Question

Discuss Financing of interventions within the budgetary system the regarding covid-19 in Australia?

Answer 1

The outbreak of Covid-19 is an public health issue, but the implications of Covid 19 has been more than just of public health. Each and every country on this planet has suffered a lot due to covid and Australia is no exception to this.The Reserve Bank of Australia is an apex body that deals with the economic policies within the country. In order to counter the damage done by Covid, the Australian Reserve Bank took the following steps-

• Lowered the cash rate target to 0.25%- The reserve bank lowered the cash rate twice in March, to 0.25%. This led to boost in cash flow of the domestic and business. This increased the business a bit during the pandemic. On the contrary, it effected the people that depend on high interest rates for their profits.
• Target to achieve 3 year bond yeild to around 0.25 percent- The Australian Reserve Bank has asked its subsidiaries banks to maintian an bond yeild of 0.25%. The maintainance is highly essential for the growth of the domestic business. It also acts as an Yardstick to measure the progress during the times of pandemic.
• Provide term funding facility(TFF) for the banking system- As per the Australian Reserve Bank, an separate deposit institutions known as ADI's (authorised deposit taking institutions) are expected to collect funds from the banks. The banks are supposed to pay 0.25% of their incomes to the TFF's. Its an mechanism to maintain the reserve of funds.
• Injection of Liquidity- The Reserve Bank Of Australia, has been injecting liquidity through its daily operations. In March 2020, the Bank announced it would conduct regular one-month, three-month and six-month maturity repurchase operations as long as market conditions warranted. In April the bank announced that the daily market operations would be on much smaller scale.
• Providing Liquidity to goverment bonds- The Australian Reserve Bank is ready to purchase the domestic banks liquidity for safeguarding its business.
• Established foreign exchange Swap to support US Dollar funding- The Reserve Bank of Australia, Established an temporary Swap deal of $60 billion US Dollars to strengthen its currency through Swap Market.
• Supply of Bank Notes- We all know that in times of recession, the only way to get out of it is through supply of cash. The supply of cash funds the business and is highly important for the growth of the economy. The Australian Reserve Bank understands this and it wants to get out of recession as soon as possible.

The above mentioned steps are the ways and the inerventions by which the financial institutions in Australia are trying to get out of slump caused by Covid-19.