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NSW Most Exposed to Interest Rate Rise, Treasury Modelling Finds
NSW Treasury modelling finds the state is most exposed to rising interest rates, with housing investment falling further than elsewhere in
Key points
- NSW new-mortgage repayments on a median-priced home reached 30.7 per cent of household earnings, the highest in the 32-year data series.
- Under a 1 percentage point rise held for three years, NSW dwelling commencements would fall 2.5 per cent, versus 1 per cent elsewhere.
- The Reserve Bank is expected to lift the cash rate to 4.85 per cent, the highest in 18 years, after its Tuesday board meeting.
Why it matters. Weaker stamp duty revenue is likely to worsen NSW's predicted $2.3 billion budget deficit for 2026-27, with further write-downs expected in the half-yearly review.
An internal NSW Treasury paper says the state is "particularly sensitive" to rate rises, with new-mortgage repayments on a median-priced home taking 30.7 per cent of average household earnings, the highest in the 32-year data series. Treasury modelling of a 1 percentage point rise held over three years puts NSW dwelling investment 3 per cent lower than otherwise, against 1.5 per cent for the rest of Australia.
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NSW Most Exposed to Interest Rate Rise, Treasury Modelling Finds
New South Wales is being hit disproportionately hard by rising interest rates, according to an internal NSW Treasury paper. The paper says the state is "particularly sensitive" to rate increases. New home borrowers in NSW face the nation's highest mortgage repayments, and housing investment has fallen more than in other states. Borrowers are bracing for the fifth rate hike this year, due on Tuesday. The Treasury modelling highlights the uneven impact of monetary policy across the country.