our approach here is similar in concept to our longstanding approach to the foreign exchange market, where we have been prepared to support smooth market functioning when liquidity conditions are highly stressed. we now stand ready to do the same in the bond market and we are working in close cooperation on this with the australian office of financial management ( aofm ). in addition to these previously announced measures, today's package has four elements. they are : a reduction in the cash rate to 0. 25 per cent ; a target of 0. 25 per cent for the yield on 3 - year government bonds ; a term funding facility to support credit to businesses, particularly small and medium - sized businesses ; and an adjustment to the interest rate on accounts that financial institutions hold at the rba. i will discuss each of these in turn. 1. a further reduction in the cash rate to ¼ per cent this brings the cumulative decline over the past year to 1¼ percentage points. this is a substantial easing of monetary policy, which is boosting the cash flow of businesses and the household sector as a whole. it is also helping our trade - exposed industries through the exchange rate channel. at the same time, though, low interest rates do have negative consequences for some people, especially those relying on interest income. the reserve bank board has discussed these consequences extensively, but the evidence is that lower interest rates do benefit the community as a whole, although i acknowledge that the effects are uneven. with this decision today, the policy rates set by the reserve bank of australia, the united states federal reserve, the bank of england and the reserve bank of new zealand are all effectively at ¼ per cent. each of us are using all the scope we have with interest rates to support our economies through a very challenging period. 2 / 5 bis central bankers'speeches at its meeting yesterday, the board also agreed that we would not increase the cash rate from its current level until progress was made towards full employment and that we were confident that inflation will be sustainably within the 2 – 3 per cent range. this means that we are likely to be at this level of interest rates for an extended period. before the coronavirus hit, we were expecting to make progress towards full employment and the inflation target, although that progress was expected to be only very gradual. recent events have obviously changed the situation and we are now likely to remain short of those objectives for somewhat longer. i am not able to provide you with an updated set of economic forecasts

government has indicated that additional policy measures will be announced shortly. australian public finances are in good shape and the country's history of prudent fiscal management gives us the capacity to respond now. the banks too have an important role to play in building that bridge to the recovery by supporting their customers. without this support, it will be harder for us all to get to the other side in reasonable shape. australia has a strong financial system, which is well placed to provide the needed support to businesses and households. the system has strong capital and liquidity positions and our financial institutions have invested heavily in resilience. as apra confirmed this afternoon in a public statement, the current large buffers of capital and liquidity are able to be used to support ongoing lending to the economy. 1 / 5 bis central bankers'speeches the financial regulators have also confirmed that they are examining how the timing of various regulatory initiatives might be adjusted to allow financial institutions to concentrate on their businesses and work with their customers. apra and asic both stand ready to assist institutions work through regulatory issues arising from the virus. the council of financial regulators is meeting again tomorrow and will also meet with the largest lenders to discuss how they can support their customers and whether there are any regulatory impediments in the way. the reserve bank itself is also playing a role in building that bridge to the recovery. i will now turn to that. our major focus is to support jobs, incomes and businesses, so that when the health crisis recedes the country is well placed to recover strongly. supporting small business over coming months is a particular priority. prior to today's announcement, we had already taken several steps over recent days to support the australian economy. over the past week or so we have been injecting substantial extra liquidity into the financial system through our daily market operations. as part of this effort, we will be conducting onemonth and three - month repo operations each day. we will also conduct repo operations of sixmonth maturity or longer at least weekly, as long as market conditions warrant. as a result of these liquidity operations, exchange settlement balances have increased from around $ 2. 5 billion a month ago to over $ 20 billion today. the reserve bank also stands ready to purchase australian government bonds in the secondary market to support its smooth functioning. the government bond market is a key market for the australian financial system, because government bonds provide the pricing benchmark for many financial assets.