RBA FSR states Australia's financial system is well placed to handle an increasingly uncertain global environment and most borrowers are in a solid financial position and able to manage rise in cost pressures, though some will face increasing challenges

Says:

• Australian banks are in a strong position to continue supporting the economy even if conditions deteriorate sharply.
• Most households and businesses are in a strong financial position and are unlikely to be a source of instability.
• In this environment, financial institutions should continue to build resilience to liquidity, operational and geopolitical shocks while maintaining prudent lending standards.
• There is potential for a sharp setback in global AI-related investment if productivity disappoints.
• Unconventional policy actions and regulatory easing by governments could undermine confidence.