OBITUARY: Term Funding Facility, 2020-21

author-avatar By
on July 05, 2021
OBITUARY: Term Funding Facility, 2020-21 doesn't usually write obituaries, but we lost a great one a few days ago, so pour one out for the fallen homie.

The Term Funding Facility, son of Reserve Bank of Australia (RBA), parted this Earth on 30 June 2021.

Born into a pandemic, and designed to keep the credit juices flowing to banks, your short time on this mortal coil loomed large.

You had a thankless job, providing in excess of $200 billion in cheap funding of 0.25% and then 0.10% over a fixed period of three years to banks.

Your effect was profound.

Many lenders juicing your squeeze introduced home loans under the 2% mark, while also introducing cashback offers - a feeding frenzy for the ages.

This has in part resulted in a huge boom in home loans written, with the cheap funding also thought to have pushed up house prices.

While praised for your ability to keep the debt economy well lubricated, you were also criticised by some pundits.

One expert said you were "not fair", while another, Peter Sheahan of Curve Securities, wrote on Friday: "There are clear opinions in the market the RBA balance sheet will rise to, say, $650 billion to $700b during this new fiscal year". 

"That is staggering amount of additional liquidity within the system which could unleash any amount of asset growth in any economic sector."

That's $700 billion in effective debt, which could have a flow-on effect to inflation, and your father the RBA hopes it will push up wages, too.

Some banks were kind enough to not milk every ounce of marrow from your bones, however.

On your last day on Earth there was still $20 billion left on the table, meaning $187 billion was drawn down.

Westpac's credit strategy team said this was "attributable to smaller ADIs [banks] or international banks that did not have readily available collateral." 

So what's next for the ripple effect you had created? 

"With the TFF programme now complete we will gradually see a transition to a more normal funding environment over the next couple of quarters," Westpac's credit strategy team said.

Indeed, "normal funding" seems to be returning already - while you're pushing up daisies, TFF, lenders are pushing up rates again.

This is despite your daddy's cash rate still being at 0.10% and not expected to get higher until 2024 - with another announcement tomorrow. More of the same?

It was a great ride, mate, but unfortunately your time is now up.

Gone but not forgotten.

Rest in Peace.

Hero image created at

Latest Articles

Harrison is's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.


Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree
to the Savings Privacy Policy