The Reserve Bank Governor has warned Australian households over the high level of debt that many have taken on as a result of recent boom times. Ian Macfarlane said that while the overall economy is not under threat, individual households are vulnerable to a downturn. He appealed for them to scale back their borrowing.

Household debt increased 14 per cent a year on average over the past decade and now stands at about $530 billion while the ratio of debt to income rose to 125 per cent from 56 per cent over the same period. While the Reserve Bank doesn't believe the high debt levels would trigger a financial institution crisis similar to that of the early 1990s, household consumption and spending will have to be cut quickly when the economy deteriorates.

Mr Macfarlane also warned again on the residential property market, particularly high-rise units which he said are "seriously over-extended". He welcomed the early signs of a slowing in both housing development and household borrowing.