A growing number of Australians are falling behind on their mortgage, hit by weaker house prices and high levels of debt as more signs emerge that consumers are leading the economy down.
Ratings agency Moody's on Monday reported that the number of delinquencies on residential mortgage-backed securities rose through the March quarter, with 1.58 per cent behind on their repayments, up from 1.48 per cent in the prior March quarter.
Moody's senior analyst Alena Chen said while delinquencies and defaults would remain relatively low because of Australia's stable economy and cuts in mortgage interest rates, they would grow in the short term.
She said with household debt at almost 200 per cent of annual disposable income, a large number of home owners were financially exposed.
"The increase will be because of record-high household debt levels, the conversion of a large number of interest-only mortgages to principal and interest loans and falling house prices," she said.
CoreLogic's daily house value index suggests this month's cut in official interest rates has stabilised much of the national property market, with values in Sydney up 0.3 per cent so far this month while they have been flat in Melbourne.
Sydney's weekend auction clearance rate, according to CoreLogic, is on track to be the city's best since April last year while Melbourne's is also edging up.
However, values have fallen 0.5 per cent in Brisbane and 1.1 per cent in Perth, while the length of time properties are on the market grows.
In early April, houses in Melbourne had a "for sale" sign in the front yard for a median 39 days. This week it was at 45 days, while in Sydney it is now at 49 days. Units in Perth are sitting on the market for a median 100 days.
The economic impact of cash-strapped consumers appears to be broadening out of the housing sector.
McMillan Shakespeare, a company that specialises in the leasing and management of vehicles, used a market update to the stock exchange on Monday to note it was facing "challenging conditions" in the retail car sector, with lower than expected volumes.
The annual growth in car sales, which are heavily affected by credit availability as well as broader consumer demand, has fallen to a nine-year low.
Air passenger figures from the Bureau of Infrastructure, Transport and Regional Economics on Monday also point to softness in the economy.
Passenger numbers on the Melbourne-Sydney route, one of the busiest routes in the world and heavily dominated by business travel, were 3.8 per cent down on a year ago in April, with negative annual growth for the first time since August 2012.
Over the 12 months to April, national passenger numbers rose just 0.6 per cent, the slowest rate in more than three years.
Minutes of this month's Reserve Bank of Australia board meeting, at which it sliced official interest rates to a record-low 1.25 per cent, will be released on Tuesday. They are expected to show in more detail the bank's internal debate over the timing of follow-up rate cuts.
Financial markets have fully priced in two more 0.25 percentage point rate cuts by February next year in a move that would take the cash rate down to 0.75 per cent.
UBS senior analyst George Tharenou, who believes the RBA will cut rates twice by February, said the retail sector was pointing to the economy's major issues.
"We reiterate our view the economy is still weak and needs much more stimulus," he said.
- SMH/The Age