, sir leslie melville lecture, canberra, 29 october. committee on the global financial system ( 2019 ), ‘ unconventional monetary policy tools : a cross - country analysis ’, cgfs papers no 63, bank for international settlements. available at < https : / / www. bis. org / publ / cgfs63. htm >. https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 11 - 26. html 11 / 12 26 / 11 / 2019 unconventional monetary policy : some lessons from overseas | speeches | rba this risk has been reduced by the strengthening of liquidity regulation. it is also worth recalling that one role of the central bank is to support the liquidity of the system as a whole and that it is neither possible, nor desirable, for financial institutions individually to insure against system - wide shocks. debelle g ( 2018 ), ‘ lessons and questions from the gfc ’, address to the australian business economists annual dinner, sydney, 6 december. brunnermeier m and y koby ( 2019 ), ‘ the reversal interest rate ’. available at : < https : / / scholar. princeton. edu / markus / publications / reversal - interest - rate - effective - lower - bound - monetary - policy >. large - scale asset purchases would increase settlement balances, which would likely result in the cash rate moving below 0. 25 per cent. © reserve bank of australia, 2001 – 2019. all rights reserved. the reserve bank of australia acknowledges the aboriginal and torres strait islander peoples of australia as the traditional custodians of this land, and recognises their continuing connection to country. we pay our respects to their elders, past, present and emerging. https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 11 - 26. html 12 / 12

am confident that here, in australia, we are still a fair way from it. conventional monetary policy is still working in australia and we see the evidence of this in the exchange rate, in asset prices and in the boost to aggregate household disposable income. my third observation is that we have no appetite to undertake outright purchases of private sector assets as part of a qe program. https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 11 - 26. html 8 / 12 26 / 11 / 2019 unconventional monetary policy : some lessons from overseas | speeches | rba there are two reasons for this. the first is that there is no sign of dysfunction in our capital markets that would warrant the reserve bank stepping in. the second is that the purchase of private assets by the central bank, financed through money creation, represents a significant intervention by a public sector entity into private markets. it comes with a whole range of complicated governance issues and would insert the reserve bank very directly into decisions about resource allocation in the economy. while there are some scenarios where such intervention might be considered, those scenarios are not on our radar screen. my fourth point is that if – and it is important to emphasise the word if – the reserve bank were to undertake a program of quantitative easing, we would purchase government bonds, and we would do so in the secondary market. an important advantage in buying government bonds over other assets is that the risk - free interest rate affects all asset prices and interest rates in the economy. so it gets into all the corners of the financial system, unlike interventions in just one specific private asset market. if we were to move in this direction, it would be with the intention of lowering risk - free interest rates along the yield curve. as with the international experience, this would work through two channels. the first is the direct price impact of buying government bonds, which lowers their yields. and the second is through market expectations or a signalling effect, with the bond purchases reinforcing the credibility of the reserve bank's commitment to keep the cash rate low for an extended period. currently, the government bond yield curve sits around 20 basis points above the overnight indexed swaps ( ois ) curve, which represents the market's average expectation of the future monetary policy rate ( graph 4 ). purchasing government securities could compress this differential and could also flatten the ois curve through the expectations effect i just mentioned. a lower