RBA says households to revaluate the risks of having highly leveraged balance sheets

RBA says households to revaluate the risks of having highly leveraged balance sheets
RBA says households to revaluate the risks of having highly leveraged balance sheets

The RBA boss says it is highly probable that the severe shocks we are now experiencing will change the mindsets of some people and businesses.

"Even after the restrictions are lifted, it is likely that some of the precautionary behaviour will persist," Dr Philip Lowe said in a speech today giving an economic update.

"In the months ahead, we are likely to lose some businesses, despite best efforts, and some of these businesses will not reopen.

"There will also be a higher level of debt and some households might revaluate the risks of having highly leveraged balance sheets.

"It is also probable that there will be structural changes in the economy.

"We are all learning to work, shop and travel differently.

"Some of these changes will probably stay with us, requiring a rethinking of business models.

"So the crisis will have reverberations through our economy for some time to come," Dr Lowe said.

"On the optimistic side, the restrictions could be lifted more quickly, with the virus being contained.

"In that case, a stronger recovery could be expected, particularly in light of the very large monetary and fiscal support that is in place.

"On the other hand, if the restrictions stay in place longer, or they have to be reimposed, the recovery will be delayed and interrupted.

"In that case, the loss of incomes and jobs would be even more pronounced.

"Whatever the timing of the recovery, when it does come, we should not be expecting that we will return quickly to business as usual.

"Rather, the twin health and economic emergencies that we are experiencing now will cast a shadow over our economy for some time to come."

Tags: 
Rba/philip Lowe Rba Insights

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