Slower population growth could ease interest rate pressure

Monday 17 May 2010

Article by Mozo

Australia’s population growth is set to slow over the next two years, thereby easing the upward pressure on interest rates, new research has suggested.

A study by economic research firm BIS predicts that while Australia’s population growth was a strong 2.1 per cent in 2008-09, a fall in net migration over the next two years will see the country’s population grow by 1.5 per cent in 2010-11 and 1.3 per cent in 2011-12.

Jason Anderson, a senior economist at BIS, claimed that this slower rate of growth could help the Australian economy by reducing inflationary pressures and therefore interest rates.

"We should expect to see some dampening of household spending growth but there should also be some alleviation of inflationary pressure that has resulted from the strong demand growth for domestic goods and services," said Mr Anderson.

"In terms of the housing sector, shortages will remain and there will be less upward pressure on interest rates."

Rising interest rates in recent months have served to compound debt problems for a growing number of Australians. Data released earlier this month by the Victorian Sheriff’s Office showed that an average of one home per day is now being repossessed in the state as a result of rising mortgage repayment costs.

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