RBA warns rising debt-fuelled AI hype could spark global financial shock

The Reserve Bank of Australia’s latest financial-stability report warns that persistent high inflation is squeezing household budgets and that a debt-driven boom in artificial intelligence investment could become a catalyst for a global financial shock. While fewer than 1 % of mortgage holders are currently in negative equity, the proportion is higher among recent buyers, notably those who accessed the 5 % deposit scheme for first-time owners.

House prices have been sliding after several interest-rate increases this year, and the RBA lifted the cash rate to a 15-year high of 4.6 %. Scenario modelling shows that an overseas shock could push the share of borrowers at heightened default risk to about 5 %, only slightly above the 2023 peak, and a further 20 % fall in home values would leave few households in negative equity. The report underscores that lower-income renters are especially vulnerable as inflation eats into their disposable income.