Future economic shocks may hit households harder than in past financial tremors, according to a paper by the Reserve Bank of Australia.
Credit losses suffered by Australian banks during recessions and economic crises stemmed from slack lending standards to businesses. The RBA discussion paper warns that high household debt means it could be different next time around.
David Rodgers, of the RBA's Economic Research Department, sifted through data from 1980 to 2013, a period spanning the bouts of bank loan losses in the early 1990s recession and the global financial crisis.
Most of the big losses were in business loans gone bad and they peaked around the time economic growth was at its worst.
The paper found losses suffered by banks on housing loans did not rise much even as the banks' corporate loan books fell into disarray, but warned that might not always apply.
