The governor of the Reserve Bank has made the stunning claim that renters and low income households are better off today than they were two years ago.
Michele Bullock said renters had more cash to spend as of June 2023 compared with December 2021 in her first full speech since taking over the job five weeks ago.
That is despite recent data showing median rents went up in the vast majority of Australian suburbs in the past year, including hikes of up to 30 per cent in some inner-city areas.
But Ms Bullock maintained that even allowing for rapidly rising rents and repeated inflation hikes, renters have more cash available in a speech on monetary police to the 2023 Commonwealth Bank Global Markets Conference.
The reason renters are better off, she said, is that their improved incomes have more than compensated for extra costs.
Australia’s renters have improved cash flow now compared with 2021, despite high rents, said RBA governor Michele Bullock
The reason renters are better off, Ms Bullock (pictured) said, is that their improved incomes have more than compensated for extra costs
That extra income was driven by a labour market desperate for workers and recent increases in low incomes.
The unemployment rate fell in September to 3.6 per cent, mainly because fewer Australians looked for work. Ms Bullock has acknowledged that rate is expected to increase to around 4.5 per cent by late 2024.
From July 1, the Fair Work Commission raised Australia’s minimum wage to $882.80 per week or $23.23 per hour.
Award minimum wages increased by 5.75 per cent.
Renters are also doing better in terms of available cash than people with mortgages, Ms Bullock claimed.
‘Households with a mortgage have experienced a significant decline in spare cash flows, unlike other households [for whom] higher interest costs have reduced their cash flow by more than the rise in inflation has,’ Ms Bullock said.
‘By contrast, the spare cash flow of renters has, on average, risen a little as high inflation and rising rents have been more than offset by growth in income.’
Ms Bullock became the first woman to hold the role of RBA chief when she took over five weeks ago.
Her comments appear at odds with the experiences of many renters, with the nation widely acknowledged as being stuck in a rental crisis that shows no signs of improving.
Rental properties have been extremely difficult to find and secure for years now and since the pandemic ended, tenants have been hit with a barrage of rent increases.
In September CoreLogic said the national vacancy rate fell to a new record low of 1.1 per cent as the total number of rental listings fell to its lowest level for 11 years.
Low vacancy rates tend to push up the cost of renting a home.
That is because agents can set higher prices with high demand and desperate tenants offer above advertised rates as they try to get their applications accepted.
Nationally rents grew 12.2 per cent in capital cities in the year to September, according to PropTrack.
In Sydney the increase was 18.2 per cent, in Melbourne it was 13.3 per cent and 14.9 per cent in Perth.
Australia’s low vacancy rates are blamed on a combination of record high immigration and low building activity.
Only 175,000 homes were built in Australia for 12 months to March 2023, while the population increased by 563,000.
Australia’s latest inflation figures are due for release on Wednesday morning.