Two women walk next to the Reserve Bank of Australia headquarters in central Sydney, Australia February 6, 2018.
In an effort to curb surging inflation, the central bank has lifted interest rates to a decade-high of 4.1%, causing widespread financial stress among households where debt levels are at record peaks.
"A small, but rising share of borrowers are on the cusp, or in the early stages, of financial stress," the review stated.
"A tightening in global financial conditions could transmit to Australia via linkages in funding markets and risk aversion," the review said.
Another area of concern was China's property sector where financial stress was proving a drag on the world's second largest economy and Australia's single biggest export market.
Persons:
Daniel Munoz, Michele Bullock, Wayne Cole
Organizations:
Reserve Bank of Australia, REUTERS, Rights, Financial, Thomson
Locations:
Sydney, Australia, China, U.S, United States, AUSTRALIA