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Our Role
The Reserve Bank of Australia
Teacher and Student Guide
Australia’s Central Bank
Commenced operations in 1960
•Monetary policy
•Market operations
•Financial stability
•Payments system
•Government banking
•Banknotes
Monetary PolicyOur objectives
•Stability of the currency
•Full employment
•Economic prosperity and welfare of the people of Australia
Inflation target
•Keep inflation at 23 per cent, on average, over the medium term
Reserve Bank Board
•Governor, Deputy Governor, Treasury Secretary and six external members
•Monthly meeting includes a decision about setting the cash rate
Monetary Policy• The RBA adjusts the cash rate to try and keep the growth of total
spending in line with potential output thereby ensuring that inflation is low and stable
Amount of goods and services
Time
Potential outputTotal spending
Falling unemployment,rising inflation
Rising unemployment,falling inflation
Cash rate
Exchange rateImport prices
Expectations
Interest rates
Spending
Inflation
Monetary Policy• Adjusting the cash rate affects spending and inflation
through several channels, such as:
Market Operations
• To implement monetary policy, the RBA sets the cash rate
• Banks borrow or lend from each other overnight at the cash rate
• Open market operations keep the cash rate at target each day
Market Operations• The RBA keeps the cash rate at target by setting the supply
of funds in exchange settlement accounts so that it is consistent with demand
Public
Loans
Deposits
Exchange Settlement Accounts
RBA Banks
Raises account balances•RBA buys government bonds•Government makes outlays•Banks return banknotes
Lowers account balances•RBA sells government bonds•Government receives revenue•RBA issues banknotes
Foreign Exchange Reserves
• The RBA holds foreign exchange reserves to support monetary policy and Government banking
• Income earned on reserves is paid over time to the Australian Government
• The RBA only intervenes in foreign exchange markets if:
disorderly market conditions
clear overshooting (large movement not supported by fundamentals)
• The RBA does not target a particular level of the exchange rate
Financial Stability
• Smooth flow of funds between savers and investors supports economic growth
• Safe and robust financial market infrastructure
• Coordinate with financial regulators
• Crisis management capability, including liquidity support
• The RBA monitors financial system health, published in Financial Stability Review
Payments System
• Allows consumers and businesses to transfer funds to each other
Payments System Board
• Promotes efficiency and competition in means of payment, including credit and debit cards
• Oversees key financial market infrastructure to promote stability in the payments system
Reserve Bank Information and Transfer System (RITS)
• The RBA runs Australia’s real-time gross settlement system
Payments System• RBA at the core, settling all electronic transactions between banks
securely
RBA(RITS)
International & high-value
payments
Debt securities
Transfers between
banks
Cards, direct entry, cheques
Equity securities
Government Banking
• Banker to the Australian Government, maintaining its core cash accounts
• Facilitate government payments to households and businesses, including on behalf of:
Centrelink
Medicare
Australian Taxation Office
Banknotes
• The RBA manages Australia’s banknotes, including production, issue and distribution
• Aim to maintain Australians’ confidence in banknotes as a payment method
• Printed on polymer substrate with hard-to-counterfeit security features
• Meet the demand of households and businesses for banknotes
• Maintain high quality by withdrawing and replacing damaged notes
Australia’s Central Bank
Our locations
•Head Office in Sydney
•State Offices in Adelaide, Brisbane, Melbourne and Perth
•Branch in Canberra
•Overseas offices in Beijing, London and New York
For more information
Visit the Reserve Bank website: rba.gov.au
•Monetary policy
•Market operations
•Financial stability
•Payments system
•Government banking
•Banknotes