Reserve Bank of Australia Annual Report 2017
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Contents
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Part 1: About the Reserve Bank
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In its role as Australia's central bank, the Reserve Bank of Australia determines and implements monetary policy, fosters financial stability, undertakes a range of activities in financial markets, acts as a banker to the Australian Government, issues Australia's banknotes and has policy, supervisory and operational roles in the payments system.
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The Reserve Bank has two boards: the Reserve Bank Board, which has responsibility for monetary and banking policy and the Bank's policy on other matters excluding payments system policy; and the Payments System Board, which has responsibility for payments system policy. Subject to policy set by the boards, the Bank is managed by the Governor.
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The Reserve Bank Board comprises nine members: the Governor (Chair), Deputy Governor (Deputy Chair), Secretary to the Treasury (ex officio member) and six other non-executive members appointed by the Treasurer. Further to the legislative requirements, and in recognition of their responsibility to uphold the integrity of the Board and the Reserve Bank, members have adopted a Code of Conduct.
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The Reserve Bank is an independent central bank, accountable to the Parliament of Australia. The Bank engages with the Australian Government at a range of levels and seeks to enhance the community's understanding of its responsibilities, policies and actions through a broad communication program.
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The Reserve Bank has five operational groups – Business Services Group, Corporate Services Group, Economic Group, Financial Markets Group and Financial System Group – and five supporting departments.
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Part 2: Our Operations
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The Reserve Bank operates in domestic and international financial markets in order to meet the Bank's policy objectives. These include implementing the monetary policy decisions of the Reserve Bank Board, facilitating the smooth functioning of the payments system, managing the nation's foreign exchange reserve assets and providing banking services to clients (mainly the Australian Government and foreign central banks).
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The Reserve Bank provides banking and payment services that underpin the efficient and stable functioning of the Australian financial system. The Bank is currently engaged in projects to renovate and strengthen its banking and settlement capabilities and introduce new infrastructure to support real-time payments by households and businesses on a 24/7 basis. This will enable the Bank to continue to meet the banking and payment needs of its government and agency customers and, in turn, the Australian public.
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The Reserve Bank is responsible for producing and issuing Australia's banknotes. The Bank seeks to ensure the high quality of banknotes in circulation to maintain confidence in banknotes as a payment mechanism and a store of value. The Bank also conducts research and development to ensure that Australian banknotes remain secure against counterfeiting. To this end, the Bank is issuing an upgraded series of banknotes, with the first denomination – the $5 – issued in September 2016 and the $10 to be released in September 2017. At the end of June 2017 there were 1.5 billion banknotes, worth $73.6 billion, in circulation.
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The Reserve Bank continues to participate actively in initiatives that seek to address the challenges facing the global economy and improve the global financial architecture. It does so through its membership of global and regional forums and its close bilateral relationships with other central banks.
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Community engagement is important in ensuring that the Reserve Bank succeeds in promoting the public interest, which is a core value of the Bank. Staff in the Bank's Head Office and State Offices work to ensure that the Bank's role and actions are well understood by the community and that the Bank in turn understands the community's perspectives. The Bank supports academic research and education and also engages with the public through the Reserve Bank of Australia Museum.
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Part 3: Management and Accountability
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The Reserve Bank seeks to attract, develop and retain high-quality people who work productively together in order to achieve the Bank's objectives in a way that is consistent with its values. This is supported by the Bank's People and Culture Strategy, which in 2016/17 focused on leadership development, diversity and inclusion. In 2016/17 the proportion of women in management positions increased by 1 percentage point and the Bank created additional employment opportunities for Indigenous Australians and people with a disability. The total number of employees increased by 2 per cent, which was a smaller increase than in recent years as the Bank's project workload reached its peak.
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Much of the Reserve Bank's call on resources comes from ongoing activities associated with its key policy and operational responsibilities. A number of ongoing major projects, designed to strengthen its operations, have added to the Bank's costs in recent years. Several of these were brought to completion in 2016/17 and, as the remainder are completed in coming years, project costs are expected to return to historical levels.
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In meeting its objectives, the Reserve Bank takes on a number of risks. The framework through which these risks are managed is overseen by the Risk Management Committee, which is chaired by the Deputy Governor. Underpinning this framework is an active risk management culture.
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While the Reserve Bank earns a profit in most years, it also holds reserves sufficient to cover potential financial losses when they occur. In 2016/17, the Bank recorded an accounting loss of $0.9 billion, as unrealised valuation losses exceeded the sum of other components of profit. Despite the accounting loss, earnings of $1.3 billion were still available for distribution as, when determining distribution under the Reserve Bank Act 1959, unrealised valuation losses are offset against previously retained net unrealised valuation gains.
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The Pro Forma Business Accounts for the Reserve Bank's contestable business have been prepared in accordance with competitive neutrality guidelines. These accounts do not form part of the audited financial statements.
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The Reserve Bank has a number of statutory reporting requirements that extend beyond its policy objectives and cover areas such as equal employment opportunity, work health and safety and freedom of information requests submitted to the Bank. In 2016/17, the Bank's Diversity and Inclusion Program continued to focus on gender diversity, the Bank's culture of inclusiveness and flexible work practices, with a range of employee resource groups established to support these aims.
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Part 4: Financial Statements
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Part 5: Indexes
ISSN 1448–5303 (Print)
ISSN 1448–5192 (Online)