Role of the Reserve Bank

The Reserve Bank of Australia is Australia's central bank. 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 inflation target, working to maintain a strong financial system and efficient payments system, and issuing the nation's banknotes. The Bank also manages Australia's foreign exchange reserves and provides banking services to the government.

Transcript

Glenn Stevens, Governor (2006 – 2016)

I suppose the role that people most hear about is the monetary policy one, where we make a monthly decision about interest rates. And the main purpose of those decisions really is to try to preserve the stability of the value of money over time, a stable money is a foundation for a prosperous economy and it's really that simple. So that's the thing probably people hear about most frequently. But we actually do a lot of other things besides set that one interest rate.

For most people the closest connection to us that they probably have is they're carrying these around. We print these brightly coloured pieces of plastic and there's $60 billion worth of that floating around out in the community that is used for everyday transactions. So pretty much everybody is carrying that in their pocket every day of the week and that's their closest connection to us actually.

It's about many other things just other than the physical cash that you're carrying around, so one of those is the Reserve Bank runs the nations electronic payments system. We clear about $180 billion every day through that system of electronic transfers all of that goes across our books as the private banks settle with each other. That has to be run to a very high standard of reliability and efficiency.

We have a broad mandate for stability of the financial system, this is in a way hard to define precisely because usually you can only define what financial stability means by thinking about its absence. So in recent years we've seen in other countries an absence of stability, we've seen banks failing or under pressure, we've seen the system seize up in moments of crisis and our job is to try to prevent that happening by maintaining sound banks, sound financial institutions, well-functioning financial markets, and central banks generally, and the Reserve Bank is no exception, have always felt an obligation to try to foster that stability to the limits of our ability.

We are the Government's banker, most people if they've received a cheque from the Tax Office, if you're lucky enough to get a refund, or you've received a payment of a pension, a social security benefit, a payment from Medicare, all of these things are across accounts at the Reserve Bank, so we run those accounts on a daily basis and there are some 200 million or more electronic payments processed by the RBA every year, so quite a major player in that space.

We hold Australia's foreign exchange reserve assets, these are assets held offshore as custodian for the nation, so we hold them in United States dollars, Euros, some Yen, some Canadian dollars and recently some Chinese RMB. And these are held really against a rainy day, they're held in case one day a situation arises where we need to have access to foreign funds, there's about $40 billion available there and our job is to hold those essentially in trust for the nation, we're the owner, but we're holding them on behalf of the country.

A lot of people think of the Reserve Bank as an institution in Sydney and certainly that's where our Head Office is, but we maintain a presence around the State capitals on the mainland. We're the nation's central bank we're not just a Sydney institution, we're a national institution, our obligations are national not just Sydney, and we take that obligation very seriously.