Pascoe, and the RBA, provide the classically accepted explanation of how banks fund their loans. This explanation is not factually correct - as explained by the Bank of England (see https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy). As was pointed out in an earlier comment a loan is simply created by adding a number into an account - no money is needed! Please read the BoE explanation.
However, that is not the full story. Imagine the banking system is a closed system. Any money created by the action of making a loan must end up as a deposit. Assuming that, on average, loans made by a bank find their way back to the bank, the bank will have a loan book mirrored by a deposit book. And the bank will need to pay interest on that deposit. So you might regard the interest paid on the deposit as the cost of the loan. This is what Pascoe and the RBA mean, but they fail to understand how the system actually works.
Of note is the effect of the creation of money by private banks. Since the deregulation of banks in the 70/80's, there has been a steady increase in money supply caused by the increasing loan books of banks. This outside the direct control of governments. After the GFC when more loans were paid back than created the money supply shrank. As consumers reach a limit on the amount of debt they can take on, the growth of money supply must slow or reverse.
Our economy is critically dependent on the growth of money supply through the issuance of debt, but sadly the government (of all persuasions) and the RBA don't seem to understand the consequences of this dependency.
