roundtable webinar, online, 20 october 2020. available at < https : / / www. rba. gov. au / speeches / 2020 / sp - ag - 2020 - 10 - 20. html >. for an explanation of how the reserve bank's purchase of bonds and the term funding facility contribute to deposits, see ‘ box d : recent growth in the money supply and deposits ’, rba statement on monetary policy, august 2020. available at < https : / / www. rba. gov. au / publications / smp / 2020 / aug / box - d - recent - growth - in - the - money - supply - anddeposits. html >. the tff has also put downward pressure on interest rates at around the 3 - year tenor. because the tff represents a 3year fixed - rate liability for banks, those that draw on the facility have an incentive to either write a fixed - rate loan for the same term, invest in a security, or enter into a swap. all of these measures place downward pressure on important 3 - year interest rates throughout the economy, complementing forward guidance and the yield target. the materials on this webpage are subject to copyright and their use is subject to the terms and conditions set out in the copyright and disclaimer notice. © reserve bank of australia, 2001 – 2021. 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.

which is then managed and gradually wound down. the assets have to be transferred at some price, and the process of striking that price has to protect the interests of taxpayers, who should not over - pay for the bad assets and thereby give a windfall to shareholders. at the same time, there has to be pressure on the institutions concerned actually to get on with the clean up, as opposed to just waiting for something to turn up. the plan being implemented in the united states is designed to induce private capital to take part in the asset management vehicles, which helps to sort out the pricing question. another approach is to leave the assets on the banks ’ balance sheets, but have the government insure them, for a price, to limit further downside. this is the essence of the uk approach. yet another approach is to nationalise the relevant institutions, which obviates any pricing issues for the assets per se and automatically provides enough capital, but introduces new questions in dealing with shareholders. this approach is the traditional one, though it has mostly been used in smaller countries or, where used in major countries, for smaller institutions. the economics of all these approaches is essentially the same : recognising losses that have occurred, reducing the riskiness of bank balance sheets and finding new capital to restart the credit process. which technique to choose is a matter of judgment. the politics may be harder than the economics. ordinary people resent, not surprisingly, taxpayer funds being used to fix problems that arose, in part at least, because of seriously misaligned incentives that rewarded financiers for taking too much risk. but it has to be done, otherwise economies will suffer for longer. the political leaderships of the united states, the united kingdom and some other countries have the unenviable task of persuading their citizens to accept the need for these initiatives. a second near - term condition for recovery is macroeconomic support for aggregate demand, in an environment in which private spending has weakened sharply, owing to loss of confidence and strained credit markets. that is coming into place as a result of easier monetary policy, and easier fiscal policy also in many countries. internationally, the role of fiscal policy is more prominent on this occasion than has been the case for many years, since the impaired credit system makes monetary policy less effective than it would normally be in many countries. the reason official interest rates are approaching zero in a growing list of countries is not because central banks think it is a good