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"
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