As the Australian economy continues to befuddle investors and punters, we asked the experts what Aussies can actually expect to happen in the world of money over the coming months…
The Australian economy is in a pretty funky spot right now. The cost of living has ballooned as a result of surging global inflation and interest rates are being cranked up by the RBA while housing prices continue to pump upwards.
The price of stocks and other investable assets are tumbling and rumours of a “post-election housing crash” are doing the rounds – creating a strange environment where there’s seemingly no good place for everyday people to keep their money safe.
Financial anxiety is high as Australians everywhere are wondering what on Earth is going to happen to the economy in the coming months. So to clear up the uncertainty, DMARGE decided to ask around and figure out what the real experts think the future has in store for Aussies.
Speaking to Brodie Haupt, the co-founder of digital lending provider WLTH, we asked where he thinks interest rates are headed in the long term.
Haupt said that he expects the RBA’s current “tightening cycle” to continue to around mid next-year, as interest rates begin to increase:
“In the short term, I expect the cash rate to reach the 1% mark by the end of 2022, with the first 0.15 per cent increase to come as early as May. The tightening cycle may continue till around mid 2023 and hover around the 1.25 – 1.50 per cent range, as long as inflation fits into the target band and falling unemployment softens the blow from higher interest rates.”
Haupt added that while long-term predictions about interest rates are hard to predict, potential borrowers will need to keep a close eye on the cash rate moving forward.
“In the long term, it is really difficult to predict. While I don’t think interest rates will reach those record-lows we’ve experienced during the pandemic, the RBA needs to take into account the higher debt-to-income ratio many Australians generally have. Australia hasn’t seen a cash rate rise in over a decade, so new borrowers will need to make the necessary preparations.”
When asked about whether or not the Australian housing market is primed for a downturn, Haupt was confident that while the market may slow down, he doesn’t believe that a real crash is likely.
“I don’t envisage that there will be a housing crash anytime soon.”
“Australia has multiple housing markets, each with varying factors affecting it. The Sydney market, in particular, may slow down but remain on an upward trend as history would show.”
Haupt also noted that the recently-introduced First Home Buyers Guarantee was a good move from the government for solving some of the housing affordability problems. The 2021 Federal Budget outlined that it would be increasing the number of guarantees under the Home Guarantee Scheme to 50,000 per year for 3 years from 2022 and then 35,000 a year ongoing to support homebuyers to purchase a home with a lower deposit.
“This will assist homebuyers to purchase or build a new home without the restriction of lenders mortgage insurance, meaning they can borrow up to 95 per cent of the properties value without having to pay Lenders Mortgage Insurance (LMI). This helps more buyers get into properties with less deposit and buy or build their first home sooner.”