Large Scale Asset Purchases

The Reserve Bank’s Large Scale Asset Purchases (LSAP) programme will buy up to $60bn of NZ Government Bonds, Local Government Funding Agency (LGFA) Bonds and NZ Government Inflation-Indexed Bonds in the secondary market. This takes the total size of the Large Scale Asset Purchases programme to $60 billion over 12 months.

The aim of the programme is to inject money into the economy with the aim of lowering borrowing costs to households and businesses.

The programme will initially buy $750 million of bonds each week through an auction process. This will be reviewed regularly to ensure the programme is working as intended to support jobs and the economy by keeping interest rates low on government bonds. Adjustments and additions will be made to the programme if needed.

More details about the bond programme process.

Proposed Weekly Schedule for LSAP


Bond purchases results

Bond purchase results can be found on the Open market operations - D3 table


Frequently Asked Questions

LSAP are a tool that central banks can use to inject money into the economy and lowering borrowing costs to households and businesses.

The Reserve Bank buys government debt in the form of bonds on the secondary market from banks, insurers and other organisations in exchange for newly created cash. This is sometimes called Quantitative Easing or QE.

When the Reserve Bank buys assets, this increases their price and so reduces their yield. That means the interest rate, in this case, on government bonds, fall. This then has the effect of ‘lowering the tide’ on other interest rates in the economy, particularly longer-term interest rates of two years or more, and reduces the cost of borrowing for households and businesses.

Secondly, when the Reserve Bank purchases these government bonds, this encourages the sellers of assets to use the money they receive from the Reserve Bank to switch into other financial assets like company shares, bonds, or new lending – helping to inject money into the economy.

The Reserve Bank is tasked with keeping inflation low and stable and supporting full employment. In the current situation, this means lowering interest rates in the economy.

We normally do that by changing the Official Cash Rate (OCR). But the OCR is currently at an historic low of 0.25 percent and it is as low as the Reserve Bank wants to take it for now.

There are other tools the Reserve Bank can use to lower interest rates, particularly long term interest rates, to support the economy. The LSAP is one of those.

The LSAP programme will purchase a total of up to $30 billion of New Zealand government bonds in the secondary market over the next 12 months, or about 10 percent of the country’s annual GDP. This is similar in size to that carried out by other central banks around the world.

Up to another $3 billion of local government bonds will also be purchased on the secondary market over the next year as well.

The programme aims to provide further support to the economy, build confidence, and keep interest rates on bonds low.

The Monetary Policy Committee will monitor the effectiveness of the programme and make adjustments and additions if needed.

LSAP programmes have been conducted in the euro area, Japan, Sweden, the United Kingdom and United States.

The evidence shows LSAP proved effective in providing much needed support, lowering long-term interest rates and exchange rates, and underpinning economic growth and inflation. Studies found the government bond purchases worth 10 percent of GDP have, on average, lowered 10-year government bond yields by around 50 basis points.

We expect LSAP will also lower long-term interest rates and the exchange rate in New Zealand.

More information