SLIDE 1 Unconventional Monetary Policy: Some Lessons From Overseas
Philip Lowe Governor
Australian Business Economists Dinner, Sydney 26 November 2019
SLIDE 2 2017 2015 2013 2011 2009 2019
1 2 3 %
1 2 3 %
Central Bank Policy Rates
Euro area Sweden Switzerland Denmark Japan
Sources: Central banks; Refinitiv
SLIDE 3 2016 2013 2010 2007 2019 2 4 6 8 % 2 4 6 8 %
Central Bank Extended Liquidity Operations
Per cent of GDP
Sources: Central banks; Refinitiv
SLIDE 4 Private securities Agency securities Government bonds
2016 2013 2010 2007 2019 10 20 % 10 20 %
Central Bank Asset Purchases
Per cent of GDP
Sources: Central banks; Refinitiv
SLIDE 5
Some observations
1. Liquidity support measures in stressed markets were successful 2. Unconventional measures have had some side effects
i. Changes to incentives for financial institutions and policy makers ii. Impact on bank lending and efficient allocation of resources iii. Blurring of the lines between monetary and fiscal policy
3. A package of measures works best, with clear communication
SLIDE 6
Some observations
1. Liquidity support measures in stressed markets were successful 2. Unconventional measures have had some side effects
i. Changes to incentives for financial institutions and policymakers ii. Impact on bank lending and efficient allocation of resources iii. Blurring the lines between monetary and fiscal policy
3. A package of measures works best, with clear communication
SLIDE 7
Some observations
1. Liquidity support measures in stressed markets were successful 2. Unconventional measures have had some side effects
i. Changes to incentives for financial institutions and policymakers ii. Impact on bank lending and efficient allocation of resources iii. Blurring the lines between monetary and fiscal policy
3. A package of measures works best, with clear communication
SLIDE 8
Implications for Australia
1. RBA has flexible market operations to ensure adequate liquidity. No need to change, since financial markets are operating normally 2. Negative interest rates are extraordinarily unlikely 3. No appetite to purchase private-sector assets in a QE program 4. If RBA were to undertake QE, would purchase government bonds
SLIDE 9
Implications for Australia
1. RBA has flexible market operations to ensure adequate liquidity. No need to change, since financial markets are operating normally 2. Negative interest rates are extraordinarily unlikely 3. No appetite to purchase private-sector assets in a QE program 4. If RBA were to undertake QE, would purchase government bonds
SLIDE 10
Implications for Australia
1. RBA has flexible market operations to ensure adequate liquidity. No need to change, since financial markets are operating normally 2. Negative interest rates are extraordinarily unlikely 3. No appetite to purchase private-sector assets in a QE program 4. If RBA were to undertake QE, would purchase government bonds
SLIDE 11
Implications for Australia
1. RBA has flexible market operations to ensure adequate liquidity. No need to change, since financial markets are operating normally 2. Negative interest rates are extraordinarily unlikely 3. No appetite to purchase private-sector assets in a QE program 4. If RBA were to undertake QE, would purchase government bonds
SLIDE 12 1 2 3 4 5 6 7 8 9 10 0.50 0.75 1.00 1.25 % 0.50 0.75 1.00 1.25 % Maturity (years)
Australian Yield Curve
Overnight Indexed Swaps Australian Government Securities
Sources: Bloomberg; RBA
SLIDE 13
Implications for Australia
1. RBA has flexible market operations to ensure adequate liquidity. No need to change, since financial markets are operating normally 2. Negative interest rates are extraordinarily unlikely 3. No appetite to purchase private-sector assets in a QE program 4. If RBA were to undertake QE, would purchase government bonds 5. Threshold for undertaking QE has not been reached and is not expected to be reached
SLIDE 14 Unconventional Monetary Policy: Some Lessons From Overseas
Philip Lowe Governor
Australian Business Economists Dinner, Sydney 26 November 2019
