Reserve Bank of Australia Annual Report 2023
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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 Bank’s policy on other matters excluding payments system policy; and the Payments System Board, which has responsibility for payments system policy.
Some aspects of the Bank’s governance and accountability arrangements (including the Reserve Bank Board structure) were examined as part of an independent review of Australia’s monetary policy arrangements. Work to consider and implement recommendations of the Review of the Reserve Bank commenced following its public release in April 2023.
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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 adopt a Code of Conduct, which is published on the Bank’s website. Information about members of the Reserve Bank Board Audit Committee is provided at the end of this chapter.
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The Payments System Board comprises up to eight members: the Governor; a representative of the Reserve Bank (currently, the Deputy Governor); a representative of the Australian Prudential Regulation Authority (currently, the Chair); 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 adopt a Code of Conduct, which is published on the Bank’s website.
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The Reserve Bank is managed by the Governor and the Deputy Governor. 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). The Bank raised the cash rate target and the rate on Exchange Settlement (ES) balances by 325 basis points over 2022/23. The size of the Bank’s balance sheet declined by around $16 billion over that period, but remains large.
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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 support the government’s actions to provide financial assistance to Australian households and businesses, by ensuring that payments are 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.
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The Reserve Bank is responsible for producing and issuing Australia’s banknotes, ensuring they are of high quality and the threat of counterfeiting is low. In late 2022, the Bank concluded a review of banknote distribution arrangements to ensure they remain effective, efficient, sustainable and resilient now and into the future.
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The Reserve Bank participates in international efforts to address the challenges facing the global economy and financial system. It does so through its membership of global and regional forums and its bilateral relationships with other central banks. Over the past year, the war in Ukraine, inflationary pressures and macroeconomic policy settings continued to be at the forefront of international discussions on the global economic and financial outlook. Risks to financial stability, including from the stress that emerged in parts of the global banking system in early 2023, were also in focus. Work continued throughout the year on a range of financial sector issues, including regulation and oversight of crypto-assets and stablecoins, addressing financial risks arising from climate change and non-bank financial intermediation, and enhancing cross-border payments.
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The Reserve Bank is committed to being open, transparent and accountable in all its communication. Staff work to understand community priorities and concerns across Australia and, in turn, explain the Bank’s policies and decisions. Our engagement with the community occurs in a number of ways, including via a longstanding regional and industry liaison program, public appearances and community dinners, social media, roundtables and a public education program. Staff also consult 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 publications and speeches. It appears before parliamentary committees, responds to public enquiries, 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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The Reserve Bank is committed to discharging its policy and operational responsibilities in an efficient manner. To achieve this, it invests in its people, technology, data, facilities and the related capabilities essential for the Bank to achieve its strategic objectives.
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The Reserve Bank aims to attract, develop and retain high-quality staff. We seek people who have the technical skills and capabilities to achieve the Bank’s strategic objectives, exhibit the behaviours consistent with the Bank’s values and possess strong leadership skills.
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To achieve its strategic objectives and policy goals, the Reserve Bank needs to clearly and effectively manage risk. Accordingly, the Bank uses a Risk and Compliance Management Framework to identify and manage enterprise-wide and emerging risks in line with the Bank’s risk appetite. This framework is overseen by the Risk Management Committee.
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In 2022/23, the Reserve Bank recorded an accounting loss of $6 billion, mainly due to negative underlying earnings resulting from the higher domestic cash rate and valuation losses from a further rise in bond yields. With the balance in the unrealised profits reserve (UPR) and Reserve Bank Reserve Fund (RBRF) fully depleted from absorbing large losses last year, the accounting loss was added to accumulated losses.
The Bank was in a negative equity position of $17.7 billion on 30 June 2023, compared with $12.4 billion a year earlier. The Reserve Bank Board’s judgement continues to be that negative equity does not affect the Bank’s ability to operate effectively or perform its functions, but that it is important that the Bank’s equity is restored over time. This can be achieved through the Bank retaining its profits over the years ahead.
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Part 4: Financial Statements
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Part 5: Indexes
ISSN 1448–5303 (Print)
ISSN 1448–5192 (Online)