The combination of these changes, together with the investment-focused growth of the Australian economy, has had a marked effect on the composition of capital flows to Australia which I will discuss later in my talk. These developments may well persist for quite some time to come.
Bank funding 1 The re-pricing of risk significantly increased the cost of wholesale funding for the global banking system. At the shorter end of the yield curve, the rise in costs primarily reflected counterparty concerns. This is best exemplified by the spread between a short-term rate in the interbank market and the expected policy rate (Graph 1).