Reserve Bank assistant governor Christopher Kent has used a speech to argue there are growing signs the bank’s high interest rates are working.
The Reserve Bank’s big increase in interest rates is already reducing inflation and will continue to do so as Australian home buyers lose a record share of their take-home pay to mortgage repayments, according to a senior member of the bank.
Kent, in a speech outlining the various ways higher interest rates work through the economy, said that in Australia one of the most significant impacts was through variable interest rates on home mortgages. Kent said compared with previous periods when the Reserve Bank lifted interest rates, the impact on the economy of the current episode had been slightly delayed due to the large number of Australians who took out fixed-rate mortgages from 2020 to 2022.This large proportion of fixed-rate loans was now ending, which meant the proportion of household take-home pay required to cover mortgage repayments was climbing.
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