Christopher Kent: The Term Funding Facility, other policy measures, and financial conditions

Address (online) by Mr Christopher Kent, Assistant Governor (Financial Markets) of the Reserve Bank of Australia, to KangaNews, 9 June 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
09 June 2021


The Reserve Bank's package of monetary policy measures is supporting the Australian economy through the pandemic. It reduced funding costs across the economy and is aiding the provision of credit to households and businesses. The Term Funding Facility – the TFF – is a key part of that package. The Board confirmed in May that the TFF will proceed as planned, with final drawings of 3-year funding due by the end of this month. So it is timely to discuss the operation of that facility and the ways in which it is contributing, and will continue to contribute, to stimulatory monetary conditions. I'll then discuss some of the Bank's other monetary policy measures and the evolution of financial conditions of late. Average interest rates being paid by business and household borrowers are at or close to historic lows and financial conditions more broadly remain very accommodative.

Term Funding Facility

The TFF was announced at the onset of the pandemic to provide banks access to low-cost funding for 3 years. The facility has 3 overall aims:

  • First, it was put in place at a time when wholesale funding markets had been significantly disrupted and the economic outlook was extremely uncertain. The facility has enabled banks – which provide the bulk of financing to the Australian economy – to confidently extend credit to businesses and households.
  • Second, the TFF is contributing to lower funding costs for banks, which has in turn led to lower borrowing rates for their business and household customers. In addition, as I have discussed in an earlier speech, the TFF is indirectly helping to lower funding costs more broadly, including by encouraging investors in bank bonds to look to close substitutes, thereby pushing down yields on bonds issued by businesses and on asset-backed securities issued by non-banks.