RBA Financial Stability Review: Higher interest rates could hurt heavily-indebted households

Omkar Godbole FXStreet Contributor

In its 60-page Financial Stability Review (FSR), the Reserve Bank of Australia (RBA) warns that interest rate hikes could hurt the heavily-indebted households.

Key points from the FSR crossing the wires via Reuters are-

Main risks come from rising household debt amid low rates and weak income growth
Higher rates, falls in income could see some highly indebted households struggle to service debt
Tighter lending rules have curbed investor, interest-only loans
Australia's financial system remains strong and resilient
Sees signs of easing conditions in housing markets in sydney and melbourne
Large pipeline of new apartments pressuring prices in brisbane, parts of melbourne
Banks profitable, well capitalised, bad and doubtful debts around historic lows
In liaison, banks have expressed concern over the outlook for the retail sector due to increased competition as well as changing consumer preferences and the failures of some well-known retailers
Regulators seeking to strengthen bank accountability, risk controls given recent lapses
Local banks pulling back on commercial loans, asian bank lending still growing strongly
Little growth in shadow banking as yet, but an area to watch
Risk remain elevated in china given high levels of debt, opaque borrowing
Excessive risk taking in global financial markets risks a "Disruptive correction"
There are a number of policy uncertainties which if escalate could trigger a "reappraisal of asset valuations and a spike in volatility, while also weighing on the economic outlook"

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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