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RBA says no immediate financial stability risks from house prices

Published 03/25/2014, 09:58 PM
Updated 03/25/2014, 10:00 PM

Investing.com - The Reserve Bank of Australia does not see financial stability risks from rising house prices, but with its cash rate at a record low 2.5% it is actively monitoring the industry, according to comments from the biannual Financial Stability Review published Wednesday.

The RBA said that the low rate environment has led to a rise in house prices and encouarged higher yielding investment options.

"Present conditions in the housing market are not assessed as posing a near-term risk to financial stability," the RBA said, adding that "nonetheless, the recent pick-up in momentum warrants close monitoring" for signs of excessive speculation and riskier lending practices in investor activity.

On China, the RBA said a potential risk to financial from its "shadow" banking system remains a concern.

But it said that Chinese authorities have a range of options to address problem loans and more importantly, "Chinese banks have high regulatory capital ratios, which suggest they ought to be well placed to absorb losses."

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