Christopher Kent: Long and variable monetary policy lags

Speech by Mr Christopher Kent, Assistant Governor (Financial Markets) of the Reserve Bank of Australia, at the KangaNews DCM Summit, Sydney, 20 March 2023. 

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

Central bank speech  | 
20 March 2023

It's great to be back at the KangaNews Summit. Last year I discussed the Reserve Bank's move to quantitative tightening (QT). Today I'll provide a brief update on the unwinding of our unconventional policies before turning to more conventional monetary policy issues, which will be the focus of my presentation.

The unwinding of unconventional monetary policies

We are currently pursuing passive QT, whereby we allow our holdings of government bonds to roll off as they mature. The next maturity of substance is $13 billion of the April 2023 Australian Government bond. Some central banks have slowed QT by reinvesting some of their maturing bonds; others have done the opposite, pushing QT along by selling bonds well ahead of maturity.

While QT will contribute to a moderate decline in our balance sheet over the next few years, the roll-off of the Bank's Term Funding Facility (TFF) will lead to a sizeable reduction in our balance sheet this year and next (Graph 1).