Treasurer Jim Chalmers says the worst of the inflation crisis is over, despite new evidence showing one in two ns are cutting back on groceries.
The government has hailed the latest data showing headline inflation in the December quarter fell to a near four-year low of 2.4 per cent.
‘The worst of the inflation challenge is now well and truly behind us, and that’s one of the reasons why we are confident but not complacent about the economy in the year ahead,’ Dr Chalmers told reporters on Wednesday.
‘Now the soft landing that we have been planning for and preparing for is now looking more and more likely.’
But those with a mortgage are still really struggling with a new Your Mortgage poll of 1,049 home borrowers showing a third of them had been unprepared for the Reserve Bank’s 13 rate hikes in 2022 and 2023.
Among this group of unprepared borrowers, almost half or 48 per cent of them had cut back on spending for essential items, like groceries and power bills despite the federal government’s $300 electricity rebates.
Almost three-quarters, or 72 per cent of this group surveyed in November and December, had cut back on non-essential discretionary items like dining out and travelling.
A third or 31 per cent of struggling borrowers had increased their working hours while 13 per cent regularly skipped meals.
Older borrowers who bought their home at least 25 years ago were particularly vulnerable because they were the least prepared for the aggressive rate hikes.
‘This could suggest that older homeowners are more financially vulnerable to rate increases due to fixed or reduced incomes,’ the Your Mortgage report said.
‘Though, it’s also worth noting that Baby Boomers more broadly were the least likely group to report not being prepared for rate hikes.’
Among the struggling borrowers, one in 10 had missed a monthly mortgage repayment or applied for financial hardship help from their lender.
A rate cut couldn’t come soon enough with three of ‘s Big Four banks – Commonwealth, Westpac and now NAB – forecasting a rate cut on February 18 when the RBA meets again.
A cut to the existing RBA cash rate of 4.35 per cent would mark the first monetary policy easing since late 2020 during the Covid pandemic.
Headline inflation, also known as the consumer price index, has been within the Reserve Bank of ‘s two to three per cent target since the September quarter of last year.
Underlying inflation without volatile items, known as the trimmed mean, in December dropped to a three-year low of 3.2 per cent.
But easing inflation has failed to translate into support for the government, with Labor trailing the Coalition in multiple opinion polls, suggesting it is likely to lose the next election due by May.
‘We know that people are still under pretty substantial pressure in their household budgets, and we know that even when these national economic numbers get better and better, we know that that doesn’t always automatically translate into how people are feeling and faring in the economy,’ Dr Chalmers said.
A quarter of a percentage point rate cut would save an average borrower $100 a month on mortgage repayments, based on a typical $642,121 home loan.