Having said that, the higher the level of debt the more vulnerable households are to shocks that might affect the economy. We at the Reserve Bank therefore welcome the fact that the household debt ratio has flattened out in recent years and, as Glenn Stevens remarked last week, there would be benefits in that stability continuing.
Foreign debt Let me now turn to the question of Australia’s foreign debt. Following the floating of the exchange rate and the removal of capital controls in the early 1980s, both foreign investment in Australia and Australian investment abroad increased sharply as the Australian economy became more integrated into the global financial system (Graph 7).