Aussies cautious after rate rises | Gympie Property | Real Estate News for Gympie, Australia

AAP

RECENT interest rate rises have made households more cautious in their borrowing behaviour, the Reserve Bank of Australia says.

Australian households have sensed that increased indebtedness may leave them vulnerable to shocks such as falling income and are exhibiting cautious economic behaviour, RBA governor Glenn Stevens says.

"We see at present a certain caution in their behaviour - even though unemployment is low, and measures of confidence have been quite high, consumer spending has seen only modest growth," Mr Stevens told an audience in western Sydney on Wednesday.

"The long downward trend in the saving rate seems to have turned around and I think we are witnessing, at least just now, more caution in borrowing behaviour.

"Of course this will have been affected by the recent increase in interest rates, but the level of rates is not actually high by the standards of the past decade or two.

"We can't rule out something more fundamental at work."

The RBA lifted the cash rate six times between October last year and May to its current 4.5 per cent.

Mr Stevens said the big rise in debt over the past decade had come from the household sector.

But he said Australia's mortgage arrears rate was low by global standards and borrowers had serviced household debt levels very well.

But the RBA chief said it wouldn't be wise to let debt levels rise unabated over the years ahead.

"To be clear, my message is not that this has been a terrible thing," he said.

"(But), one would think that, however well households have coped with the events of recent years, further big increases in indebtedness could increase their vulnerability to shocks - such as a fall in income - to a greater extent than would be prudent.