RBA FSR: Vulnerabilities in household debt, housing have increased

Alongside the release of the Australian March employment report, we had the publication of the RBA Financial Stability Review (FSR), with the key headlines (via Reuters) as under:

Vulnerabilities in household debt, housing have increased

RBA says risks are more to the economic outlook than to financial institutions

Regulators watching bank lending carefully, ready to tighten rules further if needed

Rising debt makes households more vulnerable to potential income falls, higher interest rates

Regulators focused on interest only loans, which risk amplifying a downturn in home prices

Investor lending, home prices up sharply in Sydney and Melbourne, mixed in rest of country

Mortgage buffers high overall, but one third of borrowers have no buffer or less than 1 month repayment

Risk of apartment oversupply in some cities, challenging for builders and developers

Australian financial system in good shape overall, banks profitable and well capitalised

Banks will likely need to raise more capital in coming years to be "unquestionably strong"

High valuations in commercial property mean leveraged investors vulnerable to price falls

Local banks have curbed lending for commercial property, Asian banks stepped in to lend more

RBA sees limited risk in shadow banking sector at moment, but watching carefully

Financial stability risks remain elevated in China, debt at very high levels