The RBA has released research on the Australian banking sector's substantial exposure to the household sector and to quantify the household sector's financial resilience to macroeconomic shocks
- In Australia, the banking sector's substantial exposure to the household sector gives reason to continuously assess the financial resilience of households
- The model suggests that through the 2000s the household sector remained resilient to scenarios involving asset price, interest rate and unemployment rate shocks
- The associated increases in household loan losses under these scenarios were limited
- Results suggest that, despite rising levels of household indebtedness in aggregate, the distribution of household debt has remained concentrated among households that are well placed to service it
- In turn, this suggests that aggregate measures of household indebtedness may be misleading indicators of the household sector's financial fragility
- The results also highlight the potential for expansionary monetary policy to offset the effects of increases in unemployment and decreases in asset prices on household loan losses
