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Speaker 1: Inspector of COVID and it's mad fiscal ideology still being

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Speaker 1: played out with news our banks are a fortune to

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Speaker 1: the Reserve Bank. It's about a bit over nine billion

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Speaker 1: from the infamous Funding for Lending program. The FLP topped

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Speaker 1: out at nineteen billion. What's left is due in the

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Speaker 1: next couple of months. Brad Olsen in for Metric's Principle

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Speaker 1: Economists back. Well, this Brad morning to you.

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Speaker 2: Good morning.

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Speaker 1: Bank's not short of money, as we've seen in the

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Speaker 1: results this week, that they simply pay it back or

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Speaker 1: funded out some sort of way.

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Speaker 2: I mean either or they do have the options on

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Speaker 2: either side to do that. And let's be clear, they

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Speaker 2: knew when they were taking out these levels of loans

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Speaker 2: that they'd have to pay them back eventually. So if

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Speaker 2: they're not ready to pay them back, they probably don't

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Speaker 2: qualify to be called bankers at that point. So they

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Speaker 2: will be ready. They will have sort of gone through

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Speaker 2: this process. Now, what I think the difference going forward

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Speaker 2: is that, of course the funding that they're going to

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Speaker 2: have out the other side is going to be more

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Speaker 2: expensive now because these funding for lending loans they were

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Speaker 2: priced at the ocr and so to be fair. The

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Speaker 2: bank's actually been paying less in the last you know,

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Speaker 2: a couple of months over the last year, as the

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Speaker 2: official cash rate has come down, but still out the

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Speaker 2: other side they will be paying higher than whatever their

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Speaker 2: interest rate is. Right the second is it looking.

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Speaker 1: True to say, just correct it for people who might

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Speaker 1: be confused with all this hyperlutant economic talk. If you've

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Speaker 1: got the money for next to nothing, which is what

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Speaker 1: they did, why wouldn't you flick it out into the

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Speaker 1: mortgage market if you can of four or five or

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Speaker 1: six or whatever, and you're creaming it, aren't you.

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Speaker 2: Well, essentially yes, And that was the idea at the time,

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Speaker 2: is that if the Reserve Bank was able to give

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Speaker 2: cheap loans out to the banks, and the banks would

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Speaker 2: pass those cheap loans on through to the rest of

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Speaker 2: the economy, that would stimulate a bit of activity. It

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Speaker 2: would keep inflation from going too low. And as it's

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Speaker 2: turned out, we did that really really well and let

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Speaker 2: inflation get far too high off the other side. But

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Speaker 2: you're right, the banks have been lending this out at

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Speaker 2: retail rates, and for a period retail rates below and

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Speaker 2: at the moment they have gotten quite a bit higher.

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Speaker 2: They've of course come back a bit over time. But

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Speaker 2: I think as well, I mean one of the areas

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Speaker 2: because the question keeps coming up, right, what do the

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Speaker 2: banks do? You know they're just going to use their

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Speaker 2: current level of mortgages to help repay this, you know,

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Speaker 2: will they have to go out into the market and

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Speaker 2: tap you know, some money themselves. I think you look

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Speaker 2: at what's been happening in recent times between people's you know,

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Speaker 2: on calls, savings accounts versus you know, the sort of

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Speaker 2: money that's the reserve bank, Sorry, the retail banks are

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Speaker 2: having to pay out on term deposits. Is a healthy

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Speaker 2: little margin there. You look at the fact that a

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Speaker 2: lot of people have been sitting on higher floating mortgage

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Speaker 2: rates waiting for our interest rates to come down again.

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Speaker 2: It might work out well for a home loan mortgage

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Speaker 2: holder to do that for a couple of weeks, but

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Speaker 2: for the banks are still effectively making money on the

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Speaker 2: difference between those different lending options. So, long story short,

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Speaker 2: I have no issue at all with thinking that the

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Speaker 2: banks are absolutely ready to repay this. They've known it

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Speaker 2: was going to happen. They've always been ready to have

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Speaker 2: to cash.

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Speaker 1: Did the fact they've got nine left from nineteen show

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Speaker 1: you just how hopeless Adrian was.

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Speaker 2: I wouldn't put it that way. I think, you know,

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Speaker 2: when we looked at the Funding for Lending program, it

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Speaker 2: was the last part of the bigger Reserve Bank announcements

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Speaker 2: that came out around what they needed or wanted to

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Speaker 2: do around monetary policy. In hinds, I think it was

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Speaker 2: clear by that point probably that we didn't need all

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Speaker 2: that much additional stimulus in the economy, and we did

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Speaker 2: it anyway, so it certainly didn't help at that point. Today,

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Speaker 2: I do think that again, when we looked at it,

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Speaker 2: we went, Wow, we had you know, large scale asset purchases,

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Speaker 2: you know, the money printing. We had the very very

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Speaker 2: low ocr When it did come out, I think quite

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Speaker 2: a few of us probably did go I didn't realize

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Speaker 2: that we were in that much of a state that

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Speaker 2: we needed such a big another bazooka to be brought in,

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Speaker 2: and hindsight's probably proven that out.

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Speaker 1: I think that's probably true. Bradley appreciate it as always,

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Speaker 1: have a good weekend. Brad Olson in FORO Metrics Principal Economists.

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