Treasurer Josh Frydenberg plans to crackdown on growing levels of household debt which have come as a result of Australia’s soaring property market.
Frydenberg said he discussed issues surrounding Australia’s growing property market with the Council of Financial Regulators on Friday last week.
The Council comprises APRA, the Australian Securities and Investments Commission (ASIC), the Reserve Bank of Australia (RBA) and Treasury.
“Off the back of historically low interest rates Australia’s housing market has seen strong growth. It is a development replicated in many other countries,” Frydenberg said.
“A positive feature of this housing cycle compared to that of the last is a higher proportion of first home buyers and owner occupiers entering the market.”
However, there have been growing concerns around young Aussies, and particularly first home buyers, stretching themselves too thin with a large income to debt ratio building.
“We must be mindful of the balance between credit and income growth to prevent the build-up of future risks in the financial system,” Frydenberg said.
“Carefully targeted and timely adjustments are sometimes necessary.”
Frydenberg said that Australia's economy is expected to strongly recover as COVID-19 restrictions ease, and with that it is important to carefully assess the growing property trend.
The high levels of debt to income could potentially lead many Australians to default on their loans if they were to experience an income shock.
RBA considers tools to ease property prices
However, assistant governor Michele Bullock revealed that it was assessing "tools" that "could be employed in Australia" to manage the risks associated with house prices.
The ever-growing property market, and any potential house price crashes, poses a potential “financial stability risk”, Bullock said.
“The prospect of large declines in property prices presents significant balance sheet risks for households, businesses and lenders,” she said in a speech last week.