Reserve Bank of Australia Annual Report – 1987 The Bank's Accounts


Balance sheets and operating statements for the Bank, together with explanatory notes, are set out in the following pages. There were no significant changes in the Bank's accounting practices during 1986/87 except that Central Bank and Note Issue Department balance sheets have been restructured as from 30 June 1987 (see Note 1(a)).

The Bank's consolidated balance sheet grew by $2.0 billion (8.4 per cent) to $26 billion in 1986/87; the growth was a little slower than in the previous year (10.9 per cent).

The composition of the Bank's assets changed materially over the year. Holdings of gold and foreign exchange increased by $4.6 billion as a result of substantial net purchases of foreign exchange, mainly in the latter months of the year. Holdings of Commonwealth Government securities fell. Treasury notes were $2.0 billion lower than a year earlier; holdings of Bonds were $0.3 billion lower. In 1985/86, most of the growth in the balance sheet was in holdings of Commonwealth Government securities. Explanation of the movements in asset holdings is given in the chapter on the Bank's market operations, earlier in this Report.

There were sizeable increases in several of the Bank's liabilities. Australian currency notes on issue increased by $0.8 billion (9.3 per cent), slightly faster than in 1985/86 (8.3 per cent). Commonwealth Government deposits rose by $0.9 billion, reflecting buoyant revenues and loan raisings. There was a net reduction of $0.7 billion in the Bank's revaluation reserves; a substantial part of the foreign exchange component of these reserves was converted to realised gains as the Bank made sales at various times during the year.

The Bank's net operating earnings rose by $779 million to $3,464 million. Gains realised from sales of foreign currency contributed a net $1,953 million following on the gains of $1,350 million last year. Earnings on Commonwealth Government securities rose by $367 million to $1,487 million (higher average holdings) but earnings on foreign securities fell by $74 million to $527 million (lower yields). On the expenditure side, interest paid on deposits rose by 26 per cent to $397 million; higher average Commonwealth Government deposits were the major factor. Staff costs rose by 7 per cent; fringe benefits tax was a major contributor to this increase.

In terms of Section 78 of the Reserve Bank Act, the Bank's provisions for future losses and other contingencies were increased. In the wake of the rundown in the related Foreign Currency Revaluation Reserve, some $762 million was transferred to the Provision for the Effects of Movements in Exchange Rates; a further $10 million was transferred to the Provision for Building Repairs and Maintenance, and $10.3 million was provided for contingencies in Rural Credits Department.

The Bank's net profits in 1986/87, after provisions as set out in the preceding paragraph, were $2,676 million, compared with $2,492 million in 1985/86. Aside from amounts placed to the credit of the Reserve Bank Reserve Fund ($15 million), Rural Credits Department Reserve Fund and the Rural Credits Development Fund ($3.5 million in each case), the Bank's net profits are payable to the Commonwealth.