Sources: ABS; RBA  Nevertheless, some households are more likely to face financial stress than others. Highly indebted households are especially vulnerable in the event of a loss of real income through higher inflation, particularly if combined with rising interest rates, and a decrease in housing prices.
Recent borrowers are more vulnerable than earlier cohorts, as they are more likely to have borrowed at high DTIs, have had their serviceability assessed at lower interest rates (albeit with larger interest rate buffers) and have had less time to accumulate equity and liquidity buffers.