Australia's major bank frets on financial stability amid mounting household debt

Australia's major bank frets on financial stability amid mounting household debt

Australia's major financial institution ramped up its rhetoric on financial stability risks amid soaring household debt and runaway property prices, a threat, which helped ratings agency Moody's to downgrade Australia’s key banks this week.

Worries over the effects of a steep correction in the housing market mean that Australian interest rates are likely to stay at an all-time minimum of 1.50% for a considerable time notwithstanding some global major banks become hawkish.

In August 2016, the Reserve Bank of Australia reduced its interest rate. Since it has been intact, thus juggling the risks of record household debt, weak consumer spending and tepid inflation.

At their June policy gathering RBA board members spent much time talking about the relationship between financial stability as well as monetary policy. Moreover, they even looked though the academic literature and also policy experience in some countries, including the United States and Sweden.


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