Reserve Bank of Australia Annual Report – 2006 The Reserve Bank Board and Governance

The Role of the Reserve Bank Board

The Reserve Bank Act 1959, the enabling legislation, gives the Reserve Bank Board responsibility for monetary and banking policy, and the Reserve Bank's policy on all other matters, except for its payments system policy. The relationship of the Board and the government of the day is set out in Section 11 of the Act. Routinely, the Government is to be informed, from time to time, of the Bank's monetary and banking policy. In practice, this is done in the regular monthly meetings of the Governor, Deputy Governor and senior officers with the Treasurer shortly after each Board meeting.

The Act itself has not been changed since its initial proclamation with respect to the mandate for monetary policy, but procedures and practices have evolved over time in order to keep the Reserve Bank's policy-making process relevant to the changing environment and in parallel with developments abroad. In 1996, the responsible Minister, the Treasurer, and the Governor jointly signed the Statement on the Conduct of Monetary Policy, which confirmed the Reserve Bank's independence in making monetary policy and endorsed the Bank's inflation target. The Governor's twice-yearly appearances before the House of Representatives Standing Committee on Economics, Finance and Public Administration, and the quarterly Statement on Monetary Policy, have reinforced this process. An updated, though essentially unchanged, Second Statement on the Conduct of Monetary Policy was released at the time of the announcement by the Treasurer in July 2003 of the appointment of the Governor for a term of a further three years.

Stability of the financial system is a longstanding responsibility of the Reserve Bank – a mandate reconfirmed by the Government when landmark changes to the Australian financial regulatory structure were introduced in 1998. At that time, responsibility for the supervision of banks was transferred to the new, integrated regulator, APRA. Twice a year, in March and September, the Reserve Bank publishes a separate Financial Stability Review, which contains its assessment of the state of the financial system.

The Reserve Bank Act 1959 was amended in 1998 to establish the Payments System Board, which is responsible for payments system policy and reports separately in its own annual report.

Composition of the Reserve Bank Board

The Reserve Bank Board comprises the Governor, who is Chairman, Deputy Governor, Secretary to the Treasury and six external members, appointed by the Treasurer – a total of nine. Details of the current members are set out on pages 104 and 105; there is currently one vacancy on the Board. Five members form a quorum for a meeting of the Board.

Meetings of the Reserve Bank Board

The Reserve Bank Act 1959 does not stipulate the frequency of Reserve Bank Board meetings. For many years the Board's practice has been to meet 11 times each year, on the first Tuesday of each month, except January. Most meetings are held at the Head Office in Sydney. By custom, one meeting each year is held in Melbourne, usually in the first half of the year, and from time to time the Board also meets in other Australian capitals; the Board held its September 2005 meeting in Adelaide.

Board Meetings in 2005/06 – Attendance by Members(a)
IJ Macfarlane 11 (11)
GR Stevens 11 (11)
KR Henry(b) 9 (11)
JR Broadbent 11 (11)
RC Corbett(c) 4 (5)
RG Gerard(d) 4 (5)
FP Lowy(e) 3 (6)
DG McGauchie 10 (11)
WJ McKibbin 10 (11)
HM Morgan 11 (11)
(a) Figures in brackets show the number of meetings each member was eligible to attend.
(b) ML Parkinson attended two meetings in place of KR Henry, in terms of the provisions of Section 22 of the Reserve Bank Act 1959.
(c) Mr Corbett was appointed to the Board on 2 December 2005.
(d) Mr Gerard resigned from the Board on 2 December 2005.
(e) Mr Lowy's term as a member of the Board ended on 9 December 2005.

Conduct of Reserve Bank Board Members

On appointment to the Reserve Bank Board, each member is required under the Reserve Bank Act 1959 to sign a declaration to maintain secrecy in relation to the affairs of the Board and the Reserve Bank. Further, members must by law meet the general obligations of directors of statutory authorities, as set out in the Commonwealth Authorities and Companies Act 1997 (CAC Act). The CAC Act sets standards of conduct for directors and officers of Commonwealth authorities, with many of these requirements being modelled on comparable areas of the Corporations Law. As such, directors must:

  • discharge their duties with care and diligence;
  • act in good faith, and in the best interests of the Reserve Bank;
  • not use their position to benefit themselves or any other person, or to cause detriment to the Reserve Bank or any person;
  • not use any information obtained by virtue of their position to benefit themselves or any other person, or to cause detriment to the Reserve Bank or any person; and
  • declare any material personal interest where a conflict arises with the interests of the Reserve Bank.

Over and above these legislated requirements, members recognise their responsibility for maintaining a reputation for integrity and propriety on the part of the Board and the Reserve Bank in all respects. Hence, they have adopted a Code of Conduct, which provides a number of general principles as a guide for the conduct of individual members in fulfilling their duties and responsibilities as members of the Board; a copy of the Code is on the Reserve Bank's website.

Audit Committee

The primary objectives of the Audit Committee are to:

  • ensure a high-quality, independent and effective audit process;
  • assist the Governor and the Reserve Bank Board in fulfilling their obligations relating to financial reporting, compliance with laws and regulations, internal control, employee conflicts of interest, business ethics and prevention of fraud; and
  • enhance contact between management and the Audit Department.

The Committee also acts, at the request of the NPA Board, as NPA's Audit Committee.

The Audit Committee is made up of the Deputy Governor, who is Chairman, a non-executive member of the Reserve Bank Board, Jillian Broadbent, and an external appointed member, George Bennett, company director and former National Executive Chairman of KPMG Peat Marwick. During 2005/06, the Committee met on four occasions; all members attended each of these meetings. At its July 2006 meeting, the Committee considered the draft financial statements for the year ended 30 June 2006 and agreed that the statements be presented to the Reserve Bank Board with its endorsement.

The two external members of the Audit Committee also meet with the external auditor in the absence of management from time to time.

Minutes of Audit Committee meetings are circulated to the Reserve Bank Board for information and discussion, as appropriate, and a report on the Committee's activities for the year is prepared for the Board at the time of the presentation of the annual accounts.

Reporting Obligations under the CAC Act

The Reserve Bank is a Commonwealth authority for the purposes of the CAC Act and, for these purposes, the members of the Reserve Bank Board are the directors of the Reserve Bank. As such, they are responsible for the preparation of the Annual Report and, at the meeting of the Board on 1 August 2006, they resolved that the Chairman sign the Report and Financial Statements as at 30 June 2006, transmit them in accordance with the requirements of the CAC Act and arrange publication.

The House of Representatives Standing Committee on Economics, Finance and Public Administration has, in its Standing Orders, an obligation to review the Annual Report of the Reserve Bank and the Annual Report of the Payments System Board.


Fees of the non-executive members of the Reserve Bank Board are determined by the Remuneration Tribunal.

A committee of the non-executive Reserve Bank Board members, currently chaired by Donald McGauchie, reviews annually the remuneration of the Governor and Deputy Governor in terms of Section 24A of the Reserve Bank Act 1959. In June 2006, the Committee decided to raise the salary of both the Governor and Deputy Governor by 4 per cent, effective 1 July 2006, the same increase as in the preceding several years.


Under the provisions of Section 27 of the CAC Act and pursuant to a Board resolution on 3 November 1998, members of the Reserve Bank Board have been indemnified against liabilities incurred arising out of the proper discharge of their responsibilities, provided that any such liability does not arise from conduct involving a lack of good faith. This indemnity does not extend to claims by the Reserve Bank itself or any subsidiary of the Bank. A similar indemnity was extended to the members of the Payments System Board, pursuant to a resolution by the Reserve Bank Board on 3 November 1998.

Reserve Bank Board End July 2006

Photograph of Ian Macfarlane

Chairman: Ian Macfarlane AC

Governor since 18 September 1996
Present term expires 17 September 2006

Chairman – Payments System Board
Chairman – Council of Financial Regulators

Photograph of Glenn Stevens

Glenn Stevens

Deputy Governor since 21 December 2001
Present term expires 20 December 2008

Photograph of Ken Henry

Ken Henry

Secretary to the Treasury
Member since 27 April 2001

Photograph of Jillian Broadbent

Jillian Broadbent AO

Member since 7 May 1998
Present term expires 6 May 2008

Director – Coca Cola Amatil Limited
Director – Special Broadcasting Service
Director – Woodside Petroleum Limited

Photograph of Roger Corbett

Roger Corbett AM

Member since 2 December 2005
Present term expires 1 December 2010

Chief Executive Officer and Group Managing Director – Woolworths Limited
Director – Fairfax Holdings Limited
Director – CEIS Food Business Forum

Photograph of Donald McGauchie

Donald McGauchie AO

Member since 30 March 2001
Present term expires 29 March 2011

Chairman – Telstra Corporation Limited
Director – Nufarm Limited
Director – James Hardie Industries NV

Photograph of Warwick McKibbin

Warwick McKibbin

Member since 31 July 2001
Present term expires 30 July 2011

Executive Director, Centre for Applied Macroeconomic Analysis & Professor of International Economics, Research School of Pacific & Asian Studies – Australian National University
Professorial Fellow – Lowy Institute for International Policy
Non-Resident Senior Fellow – The Brookings Institution, USA
President – McKibbin Software Group Inc (USA)
Director – McKibbin Software Group Pty Ltd
Director – Pty Ltd

Photograph of Hugh Morgan

Hugh Morgan AC

Member since 14 August 1996
Present term expires 28 July 2007

Principal – First Charnock Pty Ltd
Chairman – BioDiem Ltd Joint
Chairman – Commonwealth Business Council
President – Australia Japan Business Co-operation Committee
Member – Lafarge International Advisory Board