Recent reads on sentiment are showing a deeply pessimistic consumer, particularly following the further November rate increase by the RBA. Whilst sentiment is low and consumer spending is falling, the supportive backbone has been employment.
The Australian economy is showing resilience considering the extent of rate increases. Despite labour market surveys always being retrospective, an unemployment rate of only 3.7% has been the support — but must be closely monitored. Wage growth is finally running at or above CPI for many workers for the first time in years, which should provide some offset to debt-servicing pressure.
Mortgage rollover risk remains the dominant macro risk for Australia in 2024. Roughly 40% of fixed-rate borrowers will roll into materially higher variable rates over the year. The income shock is meaningful, but spread over time and partially absorbed by buffer balances.
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