Australia's central bank has warned borrowers not to take on too much debt when interest rates start coming down and risk a boom/bust cycle, though it judged the financial system remained resilient overall.

In its semi-annual Financial Stability Review, the Reserve Bank of Australia again pointed out the resilience of households, businesses and banks despite decade-high interest rates and painful inflation.

A small but growing share of mortgage holders were starting to fall behind on payments, and an increasing number were making the difficult decision to sell their homes to avoid default.

Still, the share of borrowers in severe financial stress remains small at less than 2 per cent, the RBA said. Of those loans in arrears, 0.5 per cent were also in negative equity.

The RBA expects household budget pressures to ease once interest rates start to fall but also sees dangers in that.

"Domestic vulnerabilities could increase if households respond to any easing in financial conditions by taking on excessive debt," said the RBA in a 45-page review, warning that the risk could be magnified if lending standards drop.

It concluded that, under a wide range of scenarios, most borrowers will be able to service their debt, and by selling their properties to repay their loans and avoid default, the risk to the financial system is limited.

The central bank has kept rates steady since November, deeming a cash rate of 4.35 per cent - up from a record-low 0.1 per cent during the pandemic - restrictive enough to bring inflation within the target band of 2-3 per cent while preserving employment gains.

Policymakers have ruled out a near-term cut in interest rates as they wait for inflation to cool further.

Australia's central bank has warned borrowers not to take on too much debt when interest rates start coming down and risk a boom/bust cycle, though it judged the financial system remained resilient overall.

Australia's central bank has warned borrowers not to take on too much debt when interest rates start coming down and risk a boom/bust cycle, though it judged the financial system remained resilient overall. In its semi-annual Financial Stability Review, the Reserve Bank of Australia again pointed out the resilience of households, businesses and banks despite decade-high interest rates and painful inflation. A small but growing share of mortgage holders were starting to fall behind on payments, and an increasing number were making the difficult decision to sell their homes to avoid default. Still, the share of borrowers in severe financial stress remains small at less than 2 per cent, the RBA said. Of those loans in arrears, 0.5 per cent were also in negative equity. The RBA expects household budget pressures to ease once interest rates start to fall but also sees dangers in that. "Domestic vulnerabilities could increase if households respond to any easing in financial conditions by taking on excessive debt," said the RBA in a 45-page review, warning that the risk could be magnified if lending standards drop. It concluded that, under a wide range of scenarios, most borrowers will be able to service their debt, and by selling their properties to repay their loans and avoid default, the risk to the financial system is limited. The central bank has kept rates steady since November, deeming a cash rate of 4.35 per cent - up from a record-low 0.1 per cent during the pandemic - restrictive enough to bring inflation within the target band of 2-3 per cent while preserving employment gains. Policymakers have ruled out a near-term cut in interest rates as they wait for inflation to cool further.

Australia's central bank cautions households against over-borrowing when interest rates decline

The Reserve Bank of Australia reiterated on Wednesday its commitment to running a restrictive monetary policy given the broader need to contain inflation. The RBA did not dismiss the possibility of further interest rate hikes in case need be, but acknowledged the financial strain that many households were going through.

In a speech on the banking industry in Melbourne, RBA Assistant Governor Christopher Kent highlighted that the present setting of interest rates at 4.35% is currently dampening the growth of demand and, as such, driving inflation lower. "We know that many are feeling a painful squeeze on their finances because of higher interest rates," said Kent. He emphasised that mortgage payment has already surged to a record 10% of household disposable income.

Kent also noted that current rates were far above all estimates of the neutral rate, which is the rate neither stimulating nor handicapping economic growth. The RBA has increased a record series of rates amounting to 425 basis points since May 2022, but has held steady for five straight meetings as the running inflation remained above its 2-3 per cent target band at 3.6%.

RBA Governor Michele Bullock said earlier this month that the restrictive policy had contributed to the bank's wariness about lifting rates higher at its June policy meeting. Financial markets are forecasting barely any chance of a rate cut before April next year, with just 43 basis points of easing expected by the end of 2025.

Kent reiterated that the central bank was standing back on any rate adjustments.

"While recent economic data have been mixed, they have reinforced the need to remain vigilant to upside risks to inflation," he reiterated.

"Hence, with regards to the path of interest rates, the Reserve Bank Board is not ruling anything in or out."

The chariness reflects the RBA's commitment to containing inflation, navigating the delicate balance between the growth of the economy and household financial stability. With world economic conditions highly uncertain in large part, the RBA is on high alert to keep the economy healthy from any possible shocks of upward inflationary pressures.

The Reserve Bank of Australia reiterated on Wednesday its commitment to running a restrictive monetary policy given the broader need to contain inflation. The RBA did not dismiss the possibility of further interest rate hikes in case need be, but acknowledged the financial strain that many households were going through.

The Reserve Bank of Australia reiterated on Wednesday its commitment to running a restrictive monetary policy given the broader need to contain inflation. The RBA did not dismiss the possibility of further interest rate hikes in case need be, but acknowledged the financial strain that many households were going through. In a speech on the banking industry in Melbourne, RBA Assistant Governor Christopher Kent highlighted that the present setting of interest rates at 4.35% is currently dampening the growth of demand and, as such, driving inflation lower. "We know that many are feeling a painful squeeze on their finances because of higher interest rates," said Kent. He emphasised that mortgage payment has already surged to a record 10% of household disposable income. Kent also noted that current rates were far above all estimates of the neutral rate, which is the rate neither stimulating nor handicapping economic growth. The RBA has increased a record series of rates amounting to 425 basis points since May 2022, but has held steady for five straight meetings as the running inflation remained above its 2-3 per cent target band at 3.6%. RBA Governor Michele Bullock said earlier this month that the restrictive policy had contributed to the bank's wariness about lifting rates higher at its June policy meeting. Financial markets are forecasting barely any chance of a rate cut before April next year, with just 43 basis points of easing expected by the end of 2025. Kent reiterated that the central bank was standing back on any rate adjustments. "While recent economic data have been mixed, they have reinforced the need to remain vigilant to upside risks to inflation," he reiterated. "Hence, with regards to the path of interest rates, the Reserve Bank Board is not ruling anything in or out." The chariness reflects the RBA's commitment to containing inflation, navigating the delicate balance between the growth of the economy and household financial stability. With world economic conditions highly uncertain in large part, the RBA is on high alert to keep the economy healthy from any possible shocks of upward inflationary pressures.

Australia's central bank keeps monetary policy restrictive over inflation concerns

Australia has appointed a woman, Michele Bullock to lead its central bank, the first time ever in the 63-year history of the Reserve Bank of Australia (RBA). A veteran economist at the central bank, Bullock will take over charge from the outgoing governor Philip Lowe in September this year.

“I am deeply honoured to have been appointed to this important position,” Bullock said in a statement on Friday. “It is a challenging time to be coming into this role, but I will be supported by a strong executive team and boards. I am committed to ensuring that the Reserve Bank delivers on its policy and operational objectives for the benefit of the Australian people.”

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Australian Prime Minister Anthony Albanese described Bullock as an “outgoing economist and leader”.

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BREAKING: Congratulations Michele Bullock, Australia’s 9th Reserve Bank Governor. 
 
Michele is an outstanding economist, with a long and distinguished career at the central bank. 
 
At a critical time for the global economy, her job will be an important one.
— Anthony Albanese (@AlboMP) <a href="https://twitter.com/AlboMP/status/1679638574541729792?ref_src=twsrc%5Etfw">July 13, 2023</a></blockquote>
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<h2>Who is Michele Bullock?</h2>

Bullock will become the first-ever woman to head the central bank. She will take charge as the governor of the Reserve Bank of Australia (RBA) on 18 September. She joined RBA in 1985 after graduating from Australia’s University of New England in 1984. She then pursued her master’s at the London School of Economics in 1989.

Bullock served in a variety of roles related to areas including payment settlements and government banking before being appointed as the first woman deputy governor in April 2022.&nbsp;

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Before leading the most important position at the central bank, she headed a string of increasingly important roles at the bank. She was appointed as the Assistant Governor from 2010-2022. She started her career as a Chief Manager of&nbsp;Payment Policy Department in 1998 and served in this position till 2007.&nbsp; 
 
Jonathan Kearns, a senior RBA executive before he left the bank to join Challenger in January, said Bullock was “very well credentialed and she is across every aspect of the RBA”.

<h2>What will be on Bullock’s agenda?</h2>

Bullock’s appointment comes after the government decided not to reappoint Lowe to a second seven-year term.&nbsp;

By the time Bullock takes over, the RBA committee will have met twice more on interest rates. As a board member, she will have a voice in shaping those decisions. Her attention will also be absorbed in part by the need to implement a range of recommendations resulting from the once-in-a-generation review of the RBA.

(With inputs from agencies) 
 
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Australia has appointed a woman, Michele Bullock to lead its central bank, the first time ever in the 63-year history of the Reserve Bank of Australia (RBA). A veteran economist at the central bank, Bullock will take over charge from the outgoing governor Philip Lowe in September this year.

Australia has appointed a woman, Michele Bullock to lead its central bank, the first time ever in the 63-year history of the Reserve Bank of Australia (RBA). A veteran economist at the central bank, Bullock will take over charge from the outgoing governor Philip Lowe in September this year. “I am deeply honoured to have been appointed to this important position,” Bullock said in a statement on Friday. “It is a challenging time to be coming into this role, but I will be supported by a strong executive team and boards. I am committed to ensuring that the Reserve Bank delivers on its policy and operational objectives for the benefit of the Australian people.” Also Read | Boris Johnson 'forgets password' of phone with WhatsApp messages for Covid inquiry Australian Prime Minister Anthony Albanese described Bullock as an “outgoing economist and leader”. BREAKING: Congratulations Michele Bullock, Australia’s 9th Reserve Bank Governor. Michele is an outstanding economist, with a long and distinguished career at the central bank. At a critical time for the global economy, her job will be an important one. — Anthony Albanese (@AlboMP) July 13, 2023 × Who is Michele Bullock? Bullock will become the first-ever woman to head the central bank. She will take charge as the governor of the Reserve Bank of Australia (RBA) on 18 September. She joined RBA in 1985 after graduating from Australia’s University of New England in 1984. She then pursued her master’s at the London School of Economics in 1989. Bullock served in a variety of roles related to areas including payment settlements and government banking before being appointed as the first woman deputy governor in April 2022. Also Read | WATCH | Rafale flypast over Paris as PM Modi attends Bastille Day parade Before leading the most important position at the central bank, she headed a string of increasingly important roles at the bank. She was appointed as the Assistant Governor from 2010-2022. She started her career as a Chief Manager of Payment Policy Department in 1998 and served in this position till 2007. Jonathan Kearns, a senior RBA executive before he left the bank to join Challenger in January, said Bullock was “very well credentialed and she is across every aspect of the RBA”. What will be on Bullock’s agenda? Bullock’s appointment comes after the government decided not to reappoint Lowe to a second seven-year term. By the time Bullock takes over, the RBA committee will have met twice more on interest rates. As a board member, she will have a voice in shaping those decisions. Her attention will also be absorbed in part by the need to implement a range of recommendations resulting from the once-in-a-generation review of the RBA. (With inputs from agencies) WATCH WION LIVE HERE You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.

Who is Michele Bullock? First-ever female governor of Australia's central bank

Australia's central bank lowered the cost of borrowing for the first time in three years on Tuesday, hoping to extend a record 28-year-run without a recession in the face of stiffening economic headwinds.

The Reserve Bank of Australia cut rates by 25 basis points to a historic low of 1.25 per cent as the pace of growth slowed to levels not seen since the <a href="https://www.wionews.com/opinions/how-to-deal-with-the-next-global-financial-crisis-170190">global financial crisis.</a>

Australia dodged much of the global economic tumult of the past two decades as Beijing lapped up its vast iron ore, coal and other mineral deposits.But now rising unemployment, low wages, a housing slump and below-target inflation are stoking fears about the health of the economy down nder.

"The Board took this decision to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target," governor Philip Lowe said in a statement.

The rate cut had been expected and analysts believe that more measures to juice the economy could be on the way.Lowe said the bank would "continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy".

The <a href="https://www.wionews.com/world/un-forecasts-global-economy-to-grow-27-in-2019-29-in-2020-220522">economy</a> grew at 0.3 and 0.2 per cent in the last two quarters while figures for the first quarter of 2019 will be released on Wednesday.

Any contraction would trigger alarm with negative growth for two consecutive quarters widely considered a recession. 
Many are predicting the cash rate will fall below 1.0 per cent this year and the central bank could even look at buying up securities.

In the 10 years since the global meltdown, the Reserve Bank of Australia has -- apart from a brief burst of optimism in 2010 -- steadily cut rates from a peak of 7.25 per cent.&nbsp;

Any hope of returning rates to more "normal" pre-crisis levels have been quashed by the slow global recovery, trade disputes between China and the United States and domestic challenges. Lowe said that while the global outlook appears "reasonable", the "downside risks stemming from the trade disputes have increased".

Earlier on Tuesday, there was news of faltering retail sales and the country's main telecoms firm cutting 10,000 contractors.

A downturn in the country's hypercharged housing market, falling consumption and stalled wages have already pushed Australia into a per capita recession, with the output per person falling for two consecutive quarters.

Treasurer Josh Frydenberg urged lenders to pass on the lower cost of borrowing to customers and criticised one lender for announcing it would pass on only an 18 basis-point cut.&nbsp;

The decision to cut rates takes the central bank further into uncharted territory.

Lowe has himself warned that "low-for-long" interest rates could pose problems for financial stability, with banks and other firms overvaluing risky assets.

But already there is talk about the bank going a step further in improving liquidity, by buying up securities -- known as quantitative easing. &nbsp;

National Australia Bank analysts predicted another cut in August and further possible cuts in 2020.

"It's quite possible that the government will begin to contemplate some further financial support as well later in the year if current trends continue," they said.

Australia's central bank lowered the cost of borrowing for the first time in three years on Tuesday, hoping to extend a record 28-year-run without a recession in the face of stiffening economic headwinds.

Australia's central bank lowered the cost of borrowing for the first time in three years on Tuesday, hoping to extend a record 28-year-run without a recession in the face of stiffening economic headwinds. The Reserve Bank of Australia cut rates by 25 basis points to a historic low of 1.25 per cent as the pace of growth slowed to levels not seen since the global financial crisis. Australia dodged much of the global economic tumult of the past two decades as Beijing lapped up its vast iron ore, coal and other mineral deposits.But now rising unemployment, low wages, a housing slump and below-target inflation are stoking fears about the health of the economy down nder. "The Board took this decision to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target," governor Philip Lowe said in a statement. The rate cut had been expected and analysts believe that more measures to juice the economy could be on the way.Lowe said the bank would "continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy". The economy grew at 0.3 and 0.2 per cent in the last two quarters while figures for the first quarter of 2019 will be released on Wednesday. Any contraction would trigger alarm with negative growth for two consecutive quarters widely considered a recession. Many are predicting the cash rate will fall below 1.0 per cent this year and the central bank could even look at buying up securities. In the 10 years since the global meltdown, the Reserve Bank of Australia has -- apart from a brief burst of optimism in 2010 -- steadily cut rates from a peak of 7.25 per cent. Any hope of returning rates to more "normal" pre-crisis levels have been quashed by the slow global recovery, trade disputes between China and the United States and domestic challenges. Lowe said that while the global outlook appears "reasonable", the "downside risks stemming from the trade disputes have increased". Earlier on Tuesday, there was news of faltering retail sales and the country's main telecoms firm cutting 10,000 contractors. A downturn in the country's hypercharged housing market, falling consumption and stalled wages have already pushed Australia into a per capita recession, with the output per person falling for two consecutive quarters. Treasurer Josh Frydenberg urged lenders to pass on the lower cost of borrowing to customers and criticised one lender for announcing it would pass on only an 18 basis-point cut. The decision to cut rates takes the central bank further into uncharted territory. Lowe has himself warned that "low-for-long" interest rates could pose problems for financial stability, with banks and other firms overvaluing risky assets. But already there is talk about the bank going a step further in improving liquidity, by buying up securities -- known as quantitative easing. National Australia Bank analysts predicted another cut in August and further possible cuts in 2020. "It's quite possible that the government will begin to contemplate some further financial support as well later in the year if current trends continue," they said.

Australia cuts rates to historic low as economy slows