The deputy governor of the Reserve Bank of Australia (RBA) told an audience in Sydney that tighter lending standards are helping protect the Australian economy from bad mortgages.

"Nonperforming loans currently pose little risk to the health of financial institutions," said Guy Debelle.  "The risks that mortgage arrears currently pose to bank profitability are low," he added.

Mr. Debelle says the national mortgage arrears rate at just one percent, which is low by both historical and international standards.  And loans granted since Australian regulators began tightening bank lending standards in 2014 had an arrears rate almost 40 basis points lower than loans before that.

"The lower arrears rates for more recent loans suggests these tighter lending standards have been effective," Mr. Debelle said.  "It seems unlikely that the national arrears rate will increase substantially from here."  That's partly due to the central bank's three cuts in interest rates since June which he claims are lowering interest payments and supporting employment.

"Rates are now at a historic low of 0.75 percent and financial markets wager a further easing to 0.5 percent is likely next year."