Why today's borrowers are worse off than those facing 17% rates in the early 90s | The Business

New economic analysis has found that, over the past two years, Australian households have faced tougher conditions than they did when the RBA's cash rate reached 17.5 per cent in 1989. KPMG senior economist Terry Rawnsley says Gen X households faced the toughest interest rate burden during the global financial crisis. But his analysis of Australian Bureau of Statistics data on home loans, personal loans and credit card interest payments over the past 40 years reveals that households overall have recently faced one of the heaviest interest rate burdens on record. "What we know is that the 25 to 34 and 34 to 44 age groups -- they're the ones with the biggest mortgages. They're the ones that have purchsed most recently. But also they've purchased when home loans have been much larger, so they're really feeling the bite." According to Mr Rawnsley, total interest payments on debt hit a historical low of 2.6 per cent of household income in the March quarter of 2022. But they hit a recent peak of 5.9 per cent in the December quarter of 2023 and averaged 5.8 per cent between September 2023 and March 2025. That cycle occurred when the RBA aggressively hiked the cash rate target from 0.1 per cent to 4.35 per cent. In contrast, during the 1989-90 inflation spike, total interest payments peaked at 5.7 per cent of household income in the March quarter of 1990 and averaged 5.6 per cent between September 1989 and June 1990.
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