Australia’s indebted households at risk from falling dollar

By Leith van Onselen

Michael Pasco’s Panglossian view about Australia’s record household debt has been challenged by Moody’s Investor Services, which has warned that a “Sustained currency depreciation would raise risks related to household debt and external financing”:

Sustained currency depreciation is credit negative for Australia because it could bring forward a tightening of the country’s monetary policy, making debt less affordable for highly leveraged households. To the extent that a weaker local currency denotes less appetite for Australian assets, it would also raise external risks given the country’s reliance on external financing.