19 June 2012

Finally there is an acknowledgement in the financial media that not every Australian has a home loan hanging over their heads like the sword of Damocles. According to the Australian Bureau of Statistics, approximately one third of Australian adults rent their home, one third have a loan on their home and the other third own their own home outright. So while one in three adults are saddled with housing loans, most of the other two thirds are either saving up for a deposit to buy a home or are saving for their retirements.

As pointed out by Don Stammer in this article in today’s Australian newspaper, many more Australians benefit from an interest rate rise than from a fall. The only reason why the press seems to focus solely on the benefits of falling interest rates is that home loans are often quite substantial relative to the borrowers’ net worth. Yet as the demographics of Australia inexorably shift to reflect an aging population, there will come a time where there is a considerable net gain for the population at large from an interest rate rise. Quite possibly we are there already but the media is bound to cling to its aversion to rate rises for many years to come.