In its twice-yearly Financial Stability Review, the RBA said the debt-financing cycle underpinning investment in artificial intelligence is becoming more opaque and circular. A shift in sentiment towards the AI investment boom, which is increasingly funded by borrowing and expectations of rapid earnings growth, could trigger international economic turmoil. "Threats to international financial stability continue to mount," the report said.
The central bank also assessed that less than one per cent of home borrowers are in negative equity – where the amount owed on a mortgage exceeds the property's value. However, first home buyers, including those using the 5% deposit scheme, are most likely to be in negative equity as property prices sink and interest rates rise.
The Age reports that around 5% of home borrowers would be at risk of defaulting on their loans if inflation reaches 7%. The Guardian says households are generally well placed to weather rising interest rates and plunging property prices, but that Australia would not be immune to a sudden collapse of the global AI investment boom.
The review comes as Australian home values have fallen for six consecutive months, according to related CoreLogic data cited in the reports. The RBA warned that the risk to Australia from a major global financial shock is growing as the purchasing power of households is eroded by high inflation.