Our Role

The Reserve Bank of Australia

Teacher and Student Guide
Australias Central Bank
Commenced operations in 1960
Monetary policy
Market operations
Financial stability
Payments system
Government banking
Banknotes
Monetary Policy
Our objectives
Stability of the currency
Full employment
Economic prosperity and welfare of
the people of Australia
Inflation target
Keep inflation at 2!3 per cent, on
average, over the medium term
Reserve Bank Board
Governor, Deputy Governor, Treasury Secretary and six external members
Monthly meeting includes a decision about setting the cash rate
Monetary Policy
The RBA adjusts the cash rate to try and keep the growth of total spending
in line with potential output thereby ensuring that inflation is low and stable
Amount of
goods and
services
Time
Potential output
Total spending
Falling
unemployment,
rising inflation
Rising
unemployment,
falling inflation
Cash
rate
Exchange
rate
Import prices
Expectations
Interest rates
Spending
Inflation
Monetary Policy
Adjusting the cash rate affects spending and inflation through
several channels, such as:
Market Operations
To implement monetary policy, the
RBA sets the cash rate
Banks borrow or lend from each
other overnight at the cash rate
Open market operations keep the
cash rate at target each day
Market Operations
The RBA keeps the cash rate at target by setting the supply of funds
in exchange settlement accounts so that it is consistent with demand
Public
Loans
Deposits
Exchange
Settlement
Accounts
RBA Banks
Raises account balances
RBA buys government bonds
Government makes outlays
Banks return banknotes
Lowers account balances
RBA sells government bonds
Government receives revenue
RBA issues banknotes
Foreign Exchange Reserves
The RBA holds foreign exchange
reserves to support monetary policy and
Government banking
Income earned on reserves is paid over
time to the Australian Government
The RBA only intervenes in foreign
exchange markets if:
!
disorderly market conditions
!
clear overshooting (large movement
not supported by fundamentals)
The RBA does not target a particular
level of the exchange rate
Financial Stability
Smooth flow of funds between savers
and investors supports economic growth
Safe and robust financial market
infrastructure
Coordinate with financial regulators
Crisis management capability,
including liquidity support
The RBA monitors financial system health,
published in Financial Stability Review
Payments System
Allows consumers and businesses to
transfer funds to each other
Payments System Board
Promotes efficiency and competition
in means of payment, including
credit and debit cards
Oversees key financial market
infrastructure to promote stability in the payments system
Reserve Bank Information and Transfer System (RITS)
The RBA runs Australias real-time gross settlement system
Payments System
RBA at the core, settling all electronic transactions between banks securely
RBA
(RITS)
International
& high-value
payments
Debt
securities
Transfers
between
banks
Cards, direct
entry, cheques
Equity
securities
Government Banking
Banker to the Australian
Government, maintaining its
core cash accounts
Facilitate government payments
to households and businesses,
including on behalf of:
!
Centrelink
!
Medicare
!
Australian Taxation Office
Banknotes
The RBA manages Australias banknotes, including
production, issue and distribution
Aim to maintain Australians confidence
in banknotes as a payment method
Printed on polymer substrate with
hard-to-counterfeit security features
Meet the demand of households and businesses
for banknotes
Maintain high quality by withdrawing and replacing
damaged notes
Australias Central Bank
Our locations
Head Office in Sydney
State Offices in Adelaide, Brisbane,
Melbourne and Perth
Branch in Canberra
Overseas offices in Beijing, London and
New York
For more information
Visit the Reserve Bank website: rba.gov.au
Monetary policy
Market operations
Financial stability
Payments system
Government banking
Banknotes