Exchange settlement accounts - are low interest paying accounts that banks MUST maintain with the RBA to facilitate the payment system - in particular cheques. When a cheque is presented to a bank for depositing, the amount is deducted from the bank of the person who wrote the cheque, and added to the bank that the receiver of the cheque banks with.
Try the simulation below. Excess funds in ESAs then become supply in the short term money market. The RBA targets the desired cash rate by manipulating supply in the short term money market by buying or selling Commonwealth Government securities to the banks, altering the cash in the ESAs and therefore the supply in the short term money market.