Financial Stability Review – October 2025

In Brief

The Financial Stability Review provides the RBA's assessment of the current resilience of the financial system and potential risks to financial stability. It is issued half-yearly.

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The Australian financial system is well positioned to deal with negative shocks but global financial stability risks are elevated.

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Households

Budget pressures on Australian households have been gradually easing.

Household cash flow pressures have eased as inflation and interest rates have come down, though budget pressures remain a challenge for many Australians.
Many borrowers have savings buffers in offset and redraw accounts, and the share of households who are behind on their mortgage payments is low.

Businesses

While conditions remain challenging for some businesses, most appear to be resilient.

The share of companies entering insolvency is around its longer run average, but is higher in some industries.
Businesses’ cash flow pressures are expected to ease further, although the outlook is uncertain.

Banks

The Australian banking system is in good shape.

Banks are well placed to keep supporting the economy if there was a downturn.
It is important that lending standards remain sound.

Non-banks

Risks posed by other financial institutions (e.g. superannuation funds, non-bank lenders, insurers) remain contained.

As superannuation funds keep growing, they will need to continue to build resilience.
Non-bank lenders are a small but growing part of the Australian financial system and so it is important to keep monitoring the changes occurring in that sector.

Global environment

The global financial system has remained stable but is facing heightened uncertainty.

Unexpected events could lead to sharp movements in global financial markets.
The digital transformation of the financial system increases the risk of operational incidents.

Overseas shocks

Overseas shocks could affect the stability of the Australian financial system.

Financing costs could increase sharply for businesses and financial institutions if a negative shock occurred.
Exporters and their suppliers would be particularly affected by a large trade shock involving one of Australia’s major trading partners.