RBA lavishes the fundingĪt the start of 2020, before COVID-19 struck, the RBA balance sheet was worth about 9% of Australia’s GDP, down from a peak of about 13% during the GFC.
A cash flow optimisation strategy by the Government to stimulate activity is the current modus operandi, and it’s creating favourable conditions for risk assets. The banking system is literally awash with cash and banks are turning away deposits while rapidly reducing the rates paid to savers.
This is $66 billion higher since 30 June 2020 and deposits from Australian banks (in the form of Exchange Settlement balances) have risen by $94 billion. Last week alone it grew by another $10 billion to $344 billion. The message of 'lower for longer' interest rates has been heard loud and clear from a cheerful and optimistic Governor of the RBA, Philip Lowe, including an unrelenting expansion of its balance sheet. Their current market position on price competition and sheer scale of influence unleashes factors of productivity improvement and makes it difficult for others to compete on traditional business models. They are redefining logistics in their distribution channels. They have both positioned themselves as the premier high volume, low price, low margin product provider. The Reserve Bank of Australia (RBA) and Amazon have a lot in common in 2021.
