, the high unemployment rate will mean that wage growth, which was not strong pre - pandemic, will remain subdued. as wage costs are a major factor affecting prices, inflation will remain contained for some time. moreover, the declines in rents that were evident in the june quarter as a large amount of extra supply came into the rental market are also likely to persist and will also restrain inflation. we are now nearing the end of the september quarter. how is the australian economy evolving after that large decline in output? most indicators of activity and the labour market troughed in early may. since then we have seen a recovery in a number of these indicators, though there has been substantial variation across the country. i will illustrate this using the payrolls data ( graph 3 ). https : / / www. rba. gov. au / speeches / 2020 / sp - dg - 2020 - 09 - 22. html 4 / 13 22 / 09 / 2020 the australian economy and monetary policy | speeches | rba graph 3 payroll jobs by state * week ending 14 march 2020 = 100 index index wa nsw sa qld tas vic m a m j j a m a m j j a m a m j j a * excludes firms not reporting through single - touch payroll and self - employed persons sources : abs ; rba the strongest recovery has been in wa. part of this reflects the turnaround in investment in the resources sector that was already in train before the onset of the pandemic. there has also been a sharp rebound in activity in the housing sector in wa boosted by the support from both the federal and state governments. the pick - up in wa has been such that some of the bank's business liaison contacts are reporting that in some skill areas they are finding it hard to find labour, particularly with the border closures. at the other end of the scale is victoria, where the impact of the lockdown is very evident. we estimate that the lockdown in victoria has subtracted around 2 per cent from national gdp in the september quarter. overall, the recovery has not been a rapid bounce but more of a slow grind. the virus is having its effect, particularly because of the lockdown in victoria, but so too is the shortfall in demand that occurs in recessionary conditions. that shortfall in demand will be a significant brake on the recovery. until households and businesses are confident about future demand and income, they will be reluctant to spend and invest. the

https : / / www. rba. gov. au / speeches / 2020 / sp - dg - 2020 - 09 - 22. html 6 / 13 22 / 09 / 2020 the australian economy and monetary policy | speeches | rba bonds. when the reserve bank buys bonds in the secondary market, it directly boosts the banking system's deposits. third, the funds provided under the term funding facility ( tff ) have substantially increased liquidity. these funds are lent by the rba to the banking system for a term of three years and at a fixed rate of 25 basis points. the initial allowance of the tff was 3 per cent of credit extended by the banking system or $ 84 billion. that allowance has been gradually taken up over the past six months, and particularly in recent weeks, such that take - up currently stands at $ 75 billion. different types of institutions, whether large, medium - sized or small, have accessed similar shares of funding from the tff. the reserve bank board announced an extension of the tff following its september meeting. this amounts to an additional 2 per cent of credit, and is available to be drawn until june 2021. [ 7 ] why did the board take this decision? given the protracted nature of the recovery, the board considered it appropriate to provide more funding and for a longer period to support the australian economy in the recovery. the larger amount of funding available, at least 5 per cent of total credit, is a further easing in the stance of monetary policy. it will result in a further material expansion of the rba's balance sheet for the next three years. what impact are we seeing from the take - up of the tff? first, the tff has lowered lending rates by lowering bank funding costs. the tff funding is considerably cheaper than wholesale funding of similar maturity. second, it is having a noticeable effect on the composition of bank funding. it is important to keep in mind that funding is fungible for banks. it is not possible to say to what purpose particular sources of funds are being put or which they are replacing. but the funding structure of the banking system has changed significantly over the past six months as a result of the tff together with the increase in deposit funding. there has been a reduction in offshore wholesale funding, which is of a very similar size to the takeup of tff funding ( graph 5 ). the amount of domestic wholesale funding is little changed. banks have chosen to let