Reserve Bank of Australia Annual Report – 1995 The Bank's Accounts

Commentary

The Bank's net operating earnings were $1,772 million in 1994/95, an increase of $264 million on the previous year ( Note 2). This outcome reflected an increase in underlying earnings of $93 million and net capital gains of $171 million on the Bank's holdings of securities and foreign exchange. The latter figure was the outcome of three diverse movements: net realised gains of $86 million on sales of domestic and foreign securities (net losses of $29 million in 1993/94); net realised gains of $37 million on sales of foreign exchange (net gains of $657 million); and the absence of any charge against earnings for asset revaluation reserves (in 1993/94, $676 million was charged against earnings to extinguish a deficit in the Investments Revaluation Reserve). (See Notes 1,2.)

In determining net profit, in terms of section 78 of the Reserve Bank Act, the Treasurer approved the Board's decisions to write $6.9 million off Bank premises, and to seek no transfer to the Reserve for Contingencies and General Purposes.

The Bank's net profit for 1994/95 in terms of the Act was $1,772 million ($1,508 million in 1993/94). After consultation with the Board, the Treasurer determined that there should be no transfer to the Reserve Bank Reserve Fund from 1994/95 profit. The whole of net profit, therefore, is payable to the Commonwealth. An interim payment of $200 million was made in June 1995 and the balance will be paid in August 1995.

The Bank's balance sheet increased by $3.2 billion, to $36.8 billion, between June 1994 and June 1995.

• On the liabilities side, the main changes were increases in capital and reserves ($1.5 billion), reflecting the increase in asset revaluation reserves (see Notes 1(e), 3); in notes on issue ($1.0 billion); and in balances of the Commonwealth held with the Bank ($1.0 billion). A reduction in other liabilities related to clearing items ($0.6 billion) partly offset these increases.
• The major changes in assets were increases in Commonwealth Government securities ($2.6 billion, including $0.1 billion in valuation changes) and clearing items ($1.2 billion). Foreign exchange holdings fell by $0.6 billion after positive valuation adjustments of $1.3 billion.