Financial Stability Review April 2021

At a Glance

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Financial systems in Australia and globally have been resilient to a substantial shock

Financial systems in Australia and internationally have been resilient to the effects of the COVID-19 pandemic. Banks have cushioned the economic impact of the pandemic and have supported the recovery through loan repayment deferrals and new lending.

An incomplete, or very uneven, economic recovery is a risk for financial stability

If incomes remain below pre-pandemic levels, as government support is wound back, it increases the likelihood that some borrowers exhaust their financial buffers and ultimately default.

Cyclically low interest rates and rising asset prices create a risk of excessive borrowing

Asset prices globally have been rising and are at high levels underpinned by low interest rates. Asset prices rising beyond fundamental values, rapid growth in borrowing and weaker lending standards would be a risk to financial stability.

Cyber-attacks are another growing risk for financial stability

Over the past six months there have been several high-profile cyber-attacks worldwide. While financial institutions were not specifically targeted, some were impacted by these attacks.