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