RBA Dep Gov Bullock says household balance sheets are in very good shape

Reserve Bank of Australia Deputy Governor Michele Bullock speaking on:

• How are Households Placed for Interest Rate Increases?

Headlines via Reuters

• further rate increases will be needed in the months ahead
• Financial stability risks from households "are a little elevated" but unlikely to be substantial
• Risks will be important in deciding size and timing of future interest rate rises
• Risks will be influenced by the future path of employment growth
• Current strong growth in employment means people will have jobs to service their mortgages
• Aggregate household balance sheets are in very good shape
• Households have saved a large amount of money since the onset of the pandemic
• Borrowers with the most debt also tend to have the highest liquidity Liquidity Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Read this Term buffers
• Household sector as whole has accumulated sizeable equity via higher housing prices
• House prices would have to fall a fair way for negative equity to become a systemic concern
• Much of the debt is held by high-income households that have the ability to service their debt

At the margin there are always going to be households under financial stress from rate increases (not to mention rising inflation) but RBA data is indicating most are well placed to cope. This is confirmation, not new information.