Edition 36
Australia has a low level of total debt compared to other major countries. But while public and corporate debt is low, one area of greater vulnerability is household debt.
A chronic current account deficit in Australia also means a degree of vulnerability to foreign investor sentiment – although this has been the case for decades.
While Australia is not without debt risk, it is still relatively low, in part due to the flexibility to cut interest rates further, the buffer the $A provides during extreme shocks, pent up demand in the non-mining parts of the economy and the unlikelihood of a hard landing in China.