RBA says eschewing debt helps handle house price falls: Tweet of the day

“Ongoing consolidation of household balance sheets would be desirable from a financial stability perspective, as it would make indebted households better able to cope with any future income shock or fall in housing prices,” the RBA says in its September Financial Stability Review.

The review notes that households continue to save around 9.5% of their disposable income “well above its level of five to 10 years ago … partly been motivated by a desire to rebuild wealth following the falls in asset prices over recent years”.

The RBA says household and business sectors have continued to display a “relatively prudent approach towards their finances in recent quarters”.

“Many households continue to prefer saving and paying down their existing debt more quickly than required, which has contributed to household credit growth being more in line with income growth in recent years.

“Although there are some isolated pockets of weakness, aggregate measures of financial stress remain low,” says the RBA.