In a speech, Reserve Bank of Australia Head of Domestic Markets David Jacobs announced that the open repo facility will cease in early 2027 because banks can now obtain as many reserves as needed through full-allotment open market operations. The overnight and intraday standing facilities will remain available, and the open repo facility could be reintroduced if future developments create a clear need. The RBA has not yet reached its planned ample-reserves regime, under which banking system demand will determine reserve levels. Banks now estimate they will hold about AUD 70 billion to AUD 100 billion in that environment, down from AUD 100 billion to AUD 200 billion in 2024 and below current reserves. As the RBA’s bond holdings mature, reserves are expected to decline by about AUD 20 billion to AUD 40 billion annually until banks begin replacing the drained liquidity through open market operations. The RBA may supplement those operations with foreign exchange swaps, cross-currency basis swaps or purchases of short-term Australian Government Securities if repo activity becomes large enough to impair market functioning. Market participants should prepare for more variable money market rates and more active liquidity management as reserves decline. The transition does not affect the stance of monetary policy or how the Monetary Policy Board sets the cash rate target.
2026-08-25Reserve Bank of Australia
Reserve Bank of Australia to end open repo facility in early 2027 as it moves toward demand-driven liquidity
The Reserve Bank of Australia will end its open repo facility in early 2027 as full-allotment open market operations can meet banks’ reserve needs. The RBA has not yet reached its demand-driven ample-reserves regime, with banks now estimating demand at AUD 70 billion to AUD 100 billion. Firms should prepare for more variable money market rates and more active liquidity management as reserves decline.