The full budget impact of the second most aggressive interest rate hiking cycle in the Reserve Bank's history is still months from being felt by millions of households.
The RBA raised the cash rate target by 0.25 of a percentage point on May 3.
It then hiked the cash rate by 0.50 of a percentage point in June, July and August.
"The RBA has put through an incredible amount of tightening already in a very short space of time," the Commonwealth Bank's Head of Australian Economics Gareth Aird said.
The Commonwealth Bank is the nation's largest home lender.
Its senior economist is warning home loan customers have only felt the impact of the first 0.25 percentage point.
That's because there's a time lag – which can range from several weeks to over a month – between when the Reserve Bank announces its decision on the first Tuesday of the month and when the money is debited from the mortgagor's bank account.
"There is a lag between changes in the cash rate and the impact it has on monthly cash flow for borrowers on a floating rate mortgage," Mr Aird said.
"So there [are] three [interest rate increases] in the pipeline still to hit even if the RBA was to do nothing from here."
For a variable rate $500,000 loan, on a 25-year term, the total extra cost comes to $472 increase in monthly repayments, according RateCity analysis.
The amount taken out of the majority of bank accounts to date, therefore is only a fraction of what will soon be debited.
"At CBA, for example, by December, the impact of already announced rate rises on monthly cash flow for mortgage holders will be a four fold increase compared to July," he said.
Mr Aird believes this may explain the apparent paradox of very low levels of consumer confidence coinciding with reasonably robust levels of consumer spending.
Households going backwards financially
It was hoped the wage data from the Bureau of Statistics this week (Wage Price Index) would provide some budget relief for households in the form of higher income.
However, on Wednesday, the WPI came in at 0.7 per cent for the June quarter – the same quarterly increase as was published in December 2021 and March this year.
The WPI increased 2.6 per cent over the year.
And, again, on Thursday, the Bureau of Statistics' Average Weekly Earnings data point, which estimates seasonally adjusted average weekly ordinary time earnings for full-time adults, increased by just 1.9 per cent.
The bottom line is that the speed at which many households are going backwards financially is accelerating.
It adds to the household budget squeeze from yet-to-be-felt higher mortgage costs.
Senior ANZ Bank economist Adelaide Timbrell says, all things being equal, the growing household budget pain may persist well into 2024.
"By the end of next month, the full impact of the four rate hikes from May to August will have flowed through to all variable loans," she said.
"But much of the impact of the higher cash rates on households will be staggered between now and mid-2024, as fixed-rate loans expire and are replaced with higher-interest loans, whether those new loan structures are fixed or not."
The risk the Reserve Bank may load households with higher borrowing costs than they can withstand has several economists, including AMP's Shane Oliver, suggesting the Reserve Bank may slow the pace of its Monetary Policy tightening as early as next month.
"While we lean to the RBA hiking by another 0.5 per cent next month, we think it's a close call as to whether they hike by 0.25 per cent," Dr Oliver said.
