House­hold debt fall­ing Re­serve Bank says it’s still too high

Townsville Bulletin - - Investor -

AUS­TRALIAN house­holds are sav­ing more and pay­ing down their debt thanks to a strong econ­omy but lev­els of in­debt­ed­ness re­main his­tor­i­cally high, a cen­tral bank re­port says.

In re­cent years Aus­tralian house­holds and busi­nesses had ben­e­fited from solid growth in em­ploy­ment and wage in­comes, the Re­serve Bank of Aus­tralia said in its half yearly Fi­nan­cial Sta­bil­ity Re­view.

‘‘ They are con­tin­u­ing to con­sol­i­date their fi­nances, sav­ing at a much higher rate in re­cent years and slow­ing the pace of debt ac­cu­mu­la­tion,’’ the RBA said yes­ter­day.

The cen­tral bank said that in 2010 house­holds were sav­ing 10 per cent of their net dis­pos­able in­come, which com­pared to lev­els of be­low four per cent first half of the 2001-2010 decade.

It said that a se­ries of in­ter­est rate cuts in 2008 and 2009 had en­cour­aged Aus­tralians to get ahead on their mort­gage re­pay­ments.

‘‘ Be­tween Au­gust 2008 and April 2009, the av­er­age stand a r d v a r i a b l e mort­gage in­ter­est rate fell by al­most four per­cent­age points,’’ the cen­tral bank said.

‘ ‘ There i s ev­i­dence t o sug­gest that some house­holds used this pe­riod as an op­por­tu­nity to pay down their mort­gage sched­ule.’’

The cen­tral bank pub­lished its pre­vi­ous Fi­nan­cial Sta­bil­ity Re­view in Septem­ber 2010, and since then has raised the cash rate from 4.5 per cent to 4.75 per cent in Novem­ber.

The com­mer­cial banks re­sponded to the rate hike by rais­ing their vari­able home loan in­ter­est rates by more than a quar­ter of a per­cent­age point of­fi­cial in­crease by the Re­serve.

H o w e v e r , m o r t g a g e hold­ers have coped with the in­crease, the RBA said.

‘ ‘ A r a nge o f f i nanci a l stress in­di­ca­tors show that the house­hold sec­tor is cop-

ahead

of ing rea­son­ably well with its d e b t l e v e l s a n d h i g h e r in­ter­est rates,’’ the RBA said in the re­view.

‘‘ While ar­rears rates on mort­gages are higher than the low lev­els reached dur­ing the late 1990s and early 2000s, they re­main low by in­ter­na­tional stan­dards.

‘‘ House­hold in­debt­ed­ness re­mains his­tor­i­cally high and re­cent in­creases in in­ter­est rates have lifted the ag­gre­gate debt ser­vic­ing re­quire­ment,’’ the RBA said.

The cen­tral bank warned that the im­proved debt and sav­ings po­si­tions of Aus­tralian house­holds could change if wages growth was re­duced.

GOOD NEWS: mort­gage ar­rears low by global stan­dards

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