Research: Australia at Moderate Risk in Terms of Overall Leverage
Quotes from Standard Chartered:
-We place Australia in the 'moderate risk' category in terms of overall leverage. As the economy rebalances structurally and the focus turns to domestic consumption and non-resource-led growth, Australia's Achilles' heel is in the household sector. The country's total debt level is low overall compared to other major economies, but the high level and concentration of debt among households is an area of vulnerability.
-The Reserve Bank of Australia (RBA) has reduced the policy cash rate by 200bps since November 2011 to a low of 2.75%. Easy credit, a booming housing market and a push for greater consumer consumption can be a risky combination if households leverage up excessively. In Australia's case, though, domestic conditions have led to softer demand for debt from businesses and households as they consolidate following high levels of debt earlier.
-Recent data indicates that households are moving in the right direction, taking advantage of current low interest rates to repay their existing debt and deleverage. Further deleveraging from high levels is needed to ensure adequate debt repayment capacity as interest rise in the future, in our view.
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