perspective, prudent lending standards are a good thing. they ensure that households and banks are resilient to changes in circumstances. but there needs to be a balance. the regulators are not proposing any further tightening in lending standards. and the appropriate amount of credit risk is not zero – banks need to continue to lend and that will inevitably involve some credit losses. western australia finally, i want to turn my focus to developments in western australia. as you will have seen from some of my earlier graphs, the western australian circumstances are somewhat different to those of the eastern capital cities. there are two aspects i would like to focus on – household resilience and the commercial property sector. housing prices in perth have been declining for some years ( graph 7 ). the peak in housing prices in perth was in the middle of 2014. this followed a period of strong housing price growth as the population of western australia increased strongly during the mining investment boom and housing https : / / www. rba. gov. au / speeches / 2019 / sp - ag - 2019 - 03 - 20. html 9 / 14 3 / 20 / 2019 property, debt and financial stability | speeches | rba construction took longer to ramp up. when housing construction did respond, however, population growth had slowed markedly and housing prices started to fall. median housing prices have fallen by around 12 per cent since 2014. graph 7 this has clearly been a difficult time for many homeowners in western australia. there are some households that are having difficulty meeting repayments, as evidenced by a rising arrears rate in western australia ( graph 8 ). at this stage, however, the losses are not large enough to threaten the stability of the financial sector. we nevertheless continue to monitor the situation for any potential systemic impacts. https : / / www. rba. gov. au / speeches / 2019 / sp - ag - 2019 - 03 - 20. html 10 / 14 3 / 20 / 2019 property, debt and financial stability | speeches | rba graph 8 finally, office property in western australia has also been experiencing oversupply. valuations have fallen over the past decade ( graph 9 ). rents have also fallen reflecting a sharp increase in office vacancy rates in perth's cbd over the past few years ( graph 10 ). this makes for a challenging environment for owners of these buildings, particularly for owners of older or lower quality office buildings as tenants have taken the opportunity to move into newer buildings as rents have come

. the fed, for example, cut the penalty rate on its discount window from 100 points to 50 points in order to lessen the cost of emergency funding to banks. some central banks also widened the range of securities in which they were prepared to deal. none of these measures was intended as a change in monetary policy settings and no central bank has reduced its interest rate target. neither should these measures be seen as an attempt to “ bail out ” banks or markets. rather, the measures have been technical operations aimed at breaking up the log jams in money markets and encouraging funds to flow again, in order to prevent monetary conditions becoming tighter than the settings that had been determined by the central bank monetary policy committees and boards in the various countries. the operations have restored some degree of calm to markets but conditions have not yet returned to normal. notably, yields on asset - backed commercial paper as yet have not fallen, indicating a continuing high degree of nervousness among investors. yields on us treasury bills have reversed some of their earlier fall, but still remain unusually low, again indicating a continuing strong risk aversion among investors. on the other hand, share markets in many countries have recovered strongly and some of the earlier exchange rate moves have also been largely reversed. the australian situation despite the fact that australian banks are in very sound condition and have been experiencing minimal credit losses, they were nonetheless affected by the spread of the global money market turmoil. on the morning of 10 august, banks started telling us that they were noticing a reduced flow of funds through the market. the cost of raising funds in global markets through swaps had risen noticeably, putting more pressure on domestic funding sources. yields on banks bills had jumped sharply overnight, and libor rates by even more ( graph 9 ). the reserve bank decided to supply more than the usual $ 700 - 800 million of exchange settlement funds, so that the overnight interest rate would not rise above the target set by the board in early august. those operations were successful in maintaining the cash rate at the 6. 5 per cent target, though other short - term market interest rates remained unusually elevated. since then, the bank has continued to supply whatever amounts of exchange settlement balances were necessary to keep the cash rate at the target. in the process, balances rose to a peak of $ 5. 5 billion in the middle of last week, the highest level for some years, though some of this has been reversed recently. the bank also skewed its market operations