(26 September 2012 – Australia) In its twice-yearly Financial Stability Review, the Reserve Bank of Australia (RBA) said Australia’s financial system was strong and resilient to outside influences.’The Australian banking system remains well placed to cope with shocks from abroad,’ the RBA said.
This was mainly due to a strengthening in bank’s capital, funding and liquidity positions in the wake of the global financial crisis in 2008/2009.
Australian people were more prudent in their spending and saving habits, according to the RBA.
‘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,’ it said.
The RBA said developments in Europe were still the main challenge to global markets.
‘Many of the underlying problems in the euro area are yet to be effectively resolved,’ it said.
‘Fiscal deficits remain large, many banks need to repair their balance sheets further, and the adverse feedback loop between sovereign and bank finances has yet to be broken.’
Continuing debt worries in peripheral countries such as Greece and Spain raised the question of whether the European monetary union could survive in the long term, the RBA said.
Recovery was evident among the other major banking systems.