Secondly, there is the question of whether or not monetary policy should try and prick asset price bubbles in order to avoid the consequences of the bubble popping at even higher levels with the attendant risks to financial stability.
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.