The large cohort of mortgage holders with fixed-rate loans, plus the significant savings buffers built up during the pandemic, will likely delay the full impact of aggressive interest rate hikes.
Reserve Bank of Australia assistant governor for financial markets Christopher Kent said these two features of the modern borrowing landscape have made it more difficult to gauge how quickly and how hard interest rates are biting.
This is complicating the matter of lifting interest rates to temper economic activity and slow inflation.
The RBA has already lifted interest rates 10 times from historic lows of 0.1 per cent to 3.6 per cent in a bid to push inflation back within its two-three per cent target range.
Dr Kent said while the high proportion of fixed rate loans and sizeable buffers held by many borrowers would most likely drag out the time it would usually take for higher interest rates to weigh on household spending, other channels of monetary policy were behaving as normal.
"For example, the sharp reduction in demand for new housing loans is in line with historical experience given the sharp rise in interest rates and the decline in turnover and prices in housing markets; the demand for new construction has also fallen noticeably," he said.
"Higher interest rates are making it more attractive to save and more costly for firms to invest; they have also contributed to lower asset prices and so lower wealth, which will impinge on households' willingness to spend," he added.
He said all these other challenges were helping to slow growth in aggregate demand and bring down inflation.
