declines up to that point, the bank's balance sheet will still be at least twice as large as what it was just prior to the pandemic. it will decline gradually thereafter, with bond maturities of between $ 35 billion and $ 45 billion every year for some time. 7 / 11 23 / 05 / 2022, 13 : 03 from qe to qt – the next phase in the reserve bank's bond purchase program | speeches | rba graph 5 one of the consequences of the bank's bond purchase program, and other policy measures adopted in response to the pandemic, is the abundance of exchange settlement ( es ) balances. [ 5 ] these are held by commercial banks ( and other financial institutions ) at the reserve bank and are used to settle transactions between banks. banks can also lend them to others in the overnight cash market, with those transactions determining the cash rate. as expected, the abundance of es balances led to a noticeable decline in the demand to trade cash overnight. it has also been unsurprising that the cash rate has traded slightly below the cash rate target since late - march 2020 ( graph 6 ). while es balances will decline as the various monetary policy measures adopted during the pandemic unwind, as discussed, that process will take a number of years. 8 / 11 23 / 05 / 2022, 13 : 03 from qe to qt – the next phase in the reserve bank's bond purchase program | speeches | rba graph 6 recently, the board considered options to reduce es balances more quickly. [ 6 ] if we were to do that, banks would have more of an incentive to borrow funds overnight, since their es balances would once more become relatively scarce. hence, such a change would encourage more trading in the overnight cash market, with the cash rate trading closer to, and eventually around, the cash rate target. however, the benefits of reducing es balances quickly were judged to be modest compared with the risks, including the potential to create volatility in a range of financial markets. moreover, while the abundance of es balances affects the behaviour of the cash rate relative to the cash rate target, it does not impair the ability of the bank to achieve the desired stance of monetary policy via adjustments to the cash rate target and the rate paid on es balances. in particular, because es balances will remain abundant for some time, the cash rate will tend to be

new centres. it is possible that some of this might just be keeping pace with population growth. but there is also a risk that new and improved shopping centres simply cannibalise business from some other centres, eventually resulting in excess supply, particularly in light of weak household spending of late. this would weigh on rents and valuations. and, to the extent that owners of these centres hold debt, difficulties in servicing repayments could result in further sales and price declines. graph 5 ultimately, the implication for financial stability of these vulnerabilities depends on the exposures of the financial institutions to retail businesses and developers. so the third issue addressed by my colleagues was banks'exposures to retail commercial property development. given the increase in retail property development over the past decade, it is perhaps not surprising to see that banks'exposures have also risen ( graph 6 ). indeed, in terms of commercial property, banks are most exposed to office and retail, and exposures to both these sectors have increased sharply over the https : / / www. rba. gov. au / speeches / 2019 / sp - ag - 2019 - 08 - 08. html 8 / 13 08 / 08 / 2019 financial stability through the lens of business | speeches | rba past decade. nevertheless, at less than $ 60 billion, the exposure represents less than 3 per cent of major banks'assets. and despite the difficult conditions in this sector, this has not translated into a deterioration in loan performance with non - performing loans to the retail sector remaining unchanged at low levels. so, while there may be vulnerabilities in the retail sector, these do not currently seem to pose a significant risk to the financial sector. graph 6 the second sector i want to focus on is the mining sector. in contrast to the retail sector, mining firms in aggregate have experienced improved conditions recently, driven by increased commodity prices. accordingly, profitability has increased to be at its highest level in the past ten years ( graph 7 ). liquidity is also at a very high level. at the same time, debt and gearing ratios are at the lower end of the ranges seen over the past couple of decades. in fact, they are also relatively low when compared to firms outside of the resources sector. as a result, mining firms'balance sheets appear well placed to absorb shocks, perhaps more than has been the case for some time. so, while risks related to market conditions have abated somewhat, this has occurred alongside