Financial Stability Review – April 2025

In Brief

The Financial Stability Review provides the RBA's assessment of the current resilience of the financial system and potential risks to financial stability. It is issued half-yearly.

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The Australian financial system is well positioned to manage uncertainties in the global economy.

Read the Financial Stability Assessment

Global environment

Global financial vulnerabilities remain and rising policy unpredictability could challenge financial stability.

Vulnerabilities in global financial markets could cause bad news to trigger a sharp and disruptive fall in asset prices.
A materialisation of risks in China’s financial system could impact the global economy through slower trade and increased risk aversion.
The growing digitalisation of the financial system increases the risks of cyber-attacks and system outages, which could cause severe operational disruptions.

Households

Many Australians are feeling the pressure of higher costs, but only a small share of borrowers are in severe financial stress.

Budget pressures have eased a little for some and the share of households that are behind on their mortgage payments has stabilised at pre-pandemic levels.
Cash flow pressures will remain widespread in the short term, but are expected to ease a little further in the coming months.
Vulnerabilities in the financial system could increase if households take on too much debt in response to an actual or expected fall in interest rates.

Businesses

Most businesses are managing increased financial pressures, but conditions remain tough, especially for many small businesses.

Most businesses are still making profits, despite slow economic growth and high costs.
Signs of business financial stress have stabilised, and cash flow pressures are expected to ease.

Insolvencies

Business insolvencies have risen over recent years but remain small as a share of all businesses.

The increase has been due to challenging economic conditions and a catch-up from exceptionally low insolvencies during the pandemic.
While insolvencies have risen, they remain slightly below the pre-pandemic trend and pose little threat to financial stability.

Banks

The Australian banking sector is well placed to support the economy, even in the case of a downturn.

Australian banks have high asset quality, even though some borrowers are struggling financially.
Banks remain resilient due to their strong lending standards, ample capital, and large liquid asset buffers.
Even in a severe downturn, our banks are well positioned to handle higher loan losses while continuing to lend.

Non-banks

Risks posed by Australian financial institutions outside the banking sector remain contained.

The majority of NBFI assets are managed by regulated institutions with business models that minimise risk to financial stability.
The superannuation sector is highly resilient and unlikely to threaten financial stability, but it could amplify financial system stresses in rare circumstances.
The insurance sector remains strong, but affordable and accessible insurance may become harder for customers to find over time.