SYDNEY - Australia's banking regulator on Monday said it would retain a 3% serviceability buffer for home loan lending because of high household debt, persistent cost-of-living pressures, a pickup in credit growth and weakening job market.) Regulation Authority said though inflation had continued to moderate and the risk of higher interest rates likely receded, there could be"shocks to household incomes" from a slowing labour market.
Lonsdale said the risk of financial shocks had persisted over the past year. However, the sources of economic uncertainty have shifted, forcing it to maintain its current macroprudential policy settings. Australia's employment growth slowed in October after a strong run, but the jobless rate has stayed low and underlying trends remain relatively healthy, suggesting there is little rush to cut interest rates.