MNI POLICY: RBA Minutes Note Signs Of "Credit Tightening"

The Reserve Bank of Australia's move to increase the size of its Term Funding Facility for commercial banks was a response to a tightening in the supply of credit, the minutes from the bank's September meeting show.

At its September meeting, the RBA Board moved to expand and extend its TFF program to AUD200 billion available to the end of June 2021, giving commercial banks access to funding at the official RBA rate of 0.25%.

The bank noted weak demand for household and business borrowing, and that the "supply of credit had tightened somewhat since earlier in the year," according to the minutes published Tuesday,

Expanding the TFF would help keep interest rates low for borrowers and "support the provision of credit" by commercial lenders through giving them confidence they had "continued access to low-cost funding," the RBA said, the release noted.

The original AUD90 billion TFF was announced in March and had been due to close by the end of March next year.

RECOVERY

The minutes re-iterated the RBA view that although Australia was experiencing the biggest shock to the economy since the 1930s, and was now in recession,although the downturn "had not been as severe as earlier expected" and a recovery was under way in most of Australia, with the exception of Victoria which was experiencing a second Covid-driven lockdown.

The RBA left official rates unchanged at a record low 0.25% and re-affirmed its program to buy Australian Government debt, with the aim of controlling yields on the benchmark three year Australian Government Bond.