Reserve Financial institution of Australia Monetary Stability Overview, October 2025:
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Home monetary system resilient, main dangers offshore
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Dangers embody a pullback in elevated asset costs and stress in sovereign debt markets
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Extremely leveraged trades and progress of the non-bank sector make markets extra weak
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Weak point in China’s property sector has pressured banks there and is more likely to persist
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Australian monetary system properly positioned to climate market shocks and a worldwide downturn
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Banks are properly capitalised, worthwhile, and maintain important liquid reserves
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Banks can face up to giant losses given the excessive amount and high quality of capital
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Banks should keep sturdy lending requirements; non-bank lenders below shut watch
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Banks ought to strengthen operational resilience to cyber and geopolitical dangers
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Money-flow pressures on households have eased with decrease charges and inflation
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Most households are maintaining with mortgage funds and have liquidity and fairness buffers
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Enterprise insolvencies concentrated in development, hospitality, and retail
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Helps regular macroprudential coverage to comprise dangers within the housing market
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Superannuation funds’ FX hedging wants will develop and require cautious administration
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Australia’s central financial institution warned in its semi-annual Monetary Stability Overview that the most important dangers to the worldwide monetary system stem from overseas, together with elevated asset costs, rising sovereign debt ranges, and leverage in markets. The RBA additionally highlighted the continued weak point in China’s property sector as a persistent risk.
Domestically, the RBA stated the monetary system is resilient, with worthwhile, well-capitalised banks and households aided by decrease charges and easing inflation. Most debtors are maintaining with mortgage funds and have buffers, although the drop in mortgage charges has pushed residence costs to file highs, elevating bubble issues.
The report urged banks to bolster resilience to cyber and geopolitical dangers and cautioned in opposition to loosening lending requirements or easing macroprudential limits, notably round excessive debt-to-income and investor lending.
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On the margin the warnings from the RBA on housing credit score are a contact hawkish.
