To make ends meet means “to pay for the things that you need to live when you have little money.“
With the inflation genie still out of the bottle, how are Aussie families going to make ends meet?
What was the latest monthly figure on inflation?
The monthly CPI indicator annual movement rose 6.8% in April, up from 6.3% in March. The annual movement for the monthly CPI, excluding volatile items and holiday travel, rose 6.5% in April, down from 6.9% in March. This series excludes fruit & vegetables, automotive fuel and holiday travel and accommodation.
Fuel, Food and mortgage payments will the breaking points.
Compared to April last year, borrowers are paying an extra $1133 in monthly mortgage payments, or a whopping 54 per cent more. The latest figures are suggesting a further increase is on the cards when the reserve bank next meets.
- An estimated 867,000 Australians were working multiple jobs in the December quarter
- The Australian Bureau of Statistics says it was the highest number of people working more than one job since it began keeping such records in 1994, according to a report by the ABC.
What are we likely to face over the next 12 months around the world?
US Economy – Under Pressure, slowing growth
According to the International Monetary Fund (IMF), the baseline forecast is for growth to fall from 3.4 percent in 2022 to 2.8 percent in 2023, before settling at 3.0 percent in 2024. Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023. In a plausible alternative scenario with further financial sector stress, global growth declines to about 2.5 percent in 2023, with advanced economy growth falling below 1 percent. Global headline inflation in the baseline is set to fall from 8.7 percent in 2022 to 7.0 percent in 2023 on the back of lower commodity prices but underlying (core) inflation is likely to decline more slowly. Inflation’s return to target is unlikely before 2025 in most cases.
Interest rates globally
Overall, authorities suggest that once the current inflationary episode has passed, interest rates are likely to revert toward pre-pandemic levels in advanced economies. How close interest rates get to those levels will depend on whether alternative scenarios involving persistently higher government debt and deficit or financial fragmentation materialize.
Soaring Public Debt
With the recent headlines surrounding the fiscal dilemma facing Victoria, soaring public debt is a real issue all around the world. Public debt, as a ratio to GDP, soared across the world during COVID-19 and is expected to remain elevated, posing a growing challenge for policymakers, particularly as real interest rates are still rising across the world.
When a country is in debt distress, a comprehensive approach that combines significant debt restructuring — renegotiation of terms of servicing of existing debt — fiscal consolidation, and policies to support economic growth can have a significant and long-lasting impact on reducing debt ratios.
Finally, economic growth and inflation have historically contributed to reducing debt ratios.
Supply chain fragmentation
Supply-chain disruptions and rising geopolitical tensions have brought the risks and potential benefits and costs of geoeconomics fragmentation to the center of the policy debate. Foreign direct investment (FDI) multilateral efforts to preserve global integration are the best way to reduce the large and widespread economic costs of FDI fragmentation.
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