Australia's banking system "well capitalised"

The Reserve Bank of Australia (RBA) has announced that the country's financial system is continuing to perform strongly, with low levels of bad debt and high profits.

According to a half-yearly report by the central bank, the nation remains economically stable and "well capitalised", despite high levels of household debt and a slight increase in home loan arrears.

The financial stability review warns that wider and easier access to debt could cause problems in the future, though households are becoming more financially cautious.

The RBA states: "More generally, household spending now appears to be increasing more slowly than growth in household income, after a number of years in which the reverse was the case."

The central bank intends to continue monitoring household balance sheets closely, as the risk of high debt levels remains in the wake of a recent boom in property prices.

The ratio of household debt to income in Australia has soared over the past ten years to more than 150 per cent and the rate of interest payments to income now stands at around 11 per cent.

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