Most Australian households and businesses remain able to service their debt, despite the tough economy, according to the Reserve Bank of Australia (RBA).
“Strong conditions in the labour market, the large savings buffers accumulated by many borrowers during the pandemic and rising housing prices are helping households to adapt to challenging economic conditions,” the RBA said in its latest Financial Stability Review.
The RBA also said the “strong financial starting position” of many businesses should limit risks to financial stability.
“While the profit margins of many businesses are around pre-pandemic levels, some businesses are likely to remain under financial pressure over the coming period as sales growth remains subdued; in addition, strong growth in the costs of labour and other inputs is expected to moderate only gradually,” the RBA said.
“Yet, the overall level of profitability and strong balance sheets among businesses reduce the risk of widespread financial stress, and arrears on bank loans to businesses are low.”
As a result, the RBA said the risks to the financial system from lending to households and businesses remained contained.
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