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  • CANBERRA, AAP – KEY FINDINGS OF RBA FINANCIAL STABILITY REVIEW:

    *Substantial support from governments, central banks and other regulators has underpinned the resilience of the financial system over the past year.

    *But the Reserve Bank warns against over-exuberance and extra risk-taking as asset prices rise.

    *Delays in mass vaccination against COVID-19 could stall the economic recovery.

    *Progress on vaccines has underpinned expectations for strong economic growth in the next two years.

    *Most households remain in a good position to service debts given low interest rates, which look set to remain on hold for several years.

    *The additional safety net of large mortgage prepayment buffers is also helping home owners.

    *The “wealth effect” of rising housing prices is easing the RBA’s fears for distressed sales and mortgage-lending losses.

    *But if housing prices continue to rise, affordability problems will intensify, particularly as income support ends for lower-income households.

    *Closed international borders and changing buyer preferences bring uncertainty for apartment prices, particularly in inner-city areas.

    *The end of loan holidays for households and business will have a “modest” impact on bad loans.

    *Australian banks are in a strong financial position coming out of the pandemic.

    *Hoarding dividends and raising cheap capital during the pandemic means Australian banks are strong.

    *Superannuation funds have substantially increased their liquidity after facing significant challenges in 2020, including early access to retirement savings.

    *Super funds most exposed to early release flows of $36 billion had young members who worked in industries hit hard by the pandemic.

    *But fears some super funds could lose as much as one-fifth of funds under management did not eventuate.

    *Cyber attacks by increasingly sophisticated perpetrators are a growing risk for financial stability.

    *Globally, work has resumed by regulators on longer-term risks to the financial system, including climate change.

    *Support for corporate disclosure on climate risks and closing data gaps has broadened following the USA’s decision to re-join the Paris Agreement.

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