The economy is gripped by confusing cross-currents. On the one hand, the Reserve Bank of Australia’s modelling suggests that more than 15 per cent of all borrowers have negative cash flows, which means their incomes are not sufficient to cover their mortgage repayments.
As tighter monetary policy inexorably asphyxiates vulnerable sectors of the economy, cracks are beginning to appear. After defying gravity for so long, massively overvalued commercial real estate prices are plummeting, forcing some real estate funds to Coolabah has previously quantified that these buffers are worth about 20 per cent of annual household income and are surprisingly evenly distributed among young and old and rich and poor. Our analysis also implies that the Aussie buffers are much larger than those in the US and Europe.that was extended to a larger sample of countries.
Contrary to hedonistic hopes for quick financial fixes, the inflation data released this week reiterated this point. Zooming out to consider inflation over the first half of this year, one finds sticky core inflation annualising at 4.3 per cent, notably still miles above the RBA’s de facto 2.5 per cent target.