Fed: RBA acknowledges pressure from rate rises

AAP General News (Australia)
04-04-2008
Fed: RBA acknowledges pressure from rate rises

SYDNEY, April 4 AAP - Australia's central bank says it is keenly aware that recent
interest rate rises have put pressure on borrowers, amid a concentration of mortgage stress
in parts of Sydney's west.

Reserve Bank of Australia (RBA) governor Glenn Stevens today acknowledged that rate
hikes had put more pressure on borrowers generally.

"There's no doubt there's a significant number of people feeling pressure," he said.

"There are more of them now than a year ago because of interest rate rises."

He said the bank was very conscious of a concentration of mortgage stress in areas
of western Sydney.

"Yes, I am aware of those problems and we are conscious of that and are conscious of
the need not to inflict any more pain," Mr Stevens said.

"But we have to make an aggregate decision as a whole."

The central bank raised official interest rates in August, November, February and March
to contain inflationary pressures in the economy driven by very strong domestic demand.

"People are affected by higher interest rates - I know that," Mr Stevens said in response
to a question from the the House of Representatives joint standing committee on economics
in Sydney.

"I do not have an instrument that only affects some people and not others, and neither
does anyone else."

Mortgage stress is defined as a household spending more than 30 per cent of its income
on mortgage repayments.

But Mr Stevens said a better gauge was the old definition of mortgage stress, where
the bottom 40 per cent of income earners were spending more than 30 per cent of their
income on their home loan repayments.

"Those on a high income who choose to have a high mortgage, they could be defined as
being in stress," he said.

"There are people in mortgage stress, there are people in rental stress.

"There also has been a significant share of low income people in that position."

Mr Stevens said the public should be patient, as the central bank works to reduce inflation.

"These things take time and we have to be patient," he said.

"I think it (inflation) will come back ... I don't think you can say it will come down
very quickly or very soon."

Mr Stevens also said house prices in Australia were very high relative to household income.

"Housing prices are very, very high relative to income," he said.

He said high housing prices reflected both demand and supply issues, although the latter
was becoming more apparent.

"These supply things, the more time goes on the more it becomes apparent there are
issues there," he said.

AAP saj/klm/mn/it/de

KEYWORD: RBA STRESS

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