Reserve Bank Governor Glenn Stevens warned local households yesterday that debt level increase should not be excessive, but Australia's economy may be able to pull through if Europe's debt problems worsens.

Mr. Stevens said that European's sovereign debt issues would determine next year's global growth and a possibility of financial crisis may happen.

However, he is optimistic that Australia's economy could weather the situation in Europe since the 5 per cent profits earned on exports is sent back to the country.

Governor Stevens said that the only concern Australia is facing at the moment is the global growth in Asia where it may hit resource prices, its cost, and availability of global capital.

"In the final analysis, sensible and credible policies at home, the strength of our financial institutions and the resilience and adaptability of the businesses and employees that make up the Australian economy will continue to be our greatest asset," he said.

In a survey posted by Westpac-Melbourne Institute, it showed that consumers were already cautious with confidence decreasing to almost 6 per cent.

Economists explained that the weakening consumer confidence was the result of RBA's interest rate increase, share market volatility, and a depressing global outlook.

Nevertheless, there are some people investing their savings in housing money rather than in banks. According to Commsec economist Savanth Sebastian, the housing finance figures still remained steady despite a 1.8 per cent fall in April.

While the number of loans for owner-occupiers continues to slide, investment loans have tracked higher," he said.

"Overall investment loans have posted decent gains for the past nine months and are now up 26 per cent on a year ago."

Mr. Stevens suggested that Australians should not take in more debts for the next few years because it “could increase their vulnerability to shocks.”