RBA watching high debt levels closely
(19 May 2015 – Australia) With debt levels already high, the Reserve Bank of Australia (RBA) does not want people relying on future income by borrowing large amounts of money right now while the rates are ideal.
RBA deputy governor Philip Lowe said in a speech in Sydney on 18 May that while consumer spending growth and increasing housing construction should lead to higher business investment, the RBA was treading a fine line for the country’s long-term interests.
While the central bank was hoping to engineer a consumption boom, they did not want to encourage people to borrow large amounts of money against future income.
"This is especially so when debt levels are already high and prospects for future income growth are not as positive as they once were."
Dr Lowe said this meant there was a "fine line" for the RBA to tread as it tried to foster consumer spending and business investment, but without creating the type of imbalances "that could cause problems later on".
"We will continue to assess that balance carefully," he said.
The housing market is a current concern of imbalance that the central bank will try to focus on investors in particular in the months ahead.
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