of banking assets to gdp, australia ’ s ratio is about 2, which is well within the international range and well below those in the euro area, the uk and japan. so to the extent that any generalised financial overhang exists, it is less likely to be a problem here than elsewhere. • that said, attitudes to risk and debt accumulation in the australian household sector have clearly changed. saving rates are up, the appetite for new debt is down, and attitudes to both the level and composition of household saving have become more conservative ( graph 4 ). bis central bankers ’ speeches graph 4 so what of the future? to return to my three sets of causal factors : • there are some reasons to think that longer - run trends in income and demographics can contribute to further growth of the financial sector over time. • however, much of the expansion over the pre - gfc quarter - century was driven by one - off factors, notably the adjustments to deregulation and low inflation. these adjustments have now run their course. • and, while we can ’ t be definitive, it is plausible that the world financial system has overexpanded in relative terms and needs a period of readjustment, though this is less likely to be a major factor in australia than elsewhere. the ongoing development of the financial system in the post - crisis period will depend on the interplay of those three factors. on any reading, it seems clear that this will be an environment where it is harder in general for banks and for the system as a whole to grow. while it is difficult to specify what that might mean in numerical terms, a return to financial sector growth rates consistently higher than the growth of nominal gdp seems unlikely for the foreseeable future. that is my first concluding comment. my other comment concerns the nature of competition. the pre - gfc quarter century was an unusual period, in that competition in financial intermediation came to be focused mainly on the lending side of the balance sheet. that now looks to have been an aberration, and we seem to be entering a period where significant competition on both sides of the balance sheet becomes the norm. it might take some time to get used to this new reality. but in general i see it as a healthy development because it will mean banks being under greater market discipline to manage their risks. and of course, regulators will be doing their part on that front as well. bis central bankers ’ speeches

of new loans. this borrowing is not the underlying cause of the higher housing prices. but the borrowing has added to the upward pressure on prices caused by the underlying supply - demand dynamics. it has acted as a financial amplifier in some cities, adding to the already upward pressure on prices. the borrowing by investors is also obviously contributing to the rise in the aggregate debtto - income ratio. just like in the early 2000s, there is again a discussion as to whether these increases will continue and whether they are sustainable. the distribution of debt i would now like to turn to the distribution of housing debt across households. this is important, as it is not the ‘ average ’ household that gets into trouble. at the reserve bank we have devoted considerable resources to understanding this distribution. one important source of householdlevel information is the survey of household income and labour dynamics in australia ( hilda ). if we look across the income distribution, it is clear that the rise in the debt - to - income ratio has been most pronounced for higher - income households ( graph 6 ). this is different from what 6 / 14 bis central bankers'speeches occurred in the united states in the run - up to the subprime crisis, when many lower - income households borrowed a lot of money. it is also possible to look at how the debt - to - income ratio has changed across the age distribution. this ratio has risen for households of all ages, except the very youngest, who tend to have low levels of debt ( graph 7 ). borrowers of all ages have taken out larger mortgages relative to their incomes and they are taking longer to pay them off. older households are also more likely than before to have an investment property with a mortgage and it has become more common to have a mortgage at the time of retirement. 7 / 14 bis central bankers'speeches we also look at the share of households with a debt - to - income ratio above specific thresholds. in 2002, around 12 per cent of households had debt that was over three times their income ( graph 8 ). by 2014, this figure had increased to 20 per cent of households. there has also been an increase, although not as pronounced, in the share of households with even higher debt - toincome ratios. 8 / 14 bis central bankers'speeches another dataset that provides insight into distributional issues is one maintained by the reserve bank on loans that have been securitised. 4 this indicates that around two - thirds of housing