Latest News
Hot Issues
How crypto assets can trigger CGT tripwires
ATO targets dodgy deductions for holiday homes
Tips for small business owners
About the working from home safety and wellbeing checklist
Countries with the highest GDP per capita between 1800-2040
Downsizer age reduction now in force
Raids stop $33m in tax avoidance, ATO claims
100A ruling leaves trust decisions haunted by ‘uncertainty’
A 2022 Advent Calendar for our clients
Difference Between Leasing vs Hire Purchase
How Have Australians Reacted to Interest Rate Hikes?
FBT – Christmas Parties and Taxi Fare/Rideshare
Employee Christmas Parties and Gifts – Any FBT?
Big-end-of-town tax: miners, banks pay up, but for one-third it’s zip
Cash flow forecasting template
Buyback law closes loophole ‘but franking credits here to stay’
Budget October 2022-23-Comprehensive summary
Federal budget 2022 -- Winners and Loser
Federal Budget 2022/23 - Documents and Facts Sheets
Budget: all the key points you need to know
Sole traders cut back super, work longer hours
Small business debt and tax gap at top of ATO hit list
Christmas ‘crunch time for economy, inflation outlook’
Articles archive
Quarter 4 October - December 2022
Quarter 3 July - September 2022
Quarter 2 April - June 2022
Quarter 1 January - March 2022
Quarter 4 October - December 2021
Quarter 3 July - September 2021
Quarter 2 April - June 2021
Quarter 1 January - March 2021
Quarter 4 October - December 2020
Quarter 3 July - September 2020
Quarter 2 April - June 2020
Quarter 1 January - March 2020
Quarter 4 October - December 2019
Quarter 3 July - September 2019
Quarter 2 April - June 2019
Quarter 1 January - March 2019
Quarter 4 October - December 2018
Quarter 3 July - September 2018
Quarter 2 April - June 2018
Quarter 1 January - March 2018
Quarter 4 October - December 2017
Quarter 3 July - September 2017
Quarter 2 April - June 2017
Quarter 1 January - March 2017
Quarter 4 October - December 2016
Quarter 3 July - September 2016
Quarter 2 April - June 2016
Quarter 1 January - March 2016
Quarter 4 October - December 2015
Quarter 3 July - September 2015
Quarter 2 April - June 2015
Quarter 1 January - March 2015
Quarter 4 October - December 2014
How Have Australians Reacted to Interest Rate Hikes?

Interest rates have been on the rise in Australia, and this has caused a lot of concern among consumers. Many people are worried that they will not be able to afford their monthly mortgage payments, and some are even considering selling their homes.


In this blog post, we will take a closer look at how Australians have reacted to interest rate hikes and discuss the pros and cons of these increases.

Initial Reactions

So far, the reaction to interest rate hikes has been mixed. Some people feel like the banks are taking advantage of them, while others believe that the economy must recover.

There are pros and cons to higher interest rates, and it is difficult to say whether or not they are good for the economy. What is certain is that they are causing a lot of financial stress for many Australians. If you are struggling to keep up with your mortgage payments, it is important to speak to your bank or financial advisor about your options. 

There may be some relief available, and getting advice from a professional is important before making any decisions about your finances. 

Increasing Mortgage Stress

Undoubtedly, interest rate hikes have triggered an increasing level of mortgage stress for Australians. Mortgage payments are rising, and many people are struggling to keep up with their monthly bills. This has led to an increase in people defaulting on their loans, which has a ripple effect on the economy. 

In some cases, people are forced to sell their homes at a loss in order to pay off their debt. This is not only devastating for the individual families involved, but it also has a negative impact on the property market as a whole.

Increase in Loan Refinancing

Additionally, refinancing rates have shot up, as people scramble to switch their loans for better repayment terms and flexibility. According to the Sydney Morning Herald, more than a million homeowners have refinanced their home loans in the past year. 

For more information on how refinancing can help stave off the impacts of rising interest rates, check out this resource by Joust.

Decrease in Spending

Higher interest rates also mean that people will have less money left in their household budget to spend on other things. Not only does this cause strain on mortgage repayments, it also means there's less money available to funnel into the economy through regular commerce. 

Recent data shows that Australians have been spending less on entertainment, recreation and eating out since interest rates began rising earlier in the year. Clothing and essential items such as food and petrol have not seen a significant decrease in spending. However, this can put even more pressure on household budgets because inflation in essential items has been rising much faster than in non-essential items.

On the other hand, to bring inflation back under control, it is necessary to slow down consumer spending. This is so that the demand can become more on par with the available supply. If people continue to spend money at the same rate as they have been, prices will continue to increase, and we will experience more inflation. Higher interest rates act as a brake on spending, which can help to bring inflation under control

Higher interest rates also help to do this by making it more expensive to borrow money. This then encourages people to save, which in turn reduces the amount of money that is available to be spent. This can positively affect the economy as a whole, as it helps reduce the amount of debt in the system and promote sustainable economic growth.

According to CNBC, Australians were well placed to manage the effects of the interest rate rises due to a buffer of savings due to the pandemic and a tight labour market. A high percentage of Australians were already ahead on their mortgage repayments and so may find it easier to stay on top of their loan. This is likely to help the economy recover more quickly from the interest rate rises.




Lucy Mitchell
24 November 2022

Privacy Policy | Disclaimer