Through the second channel, there will be a rise in firms’ capital raising and fixed investment, as well as in households’ consumption and net exports. Through the third channel, there will be a shift from investment in government securities to banks’ credit and investment in risk assets. Through the fourth channel, real interest rates will decrease and thereby underpin spending activity in the economy.
The market has, and continues to, respond to these pressures by looking for more efficient ways to process cheques, but they are clearly the highest cost payment instrument, as will be confirmed when the Bank releases its payments cost study later this year.