My Bui

Over the last cycle, so basically between 23 and 25, the RBA basically high to raise massively from basically around 0% to 4.35%.

And if you think about that increase, a lot of us were thinking that, you know, that would break the market because it adds so much to the monthly mortgage payment if you don't fix your mortgage interest rate.

But it didn't seem like it was particularly damaging to the economy, really.

Yes, the economy slowed, but the number of delinquencies didn't rise that much.

So I would say that the backbone of that is just basically a strong labor market, as we have mentioned just now.

If you still have the jobs, people would try to basically make ends meet.

They might try to cut down on other fund purchases, so travels, dining out to just pay for the mortgage.

I think, you know, on an individual level, remember that, you know, if you have mortgage stress, people can definitely call the bank, you know, negotiate, say maybe a longer repayment period that can lower your monthly mortgage payments.

You can try to go interest only for a certain amount of time that can alleviate that monthly mortgage payment as well, because the bank really doesn't want you to default on the mortgage.

So that's something you can do as an individual if you're under stress.

Yes, the economy is definitely slowing and obviously our recession probability has gone up, but there's always some recession probability at any time in Australia.

It already ranges around 10 to 15%.

Right now, we say that the recession probability will probably go up to around 30% with rate hikes, as well as with all the developments coming out of the Middle East war.

But let's also look at things into context here.

The GDP growth number was softer, and that was on the quarterly basis of 0.3% quarter on quarter.

But over the last year, we've grown about 2.5%.

So that's actually a pretty decent pace for a developed country like Australia.

It's actually higher than the potential growth rate that the RBA estimates for Australia, which is only about 2% to 2.2%.

So we're actually growing a bit faster than what we should be growing as.

And the reason why the RBA has to hike rates further this year is actually because businesses can actually put up prices because, again, the consumers were actually starting from a strong base, so they can take some of the price highs.