ANZ bank analysis predicts wages growth and built-up savings during the pandemic will help cushion any impact of future interest rate rises.

Senior economist Adelaide Timbrell expects wages to continue to accelerate throughout any future interest rate hike cycle.

“We expect that unemployment will continue to fall, reaching a five-decade low of 3.3% later this year,” she says.

“This means that some of the impact of higher interest payments and reduced borrowing capacity will be offset by higher household incomes as interest rates rise.”

Timbrell says rate rises do not always result in lower property prices. She says between 2002 and 2008 when rates were rising, house prices increased by more than 50%.

“While we don’t expect to see such a strong run of housing prices through the impending tightening cycle, we do expect the correction in housing prices to be a moderate one, especially when compared with the rapid housing price growth over the last two years,” she says.