Reserve Bank of Australia Annual Report 2021
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Also available at the Australian Government's Transparency Portal.
Contents
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Part 1: About the Reserve Bank
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The Reserve Bank is an independent central bank, accountable to the Parliament of Australia. The Bank has two boards: the Reserve Bank Board, which has responsibility for monetary and banking policy; and the Payments System Board, which has responsibility for payments system policy.
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The Reserve Bank Board comprises nine members: the Governor; Deputy Governor; Secretary to the Australian 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, which is published on the Bank's website.
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The Payments System Board comprises up to eight members: the Governor; Assistant Governor (Financial System); Chair of the Australian Prudential Regulation Authority (APRA); and up to five 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 Payments System Board and the Reserve Bank, members have adopted a Code of Conduct, which is published on the Bank's website.
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The Reserve Bank is managed by the Governor, Philip Lowe, and the Deputy Governor, Guy Debelle. It has five operational groups – Business Services Group, Corporate Services Group, Economic Group, Financial Markets Group and Financial System Group – and six supporting departments.
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Part 2: Performance
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The Reserve Bank operates in domestic and international financial markets to achieve its policy objectives. These operations 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, as well as foreign central banks).
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The Reserve Bank provides banking and payment services to meet the needs of the Australian Government and to support an efficient and stable Australian financial system. These services supported the government's measures to support Australian households and businesses during the COVID-19 pandemic by ensuring financial assistance payments were processed quickly and reliably. In addition to operating Australia's real-time gross settlement (RTGS) system, the Bank operates national infrastructure to support the settlement of real-time payments by households and businesses on a 24/7 basis. These services provide the Australian Government with access to 24/7 payment capabilities, and are consistent with the Bank's strategic goal of providing innovative, high-quality banking and payment services to the Australian Government, its agencies and, in turn, the Australian public.
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The Reserve Bank is responsible for producing and issuing Australia's banknotes. In this role, the Bank ensures that banknotes in circulation are of high quality and that the threat of counterfeiting is low. In late 2020, the Bank concluded the decade-long Next Generation Banknote (NGB) program with the release of the new $100 banknote. This program involved the design and development of a new banknote series to make Australia's banknotes more secure from counterfeiting. The new banknote series has been well received by the public and counterfeiting rates have remained low.
The COVID-19 pandemic continued to affect banknote demand throughout 2020/21. The demand for $50 and $100 banknotes remained strong in the second half of 2020, but abated over the first half of 2021. The demand for lower-value banknotes remained subdued, consistent with the ongoing decline in the use of cash as a means of payment. The continued decline in cash use for transactions has implications for the economics of banknote distribution and, as a result, the Bank will be commencing a consultation on banknote distribution arrangements in the second half of 2021.
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The Reserve Bank participates in international efforts to address the challenges facing the global economy and financial system, and improve the international 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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The Reserve Bank is committed to its communication being open, transparent and accountable. The Bank's staff across Australia work to understand community priorities and concerns and, in turn, explain the Bank's policies and decisions. The Bank engages with the community in a range of ways, including via a longstanding regional and industry liaison program and a public education program. It consults with businesses, consumer groups and payments industry participants on issues in payments policy. The Bank communicates its policy decisions, and the context in which these are made, through speeches and publications. The Bank participates in parliamentary hearings and responds to public enquiries. It supports academic research, publishes a broad range of statistics and operates a museum where visitors can discover the history of Australia's banknotes and economic development.
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Part 3: Management
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This chapter outlines the management structure of the Reserve Bank and describes the Bank's approach to managing its finances, technology, data and facilities. The subsequent chapters provide further detail on the Bank's people, risk management and earnings. The Bank is managed by the Governor, with assistance from the Executive Committee and the Risk Management Committee. The Bank is committed to the prudent management of its finances and the efficient functioning and security of its systems and facilities. It maintains a strong focus on cost control in discharging its key policy and operational responsibilities, and continues to invest in its technology, data, facilities and related capabilities that are essential for the Bank to achieve its objectives.
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The Reserve Bank seeks to attract, develop and retain high-quality people with the technical skills and capabilities to achieve the Bank's strategic objectives, and behaviours that are consistent with the Bank's values.
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Effective risk management is an integral element in the Reserve Bank achieving its strategic objectives and meeting its policy responsibilities. Accordingly, a risk management and control framework underpins effective decision-making in the Bank, while allowing enterprise-wide and emerging risks to be identified and managed in a way that is consistent with the Bank's risk appetite. This framework is overseen by the Risk Management Committee.
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In 2020/21, the Bank recorded an accounting loss of $4.3 billion, as unrealised valuation losses exceeded the sum of other components of profit. Despite the accounting loss, earnings of $3.9 billion were still available for distribution. This was because, when determining the amount available for distribution under the Reserve Bank Act 1959, unrealised valuation losses are offset against previously retained unrealised valuation gains. A sum of $1.2 billion was transferred to the Reserve Bank Reserve Fund (RBRF), consistent with the Reserve Bank Board's target for this reserve; $2.7 billion will be paid as a dividend to the Australian Government in September.
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Part 4: Financial Statements
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Part 5: Indexes
ISSN 1448–5303 (Print)
ISSN 1448–5192 (Online)