Household debt at record high, Australians warned

MELBOURNE: Household debt in Australia is at a record high and it is not in the public interest to encourage further borrowing, central bank Governor Philip Lowe said yesterday, in another sign that the bank might be done cutting interest rates for now.

The Reserve Bank of Australia (RBA) left interest rates at a record low of 1.5% at its policy meeting this month, sounding optimistic about the economy and more confident that inflation would pick up.

“There remain reasonable prospects that inflation will return to around average levels over the next couple of years,” Lowe said at a business dinner in Melbourne.

Lowe spoke about challenges to the outlook and managing them, while adding that the RBA’s central scenario for the AU$1.6 trillion (RM5.2 trillion) economy was a “relatively positive one”.

Rising household debt, equivalent to 185% of annual disposable income, needed a close watch.

“It is important that we avoid a build-up of financial imbalances in household balance sheets,” Lowe said.

“It is unlikely to be in the public interest, given current projections for the economy, to encourage a noticeable rise in household indebtedness, even if doing so might encourage slightly faster consumption growth in the shortterm.” – Reuters