IMF report warns Australia about household debt problem

Source: Xinhua| 2017-10-04 14:48:24|Editor: Liangyu
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SYDNEY, Oct. 4 (Xinhua) -- The International Monetary Fund (IMF) warned Australia on Wednesday about its high level of household debt.

In the October Global Financial Stability Report, The IMF said "higher growth in household debt is associated with a greater probability of a banking crises."

Throughout most advanced countries the ratio of debt to GDP is around 63 percent.

But down under, household debt has increased to represent 100 percent of Australia's GDP and with stagnant wage growth and a soaring housing market in Sydney and Melbourne.

With Australia teetering on the edge when it comes to leverage, the IMF fear a shock to the economy could leave the country "extremely exposed."

"New empirical studies, as well as recent experience from the global financial crisis, have shown that increases in private sector credit, including household debt, may raise the likelihood of a financial crisis and could lead to lower growth," the report said.

With interest rates already at a record low of 1.5 percent, any increase could add to the growing debt problem.

That's why on Tuesday, Reserve Bank of Australia governor Dr. Philip Lowe cited "growth in housing debt" as one of the major reasons for keeping the cash rate on hold.

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