In 2006-07 during the global financial crisis, academics from Griffith University – J.Dodson and N.Sipe modelled the impacts on household budgets if there was a sudden increase in interest rates and the price of oil. The VAMPIRE Index results were startling. The findings detailed that households with mortgages residing in outer-suburban locations in Australian cities will be the most adversely affected by rising fuel and mortgage costs, in large part because of their exposure to housing debt and the poor quality of alternative travel modes to the private car. In contrast, wealthier inner-urban and middle-ring localities appear less likely to be vulnerable to increasing petrol and mortgage prices, due to relatively higher incomes and greater availability of public transport.
The first run of the VAMPIRE Index was undertaken during a period where the average mortgage across Australia was approximately $300,000, interest rates on mortgages were around 5.5% and oil prices around $1.3 per litre. Fast forward to 2022 an again we are experiencing a rise in interest rates and oil prices, with mortgage rates now on average around 5.7-6% and predicted to climb further, and the price of a litre of petrol skyrocketing to $1.95 per litre. Despite the similarities with 2006-07, what makes 2022 marginally different is that the average mortgage in Australia has now climbed to a staggering $550,000 with cities like Sydney and Melbourne being outliers with average mortgages of $850,000 and $700,000 respectively. The recent increases in oil prices and mortgage rates is putting households mostly on the urban fringe in severe distress with now an estimated 1 in 10 households (or 850,000 households) across Australia experiencing ‘mortgage stress’ – where more then 1/3 of a household budget is devoted to supporting mortgage payments.
The vulnerability of Australian cities to mortgage rates and the price of petrol highlights the ‘car dependency’ within Australian Cities and some of the shortcomings of urban sprawl which has made public transport unviable in most fringe areas. Combined with sustained high prices in housing means that Australia cities are extremely vulnerable and lack resilience when economic circumstances change. Curbing urban sprawl by encouraging urban consolidation (new housing in existing inner areas of the city) and dramatically increasing the level of quality public transport are two ways in which Australian cities can be more resilient in face of rising mortgage and oil costs. Increased quality public transport such as Light Rail also encourages housing diversity which can result in smaller more compact housing that is more affordable.
Cities such as Sydney and Melbourne have recognised the need to diversify its public transport offering and have been busy the last decade in introducing more Light Rail and expanding their heaver passenger rail network. Other City’s such as Perth and Brisbane have been more slow to take up Light Rail and as a result remain as Australia’s most car-dependant and suburban cities. Political will that crosses party boundaries is needed for a sustained change in transport planning for our cities which is why there is a call in some cities to have Mid Tier Public Transport strategies developed that can be supported by Federal Funding via Infrastructure Australia. Perth is one such city which is leading the advocacy for Mid Tier Public Transport with 16 Local Governments in the metropolitan area coming together to lobby the State Labor Government for a Light rail / Trackless Tram strategy that could see implementation commence once METRONET (expansion of the passenger rail network) is completed. Time will tell if our governments are listening….