Question Number: 90
PDR Number: AET090
Date Submitted: 17/02/2022
Department or Body: Treasury

The end of the bond purchase program was not sudden. In December 2021, the Reserve Bank Board announced that it would consider the future of the bond purchase program in February 2022, with the decision to be based on the same three considerations that the Board had used since the outset of the program: the actions of other central banks; how the Australian bond market is functioning; and, most importantly, the actual and expected progress towards the Board’s goals of full employment and inflation consistent with the target. The actions of other central banks were relevant because one motivation for the introduction of the bond purchase program was that other central banks were buying bonds. If the RBA had not purchased bonds, Australian bond yields and the exchange rate would have been higher and this would have impeded the recovery from the pandemic. At the time of the decision to cease purchases, most other central banks had completed their bond purchase programs, or would do so shortly. The end of the bond purchase program does not represent a tightening of monetary policy. By mid February, the RBA had purchased over $350 billion of government bonds under its various programs and the RBA’s balance sheet had more than tripled since the start of the pandemic, to around $650 billion. These purchases and the expansion of the balance sheet are providing ongoing support to the Australian economy. The Reserve Bank Board has said that it is committed to maintaining highly supportive monetary conditions to achieve its objectives of a return to full employment in Australia and inflation consistent with the target. The cash rate remains at a historically low level.