Australia’s RBA Lifts Cash Rate to 4.85% as Recession Fears Build
Australia's central bank raised its cash rate to 4.85 per cent this month, with inflation at 3.9 per cent. A mortgage broker and former financial adviser says households should ask a different question than whether a recession is coming.
The Reserve Bank of Australia raised its cash rate to 4.85 per cent this month, and a mortgage broker who used to work as a financial adviser says the money advice Australians want to know is about their own finances, not a recession forecast.
The question keeps coming up. A listener recently asked the broker, on a podcast, whether Australians should be preparing for a downturn.
What the data shows
Annual inflation reached 3.9 per cent in the September quarter. Unemployment averaged 4.6 per cent over the same period.
The Reserve Bank now expects unemployment to climb to 5.1 per cent by the end of 2028. The broker called that "hardly an economic outlook anyone would describe as particularly comfortable."
The economy is still growing, though. GDP rose 2.1 per cent over the year to June. The central bank's central forecasts point to slower growth rather than an outright recession.
Why income is not security
The broker argues that a recession is not felt equally. Some people will barely notice it. Others may lose jobs, watch businesses struggle or need their savings sooner than planned.
Some Australians could face serious hardship even if the economy never officially enters a recession.
The broker says years of looking at clients' finances changed how they judge wealth. Some of the most striking cases were households earning $600,000, sometimes more than $1 million a year.
On paper they were doing extremely well. Behind the scenes, mortgages were enormous and spending had grown with incomes. Some had built substantial assets but set aside surprisingly little for retirement.
Others depended so heavily on their current pay that even a short break in income could have forced hard decisions. "I’ve met people who could afford almost anything, except the freedom to stop working," the broker wrote.
Choices, not headlines
The broker stressed the point is not to criticize those clients. Lifestyles expand easily as income rises, especially when the people around you do the same. A large mortgage is not necessarily a problem if income and financial buffers can support it.
The takeaway the broker offers is personal. "I’m far more interested in whether someone has choices," the broker said.
Even economists using sophisticated forecasting models cannot say with certainty what happens next, the broker noted.
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