The Reserve Bank of Australia meets tomorrow to decide whether or not to increase interest rates. The currency markets are betting rates are headed up. The Aussie dollar moved to 90 cents over the weekend against the greenback.
The key number for the rate decision seems to be twelve. A twenty five basis point rise in rates will move them to 7%, a 12 year high. According to David Uren in today’s Australian, it is “likely to push the average cost of debt service to a record 12 per cent of disposable income across all households in the country.”
Twelve percent doesn’t seem like a huge amount of disposable income to spend on debt service. For years, the corresponding number in the States has been about 14%. There appears to be a lot of fat in the household budget that you can cut if you really want to make your mortgage payment. Still, judging by the amount of traffic on our new message board, housing costs and interest rates are by far the largest concern for Australian DR readers.
The Daily Reckoning Australia