Boomers hidden face of Australia’s rental crisis with former Reserve Bank board member tipping four rate hikes

Baby boomers are the hidden face of Australia’s rental crisis — and now landlords face being squeezed, with a former Reserve Bank board member warning of four rate hikes in the coming year.

Australians aged over 67 now make up the biggest group receiving Commonwealth rent assistance, with age pension recipients making up almost a quarter of those needing help to pay a landlord.

Revelations of the aged renting crisis comes as tenants face having fewer choices with investors potentially forced to sell. In that environment, former RBA board member Warwick McKibbin is predicting four 25 basis point rate increases in 2026 and 2027.

This would see the RBA cash rate rise to 4.6 per cent for the first time since November 2011 with inflation well above the central bank’s 2-3 per cent target.

“Monetary policy in Australia is currently too loose, and as a result, inflation is high and rising,” he said on Friday.

Professor McKibbin, whose wife Renee Fry-McKibbin is on the RBA’s monetary policy board, said the neutral rate of monetary policy, where it was neither stimulating nor curbing demand in the economy, was much higher than the existing 3.6 per cent Reserve Bank cash rate. Government spending is also fuelling inflation.

“With inflation at 3.8 per cent, the neutral policy rate today is likely to be even higher,” he said.

“A neutral policy rate in the medium term should be approximately 4.5 per cent.

“With a large and growing fiscal stimulus, rising input costs, and low productivity growth, excess demand will continue to drive up prices.”

Boomer renters

While the older generation were able to buy houses cheaply during the 1980s and 1990s, many would now be financially struggling if they didn’t get into the housing market or are divorced.

They are also often too old to get into a share house, meaning they have to have their name on a lease to qualify for the maximum $215.40 a fortnight rent assistance payment to cover a minimum fortnightly rent of $439.20.

Unlike younger people, older Australians often found it hard to live with strangers, Everybody’s Home spokeswoman Maiy Azize told The Nightly.

“Many people who are older are probably past the point where want to be doing that or can be doing that,” she said.

“It’s competitive, it’s hard, there’s age discrimination, you’re probably not going to be living with people who are peers in terms of your age.

“If you didn’t buy and you’re renting, that’s one of the biggest indicators that you’re going to struggle when you get older because the rental market isn’t really designed for older people and the age pension is certainly not designed for renters.”

Age pension recipients, who have to be at least 67, made up 23.7 per cent of those getting Commonwealth rent assistance during the last financial year, new Productivity Commission figures show.

This made them by far the biggest group getting rental help on top of their Centrelink benefits ahead of those on Jobseeker unemployment benefits (21.8 per cent), disability support pensioners (21.4 per cent), single parents getting welfare (12.1 per cent), minimum-wage earners with children getting a family tax benefit (8.7 per cent) and carers (6.4 per cent).

Younger age groups, who are more likely to be in a share house, were barely represented in the figures with students and apprentices on the Youth Allowance making up 2.9 per cent of recipients.

The Federal Government spent $6.4 billion on Commonwealth rent assistance in 2024-25.

As of June last year, 74.8 per cent of low-income households would have experienced rental stress without this help, the Productivity Commission report said.

But 43 per cent of low-income households getting Commonwealth rent assistance still experienced rental stress during the last financial year.

Landlords

Investor activity in the property market is still strong, last year growing by 8.5 per cent, following three rate cuts in 2025, RBA credit data released on Friday showed.

“We’re seeing much stronger capital growth in the lowest value of properties on the urban fringes,” Cotality’s head of research for Australia Gerard Burg told The Nightly.

But should rates increase again, potentially as soon as next Tuesday, higher repayments could force landlords to sell, potentially leaving renters with fewer options in a tight rental market where building activity is failing to keep pace with population growth.

“That’s a possibility,” Mr Burg said. “In that sort of environment, expect vacancies to remain around historic lows.”

Investors can borrow more than owner-occupiers, because they can rely on rental income to pay off a mortgage, but rate rises could squeeze them financially if they are unable to put up the rent under various state laws.

Australia had a particularly tight rental market with just 1.4 per cent of investment properties available on the market in December, SQM Research data showed.

Renters wanting to buy may have a harder time getting into the property market with new rules coming into force on Sunday restricting the proportion of loans with debt-to-income ratios of six or more to 20 per cent of all loans in a bid to cool an overheating property market.

The Australian Prudential Regulation Authority could announce more restrictions this year, Mr Burg said.