Stage 3 Tax Cuts Could Ease Mortgage Stress For 1.6 Million Australians: Report
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The stage three tax cuts will provide much expected relief from mortgage stress, which has been affecting 1.6 million in Australia, a report by statistics company Roy Morgan has revealed.
According to the latest figure, 30.3% or just over 1.6 million mortgage holders were at the risk of falling into stress in June, as households continued to be affected by high living costs. However, as the stage three tax cuts -- which came into effect on July 1 -- boost household finances, the level of mortgage stress was expected to reduce, 9news reported.
"Although interest rate increases would normally lead to a higher level of mortgage stress, the stage 3 income tax cuts delivered to millions of Australians in early July are set to have a larger impact in driving down mortgage stress over the next few months," Roy Morgan CEO Michele Levine said. "Even if the RBA increases interest rates by 0.25% in both August and September to 4.85%, the level of mortgage stress would still drop by 24,000 to 1,578,000 mortgage holders (29.8%) considered at risk in the three months to September 2024."
"The stage 3 income tax cuts are delivering significant financial relief, and a boost to take-home pay, for millions of Australian taxpayers – including many mortgage holders."
Levine said the strong labor market that created 673,000 jobs had "provided support to household incomes which have helped to moderate levels of mortgage stress since the highs of early 2024," The Guardian reported.
The mortgage stress level could continue to be manageable if the unemployment rate did not rise and the Reserve Bank of Australia (RBA) did not raise the cash rate.
Though there is one-in-four chance of RBA hiking the interest rate when the board meets on July 31, the inflation rate could still influence the odds if it surpassed the 3.8% CPI threshold the bank had forecast in May.
Mortgage stress rose after the RBA's 13 rate hikes, and since then the number of default payments had been on the rise. In the first quarter of 2024, the arrears increased to 1.6% from the 1% reported in September 2022. However, the figure is lower than the pre-Covid level, which was 1.8%.
"Notably, households' confidence in their current financial situation was the second highest since early-2023," ANZ economist Madeline Dunk said. "This suggests households may be starting to see a boost to their incomes from the stage-three tax cuts and other cost-of-living relief measures."
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