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Longitudinal Study: HILDA
Title: Stress Testing the Australian Household Sector Using the HILDA Survey
Authors: Read, Matthew 
Bilston, Tom 
Johnson, Robert 
Institution: Reserve Bank of Australia
Publication Date: 9-Mar-2015
Pages: 36
Keywords: stress test
household surveys
Abstract: In Australia, the banking sector’s substantial exposure to the household sector gives reason to continuously assess the financial resilience of households. In this paper, we further explore the simulation-based household stress-testing model presented in Bilston and Rodgers (2013). This model uses data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey to quantify the household sector’s financial resilience to macroeconomic shocks. The model suggests that through the 2000s the household sector remained resilient to scenarios involving asset price, interest rate and unemployment rate shocks, and the associated increases in household loan losses under these scenarios were limited. Indeed, the results suggest that, despite rising levels of household indebtedness in aggregate, the distribution of household debt has remained concentrated among households that are well placed to service it. In turn, this suggests that aggregate measures of household indebtedness may be misleading indicators of the household sector’s financial fragility. The results also highlight the potential for expansionary monetary policy to offset the effects of increases in unemployment and decreases in asset prices on household loan losses.
ISBN: 1448-5109
Keywords: Income & Finance; Employment
Research collection: Reports and technical papers
Appears in Collections:Reports

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