Technical Analysis

RBA says its pandemic cheap lending policy to business failed (sort of)


The Reserve Bank of Australia has published a research paper on its cheap lending facility introduced as part of its Covid policy response. It concludes that the facility failed to boost borrowing by businesses.

  • Reserve Bank of Australia’s Term Funding Facility (TFF)
  • It achieved a key objective of providing banks with three-year low-cost funding and was available for drawdown until 30 June 2021.
  • we find no statistically significant evidence that the TFF increased credit supply to businesses

The report then hedges:

  • However, our confidence intervals are wide and there are significant identification challenges involved in disentangling the effects of the TFF from the effects of pandemic-related disruptions and other policy interventions on credit supply and demand. Nonetheless, the TFF provided an assured source of funding at a time of considerable stress in the financial system and lowered banks’ funding costs, and any effects on business lending via these channels may not be fully reflected in our results.

Link is here for the full thing.

Cheap funding for banks did help send house prices (even further) to the sky though …

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