Analyst Note| Nathan Zaia |
Australian major bank CEOs, the International Monetary Fund, and even the Australian federal treasurer have sounded the alarm about the risks to the financial system due to households taking on more debt. With the Reserve Bank’s cash rate target at 0.1%, it’s never been cheaper to borrow money. With homeowners taking on more debt and sluggish wages growth, the risks to financial stability from an economic shock continue to rise. Hence, we think the Australian Prudential Regulation Authority, or APRA, will introduce macro prudential measures to slow the rise in high debt/income loans in coming months.