Christopher Kent: A review of the Reserve Bank of Australia's Term Funding Facility

Speech by Mr Christopher Kent, Assistant Governor (Financial Markets) of the Reserve Bank of Australia, at the review of the Term Funding Facility (TFF) publication, Sydney, 9 October 2024.

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

Thank you for coming to the Reserve Bank's offices today. I will talk about a review we have published on the Term Funding Facility (TFF). This is the fourth instalment of the series of reviews of unconventional policy tools the RBA used during the COVID-19 pandemic.

In March 2020, the economic outlook was bleak and highly uncertain (Graph 1), financial markets were in turmoil, and there was limited scope to lower the cash rate further. In that environment, the RBA pursued a package of policies to support the economy. The TFF review considers how that element of the package worked, whether it achieved its aims, and lessons for the future. I will cover the key points but there is a lot of detail in the review itself.

What was the TFF intended to do?

The TFF aimed to:

• lower the cost of borrowing for businesses and households, by lowering lenders' funding costs, and to reinforce the benefits to the economy of the lower cash rate
• encourage banks to lend to businesses – particularly small and medium-sized enterprises (SMEs) – given that business credit tends to fall in downturns.

How did it work?

The TFF provided low-cost three-year funding to banks, which also indirectly helped to lower the cost of borrowing from wholesale markets.