Explainer: The RBA bought $361 billion in bonds. What did Australia get in return?

During the COVID-19 pandemic, the Reserve Bank purchased approximately $361 billion in government bonds to stabilise financial markets and stimulate the economy.

In an interview published on 18 October, RBA Assistant Governor Christopher Kent acknowledged that the policy delivered relatively modest benefits compared with other monetary-policy measures.

So how did it work, and what did it cost?

Why did the RBA buy bonds?

In early 2020, financial markets were approaching crisis conditions. Investors were selling government bonds, threatening the availability of credit.

The RBA initially purchased bonds to restore orderly trading.

Later, with the cash rate reduced to just 0.1%, the Bank wanted additional economic stimulus. In November 2020 it launched quantitative easing, or QE.

How does QE work?

A government bond is effectively a loan to government, paying interest until maturity.

The RBA purchased existing bonds from financial institutions through the secondary market, paying by creating additional central-bank reserves.

This increased demand for bonds, raising their prices and lowering their yields — the returns available to investors purchasing them.

Lower government bond yields can reduce longer-term borrowing costs throughout the economy, including for businesses and households.

The RBA also wanted to prevent the Australian dollar appreciating, which would have weakened export competitiveness.

What did Australia get?

The main QE program purchased $280.7 billion in bonds between November 2020 and February 2022.

Including earlier market-stabilisation and three-year yield-target purchases, the total was approximately $361 billion.

The RBA estimates that QE lowered longer-term bond yields by approximately 30 basis points, equivalent to 0.30 percentage points.

Kent acknowledged that cutting the cash rate and providing cheap funding directly to banks were more effective tools.

Why did the RBA lose money?

The RBA purchased bonds when yields were exceptionally low.

When inflation surged and interest rates increased, those bonds fell in market value.

Meanwhile, the RBA was paying higher interest on commercial banks' settlement balances while continuing to earn relatively low returns on its bond holdings.

In 2025–26, it recorded an $8.5 billion accounting loss, leaving negative equity of $11.3 billion.

These losses also reflect other financial assets and should not all be attributed exclusively to QE.

Was it worth it?

The RBA is now allowing bonds to mature rather than selling them.

Its negative equity does not prevent it operating, but rebuilding capital will restrict future dividends to government.

The economic question is whether modestly cheaper borrowing and stronger economic activity justified the financial risks.

The RBA believes QE helped. Whether those benefits outweighed the costs remains considerably harder to establish.