Reserve Bank of Australia Annual Report
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- Letter of Transmittal
- Governor's Foreword
Functions and Objectives of the Reserve Bank
The Reserve Bank of Australia is established by statute as Australia's central bank. The Bank's responsibilities include formulating and implementing monetary policy, promoting financial stability, issuing banknotes, providing banking services to government, operating the high-value payments system, managing Australia's foreign reserves and setting payments system policy. The Reserve Bank Act states that it is the Bank's duty to contribute to the maintenance of price stability, full employment, and the economic prosperity and welfare of the Australian people. Since 1993, this general mandate has found concrete expression in the form of a medium-term inflation target of 2–3 per cent, on average, over the business cycle.
The activities undertaken by the Reserve Bank are overseen by the Reserve Bank Board, Payments System Board and several permanent committees. The Reserve Bank Board has responsibility for monetary policy and banking policy, as well as a range of other policy responsibilities and statutory obligations, while the Payments System Board determines the Bank's payments system policy. The Bank's permanent committees include the Reserve Bank Board Audit Committee and Remuneration Committee, the Executive Committee and the Risk Management Committee. A key governance initiative during the year under review was the development and launch of a new Code of Conduct articulating the Bank's core values.
Reserve Bank Board
The Board comprises nine members: the Governor (Chairman), Deputy Governor (Deputy Chairman), Secretary to the Treasury and six other non-executive members appointed by the Treasurer. Jillian Broadbent AO completed her third term on the Board in May 2013.
Accountability and Communication
The Reserve Bank seeks to ensure a high degree of transparency about its goals, decision-making processes and the basis of its policy decisions. In addition to regular announcements about monetary policy decisions of the Reserve Bank Board, the Bank has an active program of communication. It informs financial markets, media and the public about its views on monetary policy through the quarterly Statement on Monetary Policy and its assessment of Australia's financial system through its bi-annual Financial Stability Review. It disseminates research conducted by its staff in the form of Research Discussion Papers and in articles in the quarterly Bulletin. The Governor and other senior staff gave 42 on-the-record speeches and attended a number of parliamentary hearings during the year under review.
Activities in 2012/13
Operations in Financial Markets
The Reserve Bank undertakes transactions in domestic and international financial markets in order to implement the Board's monetary policy decisions, manage the nation's foreign reserve assets and provide banking services (mainly to the Australian Government). The structure of the Bank's balance sheet, which grew by around $18 billion over 2012/13, is influenced by these transactions as well as the Bank's role in issuing the nation's banknotes. To meet the Board's cash rate target, the Bank operates in financial markets to maintain an appropriate level of exchange settlement balances (which are used by financial institutions to settle their payment obligations with each other and the Bank). The Bank is also an active participant in the foreign exchange market (mainly on behalf of the Australian Government) and manages Australia's official reserve assets.
Banking and Payments
The Reserve Bank provides a range of banking, registry and payment settlement services to participants in the Australian financial system, the Australian Government, and other central banks and international bodies. These include services associated with the operation of the Australian Government's principal public accounts; transactional banking services to government agencies; custodial, registry and related services; and the operation of the real-time gross settlement system for high-value Australian dollar payments. The Bank works closely with its agency customers and the Government more generally to ensure that they have access to services that are consistent with their needs and those of the public. The Bank has also commenced a major program of work to upgrade its banking systems and continues to invest in its settlement infrastructure.
The Reserve Bank is responsible for ensuring that there are sufficient high-quality banknotes in circulation to meet the public's demand. The Bank ensures that enough banknotes are printed to meet public demand, maintains the quality of banknotes in circulation by withdrawing worn banknotes and replacing them with new banknotes and conducts research to ensure that Australian banknotes remain secure against counterfeiting. At the end of June 2013 there were 1.2 billion banknotes worth $56.9 billion in circulation. With only around 10 counterfeits detected per million genuine banknotes in circulation, the level of banknote counterfeiting is low relative to international experiences and is similar to levels experienced in Australia in recent years. In September 2012, the Bank announced plans to upgrade the security of Australia's banknotes as part of the Next Generation Banknote (NGB) program. The upgraded banknotes will retain many of the key design elements of the current banknote series and will incorporate a number of new features designed to make Australia's banknotes secure in the future.
International Financial Cooperation
The Reserve Bank actively participates in work addressing the challenges facing the global economy and improving the global financial architecture. It does so through its membership of global and regional forums, including the G20, the Financial Stability Board, the Bank for International Settlements, the Basel Committee on Banking Supervision, the Committee on Payment and Settlement Systems, the International Monetary Fund, the Executives' Meeting of East Asia-Pacific Central Banks, the Organisation for Economic Co-operation and Development, the Government Partnership Fund and South Pacific Central Bank Cooperation. The Bank also maintains close bilateral relationships with other central banks.
The Reserve Bank in the Community
In addition to its Head Office in Sydney, the Reserve Bank has offices in Adelaide, Brisbane, Melbourne and Perth. These offices play an important role in the Bank's business liaison program and form a key component of the Bank's communication with members of the public, business, government, community organisations and academia in their respective states. The staff involved in the liaison program conducted around 1,000 interviews around the country over the past year. The Bank continues to convene its Small Business Advisory Panel to discuss issues relating to the provision of finance and the broader economic environment for small businesses. The Museum of Australian Currency Notes houses a permanent collection of artefacts and also hosts periodic exhibitions and talks. The Museum welcomed 13,500 visitors in the past year. The Bank continued to sponsor Australian and international economic research in areas that are closely aligned with its primary responsibilities, and contributed to various charitable initiatives.
- Operations in Financial Markets
Management of the Reserve Bank
A high proportion of the Reserve Bank's call on resources comes from activities associated with its key policy and operational responsibilities in financial markets, settlements and banking. A range of projects – including the upgrade of banking systems and the development of new banknotes – is underway, while other projects in markets and payments settlements are planned for the year ahead. These initiatives have begun to add significantly to the Bank's operating costs and will continue to do so for several years. This work is justified, in the Bank's view, by the public interest and will help the Bank to continue to meet its responsibilities in a changing financial landscape. The Bank has 1,115 employees and maintains offices across Australia and in key locations overseas (Beijing, London and New York). The Bank is committed to improving the environmental performance of its operations and will continue to set targets and pursue lower energy and water consumption.
The Reserve Bank is exposed to a broad range of risks in carrying out its responsibilities. The most significant risks are those associated with the financial assets held by the Bank to support its operations in financial markets. However, the Bank also manages material risks arising from its banking and settlement operations, the implementation of large and complex projects and from the administration of the Bank itself. The Bank seeks to manage its risk profile carefully, with the Risk Management Committee providing oversight of the risk management process.
Earnings and Distribution
The Reserve Bank manages a balance sheet of financial assets to conduct operations in financial markets to pursue its monetary policy objectives. The balance sheet fluctuates in size according to these operations; total assets averaged around $89 billion in 2012/13. These assets include Australia's foreign exchange reserves as well as domestic securities used to manage liquidity. Liabilities on the balance sheet are composed of banknotes on issue, deposits of the Australian Government and other customers, and capital and reserves. The Bank recorded an accounting profit of $4,313 million in 2012/13. As agreed with the Treasurer, the Bank's distributable earnings of $588 million in 2012/13 will be devoted entirely to rebuilding the Reserve Bank Reserve Fund (RBRF), the Bank's main permanent capital reserve, which had been depleted by large accounting losses in previous years.
Statutory Reporting Obligations
The Reserve Bank is required to report to the Australian Parliament each year on its equity and diversity program. The major focus of work in this area last year was to enhance the Bank's culture of inclusiveness and better understand the equity and diversity issues associated with employee participation and work-life balance. The Bank is also required to report each year on matters of work health and safety, workers' compensation and rehabilitation as they affect the Bank. The Bank has a strong track record in all aspects of work health and safety, and compliance with the relevant legislation and the Bank's Conditions of Licence was confirmed by external audits of the Bank's safety, compensation and rehabilitation arrangements. In addition, the Bank is an Australian Government agency subject to the Freedom of Information Act 1982. It received 17 requests for access to documents under the FOI Act in the year under review.
- Statutory Reporting Requirements Index
- Financial Statements
- Pro Forma Business Accounts
- Organisational Chart
- Organisation Overview and Executives
- Contact Details
ISSN 1448–5303 (Print)
ISSN 1448–5192 (Online)