RBA says households and banks are able to cope with falling house prices and an economic recession.

The Reserve Bank of Australia said on Thursday that even in the worst-case scenario where house prices plunge by a further 20% and the unemployment rate soars above 6%, most Australian mortgage holders would still retain positive equity in their homes. In its Financial Stability Review, the RBA estimated that most indebted households and businesses have sufficient cash reserves to weather an economic slowdown and falling house prices. The RBA said that given banks' adequate capital levels, solid profitability, and sound lending standards, the banking sector would still be able to withstand the shock even if the housing market were to experience a "major" deterioration.