Central Banks

Reserve Bank of Australia Financial Stability review

  • Australian economy is improving but housing market has slowed
  • sentiment toward housing market has become more cautious, outlook subdued
  • drop in home prices to date has been small relative to previous gains
  • rapid or large fall in home prices could disrupt financial system, household finances
  • level of household debt high but does not appear to be large risk to financial system
  • debt levels could be a risk if they cause households to cut back on consumption
  • possible, but not likely, excessive tightening in lending standards could fuel housing slowdown
  • most of tightening in regulations already in place, but banks going further
  • poor culture at banks poses a reputatiional risk to their profits and resilience
  • bank misconduct a culture of putting short-term profit ahead of customer interests
  • resilience of financial system overall has improved, capital ratios are strong
  • banks’ returns on equity have declined but still high by international standards
  • persistent rise in bbsw would not be threat to financial stability, would be added cost to banks
  • risk global financial volatility could rise for number of reasons
  • trade tensions, slowdown in china could trigger global economic downturn

Headlines via Reuters 

Well, there you go. The RBA seems sanguine on domestic conditions, highlighting the risks seemingly mainly offshore. Give a nod to high debt though, as expected and as appropriate. 



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