The following insight is extracted from the RBA’s Bulletin for the March quarter 2015.
Banks’ cost of funding
The spread of banks’ funding costs to the cash rate is estimated to have narrowed by about 9bps in 2014 (Graph 1). With the cash rate unchanged over the past year, the slight narrowing in the spread was entirely due to changes in the absolute cost and mix of funding liabilities. Changes in the costs and composition of wholesale funding (i.e. bonds and bills) contributed only marginally to the fall in funding costs.
