while baby boomers enjoy a new payday, a leading real estate agent has claimed (stock image)
He added: “The poor are crushed. »
Mr Pallier said he had seen many young workers try to do the right thing and climb the property ladder, only to find themselves over-indebted and unable to cover their mounting bills.
“A lot of young people went into the market listening to the then Governor of the Reserve Bank tell them that you will be safe, that rates probably won’t rise for two or three years and they immediately thought that it “It was a good thing. It was a good time to enter the market and then rates started to rise,” Pallier said.
“They are really the victims.”
One of those people is Kelly Travers, 30, who is working three jobs to try to avoid defaulting on her apartment loan in Sydney’s west.
The elite kayaker, who was representing her native New Zealand and hoping to win a place at the Olympics, was forced to make the devastating decision to sell some of her kayaking equipment to free up funds.
“I work, I sleep, I eat and that’s it,” Ms Travers told the programme.
“It’s not sustainable in the long term, but it’s what I have to do to pay the bills right now.”
Although she works three jobs, seven days a week – babysitting Monday to Friday, then babysitting and working at a gym on the weekends – more than 60 percent of Ms. Travers’ income is devoted to his mortgage.
“It doesn’t include council rates, it doesn’t include strata, it doesn’t include any bills,” she said.
“Every day I go to work and this financial stress is so heavy it honestly makes me want to cry.”
The Reserve Bank raised its interest rate for the 13th time in 18 months last week, to 4.35 per cent, its highest level in 12 years, leaving many mortgage holders struggling to meet their refunds.
But Baby Boomers Are Laughing All The Way To The Bank, Says Top Real Estate Agent
The latest cash rate hike is expected to add another $200 to his mortgage.
Meanwhile, banks continue to benefit from rapidly rising interest rates.
Last week, NAB recorded a cash profit of $7.7 billion, while Westpac returned some of its surplus funds to its shareholders after recording a huge increase in annual net profit to $7.2 billion. dollars.
The Melbourne Cup Day interest rate hike was aimed at stemming rising inflation, with the Consumer Price Index (CPI) rising 5.4 per cent for the year to September.
This is only a slight change from the 6 per cent annual pace recorded in the June quarter.
In a worrying sign, the RBA now expects inflation to return to the peak of its 2-3% target at the end of 2025 instead of June 2025.
“Since its August meeting, the board has received updated information on inflation, the labor market, economic activity and the revised set of forecasts,” said Michele Bullock, the new governor of the Reserve Bank.
“The weight of this information suggests that the risk of inflation remaining high for longer has increased.”
But respected economist and former government chief economic adviser Stephen Koukoulas said he believed the Reserve Bank had “gone too far”.
“They didn’t need this latest interest rate hike because the economy is slowing and inflation is falling,” Koukoulas said on the show.
“The RBA interest rate hikes were sufficient before last week’s rate hike, the economy was reacting to previous rate hikes, so in a sense they are overprescribing medicine for a problem that is already in crisis. being resolved.”
Mr Koukoulas, who advised former Prime Minister Julia Gillard and was chief economist at Citibank, warned that repeated interest rate rises could tip the economy into recession.
“There is a real risk that the RBA has overestimated interest rates, tightened interest rates too much and the economy experiences a hard landing,” he said.
The contrast was drawn between young and middle-aged people paying off mortgages or struggling with higher rents, and baby boomers with large savings and valuable real estate assets (pictured, a bartender from Sydney).
“The reason we economists focus on recessions and really hate them is because they cause economic hardship for people, they cause people to lose their jobs – it’s a horrible thing – and they cause people to lose their jobs – it’s a horrible thing – and “They cause businesses to close.”
Mr Koukoulas warned that the risk of a recession was “50-50”.
Ms Bullock, who became the first woman to become an RBA governor when she took over from Philip Lowe in September, suggested last week that baby boomers were to blame for Australia’s cost of living crisis.
Michele Bullock, herself a baby boomer, warned inflation would stay “high for longer” and blamed older Australians as the RBA interest rate climbed by a quarter of a percentage point to reach a 12-year high of 4.35 percent.
She did not mention her generation by name, but saw it as responsible for maintaining high inflation, with the 18 percent interest rates of 1989 now a distant memory for older post-war Australians. war.
The contrast was drawn between young and middle-aged people paying off mortgages or struggling with rising rents, and baby boomers with large savings and valuable real estate assets.
“The outlook for household consumption also remains uncertain, with many households facing painful financial difficulties, while some benefit from rising house prices, large savings reserves and higher interest income. high,” Ms. Bullock said.