Reserve Bank of Australia governor Philip Lowe said in a speech today that the Reserve Bank's package of policy measures announced in mid March will help support the economy.
"The early evidence is that these measures are working as expected," Dr Lowe said.
"That package was designed to keep funding costs low and credit available. It included cutting the cash rate to 25 basis points, targeting a yield of 25 basis points for 3-year Australian Government bonds and making a Term Funding Facility available to the banks to support credit to businesses, especially small and medium-sized businesses."
"Banks have reduced their lending rates to record lows, with interest rates for small business declining the most. The yield on 3-year bonds has settled at the target and the government bond markets in Australia are working well again," Dr Lowe said.
To date, the RBA has bought around $50 billion of government bonds.
It said it remains prepared to scale up purchases again if necessary to achieve its yield curve target and to assist smooth market functioning.
Dr Lowe underlined that Australia's financial institutions have an important role in the recovery.
"It is both understandable and desirable that lenders draw on the buffers that were built up in better times.
"It is in the banks' own interest and in the interest of the broader Australian community that banks support their customers now and also support them in the recovery phase when credit will be needed so that businesses can once again expand," he said.
AFR
(20min delay)