The Reserve Bank says Australian households are saving more and paying down their debt.
The central bank's released its half-yearly Financial Stability Review and says Australian households and businesses have benefited from solid growth in employment and wage incomes in recent years.
It says they're continuing to consolidate their finances saving at a much higher rate in recent years and slowing the pace of debt accumulation.
The RBA says last year households were saving 10 per cent of their net disposable income which compares to levels of below four per cent early in the decade.
Australian households are saving more and paying down their debt but indebtedness remains historically high, the Reserve Bank of Australia (RBA) said in its half-yearly Financial Stability Review.
The central bank did its previous financial stability review in September 2010 and since then it has raised the cash rate from 4.5 per cent to 4.75 per cent in November.
The commercial banks responded to this rate hike by "supersizing" the increase in the cash rate - raising their variable home loan interest rates by more than a quarter of a percentage point.
The RBA said the rate increases hasn't had much of an effect on household savings rates and paying down of debt but there should be some caution about the effects of higher mortgage and loan repayments.
"While indicators of financial stress are relatively subdued, a continuation of this recent borrowing restraint would help build resilience into banks' balance sheets.
"Household indebtedness remains historically high and recent increases in interest rates have lifted the aggregate debt servicing requirement," the central bank said.
The RBA said that while the reduced debt levels and increased savings had increased the resilience of the banking sector it had an effect on the housing market.
"The moderation in demand for housing finance contributed to some cooling in the housing market in 2010," the RBA said.
"Nationwide housing prices rose six per cent over the year, compared with 11 per cent in 2009 and were fairly flat in the second half of 2009.
The ratio of dwelling prices to household income was "broadly stable in 2010," the central bank said.
