First News
Volume:8, Number:01
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Business & Finance 4

Australia’s Central Bank Frets on Financial Stability as Household Debt Mounts

Australia’s central bank has stuck to its upbeat tune on economic growth, but heightened concerns about financial stability suggest interest rates will remain at record lows even as policy makers abroad turn hawkish. Minutes of the Reserve Bank of Australia’s (RBA) June meeting showed soaring household debt in the country’s red-hot property market and weak wages growth were at the forefront of policymakers’ minds. The central bank last cut interest rates in August 2016 to an all-time low of 1.50 percent. It has since stood pat, balancing the risk of record high household debt against tepid inflation and weak consumer spending. Australia’s household sector is under severe strain with debt-to-income at a record high 189 percent while wages are crawling at the slowest pace ever. The share of national income going to households has shrunk to its smallest since 1964 while the savings rate has fallen to a 10-year low.

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