John Howard was relaxed and comfortable. Homeowners mortgaged to the hilt were quite the opposite. The banks were preparing to rake in even more from us. And Treasurer Peter Costello seemed uncomfortable defending it all.
The Reserve Bank's decision yesterday to raise interest rates took no one by surprise. Governor Glenn Stevens flagged it even before new figures showed underlying inflation has edged just above the Reserve's target zone of 2-3 per cent.
We've all done our calculations, and know what it will cost us. For homeowners, mortgage bills will now rise by a quarter of a percentage point. The banks' standard home loan rate will jump to 8.07 per cent, its highest level since February 1997.
But then, households owed $195 billion on their mortgages. Now they owe more than $800 billion. Household incomes have risen 75 per cent, but mortgage bills have quadrupled.
This interest rate rise is going to hurt more people than any since 1994. The statistics show a rapidly rising number of mortgage defaults by borrowers, and repossessions as banks take over homes and sell them off.
In contradiction to Howard's public ravings about interest rates, Reserve Bank figures show that the effect of interest rates on households now, at 8 per cent, is very much higher than the effect on households when rates were 17 per cent under Keating.
The reason for this is simple. Household debt has almost tripled as a percentage of family income since 1989, when interest rates were 17 per cent. At that time housing interest payments made up 6.1 per cent of household disposable income. Now they make up 9.1 per cent of household disposable income.
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