Risky debt could magnify a downturn in Australia, RBA deputy … – The Sydney Morning Herald

The Reserve Bank’s second-in-command Guy Debelle says risky borrowing is more likely to accelerate an economic downturn, rather than become its trigger.

“If a negative shock were to hit the Australian economy, particularly one that caused a sizeable rise in unemployment, then the risk on the household balance sheet would magnify the adverse affect of that shock,” deputy governor Mr Debelle said in a speech discussing the impact of lending restrictions on Thursday.

“This would have first order consequences for the economy and hence also for monetary policy.”

Guy Debelle, the Reserve Bank's deputy governor, has warned Australians' excessive debt could escalate a downturn.

Guy Debelle, the Reserve Bank’s deputy governor, has warned Australians’ excessive debt could escalate a downturn.Credit:Louise Kennerley

Australian regulators tightened lending as investors poured into property, taking advantage of record-low interest rates. The measures limiting the availability of credit have weighed on the market, with a slide in housing now in its second year. Prices in Sydney and Melbourne were down 7.4 per cent in October from a year earlier and 4.7 per cent, respectively.

Autralia economy news

Leave a Reply

Your email address will not be published. Required fields are marked *