Reserve Bank of Australia

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General Overview

About The Reserve Bank of Australia

The Reserve Bank of Australia (RBA) is Australia’s central bank and derives its functions and powers from the Reserve Bank Act 1959. Its duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people. It does this by setting the cash rate to meet an agreed medium-term inflation target, working to maintain a strong financial system and efficient payments system, and issuing the nation’s banknotes.

The RBA provides certain banking services as required to the Australian Government and its agencies, and to a number of overseas central banks and official institutions. Additionally, it manages Australia’s gold and foreign exchange reserves.

Values

The Reserve Bank pursues national economic policy objectives and undertakes a range of associated activities in financial markets and banking. It also issues Australia’s banknotes and operates infrastructure critical to the payments system. Staff, and others who are involved in the activities of the Bank, have a critical role to play in achieving these objectives whether directly or in a supporting role. They are advised of their responsibility to conduct themselves with a high degree of integrity, to strive for excellence in the work they perform and the outcomes they achieve, and to promote the public interest. Their behaviour is guided by a Code of Conduct which sets out the Bank’s requirements of its employees and others who are involved in its activities. This Code embodies the following values:

Promotion of the Public Interest

They serve the public interest. They ensure that their efforts are directed to this objective, and not to serving their own interests or the interests of any other person or group.

Integrity

They are honest in their dealings with others within and outside the Bank. They are open and clear in their dealings with their colleagues. They take appropriate action if they are aware of others who are not acting properly.

Excellence

They strive for technical and professional excellence.

Intelligent Inquiry

They think carefully about the work they do and how they undertake it. They encourage debate, ask questions and speak up when they have concerns.

Respect

They treat each other with respect and courtesy. They value each other’s views and contributions.

The RBA’s Role

The Reserve Bank of Australia is Australia’s central bank. It conducts monetary policy, works to maintain a strong financial system and issues the nation’s currency. As well as being a policy-making body, the Reserve Bank provides selected banking and registry services to a range of Australian government agencies and to a number of overseas central banks and official institutions. It also manages Australia’s gold and foreign exchange reserves.

The role and functions of the Reserve Bank are underpinned by various pieces of legislation. The Bank is a statutory authority, established by an Act of Parliament, the Reserve Bank Act 1959, which gives it specific powers and obligations. In terms of the Act, there are two Boards: the Reserve Bank Board and the Payments System Board.

Monetary Policy

The Reserve Bank is responsible for Australia’s monetary policy. Monetary policy involves setting the interest rate on overnight loans in the money market (‘the cash rate’). The cash rate influences other interest rates in the economy, affecting the behaviour of borrowers and lenders, economic activity and ultimately the rate of inflation.

In determining monetary policy, the Bank has a duty to maintain price stability, full employment, and the economic prosperity and welfare of the Australian people. To achieve these statutory objectives, the Bank has an ‘inflation target’ and seeks to keep consumer price inflation in the economy to 2–3 per cent, on average, over the medium term. Controlling inflation preserves the value of money and encourages strong and sustainable growth in the economy over the longer term.

Market Operations

As part of its responsibility for monetary policy, the Reserve Bank Board sets a target for the cash rate. This is the rate at which banks borrow from and lend to each other on an overnight, unsecured basis. The rate is determined by the demand and supply of exchange settlement balances that commercial banks hold at the Reserve Bank. Through its open market operations, the Reserve Bank alters the volume of these balances so as to keep the cash rate as close as possible to its target.

The Reserve Bank undertakes transactions in the foreign exchange market on a regular basis. Many of these transactions arise out of the provision of foreign exchange services to clients, with the Australian Government the Bank’s largest client. Transactions are also undertaken in the foreign exchange market, as well as foreign asset markets, in managing Australia’s foreign currency reserves. Foreign currency reserve assets are held on the balance sheet of the Bank, with the currency allocation, asset allocation and interest rate risk on investments managed against benchmark targets. Foreign currency reserves are deployed from time to time to effect policy operations in the foreign exchange and domestic cash markets.

Financial Stability

Maintaining the stability of the financial system is a longstanding responsibility of the Reserve Bank. A stable financial system is one in which financial institutions, markets and market infrastructures facilitate the smooth flow of funds between savers and investors. This helps to promote growth in economic activity.

The Reserve Bank has a role both in mitigating the risk of financial disturbances that may have systemic consequences, and in responding to a financial system disturbance should it occur. The Bank works on these matters with other relevant agencies, mainly through the Council of Financial Regulators (CFR). The CFR, which is chaired by the Reserve Bank Governor, brings together the Bank, APRA, the Treasury and ASIC, with a mandate to contribute to the efficiency and effectiveness of regulation and the stability of the financial system.

Payments & Infrastructure

A safe, competitive and efficient payments system is essential to support the day-to-day business of the Australian economy. The Payments System Board of the Reserve Bank has a mandate to contribute to promoting efficiency and competition in the payments system, and the overall stability of the financial system. The Bank oversees the payments system as a whole, which encompasses a wide variety of individual payment instruments – ranging from cheques and payment cards to high-value corporate payments – and the usually unseen arrangements that ensure the smooth transfer of funds from accounts at one financial institution to another.

The Bank also has a formal regulatory role to ensure that the infrastructure supporting the clearing and settlement of transactions in financial markets is operated in a way that promotes financial stability. In addition, the Bank has an important operational role in the payments system through its ownership and management of the Reserve Bank Information and Transfer System (RITS), Australia’s real-time gross settlement system.

Services

Financial Services

The Reserve Bank provides a range of banking services to the Australian
Government and its agencies, overseas central banks and official institutions. Principal amongst these
is management of the Australian Government’s core accounts. Also important are transactional banking
services which are provided to some 90 government agencies on a commercial basis.

Management of the Government’s core accounts is a responsibility that
derives from the Bank’s role as the nation’s central bank and requires the Bank to manage the
consolidation of the Australian Government agency account balances. The transactional banking services
are associated with more conventional banking activities, such as making and receiving payments. A
number of services are available to Government agencies to make payments – such as direct entry, eftpos
and the real time gross settlement system. Services that enable government agencies to receive funds
include electronic funds transfer, BPAY®, eftpos, along with card-based services via phone and the
internet.

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Contact Info

Reserve Bank of Australia

65 Martin Place
Sydney, NSW

AUAustralia, 2000

 

Phone:+61 2 9551 8111
Email:rbainfo@rba.gov.au
Website: http://www.rba.gov.au/