Australia Ends QE With Murky Future for $465 Billion of Assets

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Australia concluded its quantitative easing program, leaving the Reserve Bank with more than 40% of government bonds on issue and raising questions about what it will do with the pile of assets, Bloomberg News reported. The RBA on Thursday conducted its final A$1.6 billion purchase of securities under a program that tripled its balance sheet to about A$650 billion ($465 billion). Indeed in 2021 it bought more than three times more debt than the government issued, the largest ratio across the world’s six largest developed bond markets. Governor Philip Lowe says the RBA will decide in May whether to reinvest the proceeds of maturing bonds. Even if it decides against reinvestment, analysts don’t expect a significant run-off in the near-term -- known as quantitative tightening -- given the first notable bond maturity isn’t until April 2023. The RBA’s decision to turn to QE, having managed to avoid it over the preceding decade, suggests that it’s likely to turn to it again in the next crisis or recession. Lowe said last week that while the RBA held 60% of some lines of securities, the market could accommodate more purchases if needed. Read more.
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