The amount of home loan-backed securities held by the Reserve Bank has increased 25 fold to help banks settle day-to-day transactions.
The central bank now holds $25 billion worth of the securities, known as residential mortgage-backed securities (RMBS), compared to $1 billion a year ago.
The RMBS market nearly collapsed during the 2008 global financial crisis, but a senior RBA official says the RMBS market has recovered.
"Issuance started to pick up in late 2012, reached a post-crisis high in 2013, and has remained high since then," the head of the RBA's domestic markets department, Chris Aylmer, told a conference on Tuesday.
"This mainly reflects the strong performance of Australian residential mortgages and the high quality of the collateral pools which are primarily fully documented prime mortgages."
Mr Aylmer said while Australia's market had recovered, the RMBS markets in both the US and Europe remain subdued.
The RBA has increased the number of RMBS it holds because of a change late last year in the way the banks settle their transactions with each other, now on the same day.
This has created the need for a large pool of cash in the interbank cash market.
The banks have raised this cash by selling RMBS and other securities to the RBA, typically under a repurchase agreement which reverses the transaction after a predetermined time.