![\"Matt](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/10\/25611a2557110140db195f09bab958d41123ba0d1fd3aea47f7432f64621ef20.png\")
<\/p>\n<\/p>\n
Updated October 1, 2026 \u2014 12:15pm,first published 11:58am<\/p>\n
Save<\/p>\n
You have reached your maximum number of saved items.<\/p>\n
Remove items from your saved list<\/a> to add more.<\/p>\n AAA<\/p>\n The risk to Australia from a major global financial shock is growing as the purchasing power of households is eroded by high inflation<\/a>, the Reserve Bank has warned.<\/p>\n The bank flagged on Thursday that first home buyers \u2013 including users of the 5 per cent deposit scheme \u2013 were most likely to be in negative equity as property prices sink and interest rates increase.<\/p>\n A shift in sentiment towards the AI investment boom, which is increasingly debt-funded and fuelled by expectations of rapid earnings growth, is a potential trigger for international economic turmoil, according to the RBA\u2019s twice-yearly review of financial stability.<\/p>\n \u201cThreats to international financial stability continue to mount,\u201d the report said.<\/p>\n It also warned the debt-financing cycle underpinning investment in AI is becoming more opaque and circular.<\/p>\n Related Article While less than 1 per cent of home borrowers are in negative equity \u2013 where the amount they owe on their loan is more than the value of their property \u2013 the bank said recent property buyers<\/a> were most likely to be in negative equity.<\/p>\n \u201cThis includes first home buyers participating in the Australian government 5 per cent deposit scheme,\u201d the report said.<\/p>\n Just over 100,000 first home buyers have used the 5 per cent deposit scheme since last October when Labor opened it up to those on higher incomes.<\/p>\n Australia\u2019s income per person \u2013 after tax and interest payments and adjusted for inflation \u2013 declined over the first half of 2026 due to higher inflation and increases in interest rates.<\/p>\n \u201cAll households\u2019 budgets have been affected by high inflation eroding purchasing power,\u201d the report said.<\/p>\n \u201cHowever, this is more likely to cause stress for lower-income households, many of whom are renters, because their expenses tend to make up a larger share of their disposable income.\u201d<\/p>\n House prices in Australia have been falling after multiple interest rate hikes this year, along with changes to the taxation of housing investment and lingering economic uncertainty caused by conflict in the Middle East.<\/p>\n<\/p>\n An RBA \u201cscenario analysis\u201d showed in the event of an overseas economic shock \u2013 where the unemployment rate increases to 6.3 per cent, inflation increases to 7 per cent and the cash rate rises to 5.6 per cent \u2013 the share of home borrowers at a higher risk of defaulting on their loans was estimated to increase to around 5 per cent, only a little higher than the last peak in 2023.<\/p>\n In this scenario, around two-thirds of these borrowers are estimated to have insufficient income to cover their expenses but have enough buffers to service their debts and essential expenses for at least six months.<\/p>\n But in a scenario where housing prices were to decline by a further 20 per cent, \u201cfew households are in negative equity\u201d.<\/p>\n On Tuesday, the Reserve Bank lifted official interest rates by 0.25 of a percentage point to a 15-year high of 4.6 per cent in a bid to dampen inflationary pressures in the economy. That followed hikes in February, March and May.<\/p>\n Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter<\/a>.<\/p>\n Save<\/p>\n You have reached your maximum number of saved items.<\/p>\n Remove items from your saved list<\/a> to add more.<\/p>\n![\"Around](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/10\/43ea926748deb3b3c9459397a18ae0d9e5c70db6.jpeg\")
Around 5 per cent of home borrowers would be at risk of defaulting on their loans if inflation increases to 7 per cent.Sitthixay Ditthavong<\/p>\n![\"Home](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/10\/77ef768d9ece5d33a4fc0f35faa5732767e0c597.jpeg\")
<\/a><\/p>\n![\"Matt](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/10\/1790830697_161_25611a2557110140db195f09bab958d41123ba0d1fd3aea47f7432f64621ef20.png\")
Matt Wade<\/a> is a senior economics writer at The Sydney Morning Herald.Connect via X<\/a> or email<\/a>.From our partners<\/p>\n","protected":false},"excerpt":{"rendered":"Updated October 1, 2026 \u2014 12:15pm,first published 11:58am Save You have reached your maximum number of saved items.…\n","protected":false},"author":2,"featured_media":911840,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-911839","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/911839","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=911839"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/911839\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/911840"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=911839"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=911839"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=911839"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}