The Reserve Bank's policy measures announced in mid-March “are working as expected” RBA governor, Philip Lowe, argued yesterday.

“Banks have reduced their lending rates to record lows, with interest rates for small business declining the most,” Lowe told an online FINSIA Forum.

“The yield on 3-year bonds has settled at the target and the government bond markets in Australia are working well again,” he said.?

“That package was designed to keep funding costs low and credit available. It included cutting the cash rate to 25 basis points, targeting a yield of 25 basis points for 3-year Australian Government bonds and making a Term Funding Facility available to the banks to support credit to businesses, especially small and medium-sized businesses.

“To date, the RBA has bought around $50 billion of government bonds. We have scaled back our purchases recently as conditions have continued to improve, and over the past week we have not purchased any bonds.

“We remain prepared to scale up these purchases again if necessary to achieve the yield curve target and to assist smooth market functioning,” Lowe said.