FAQ

Questions regarding the Reserve Bank

Below are quesions that we have received fom ASP members. If you have a question - please send us a note and we will attempt to answer it for you.

Does the government borrow from the RBA?

rba-lending-to-govt

 The RBA does not lend money to the government on a regular basis.

Generally, the government borrows from commercial banks and other private sector organisations. However, the RBA will provide an "overdraft" facility to the government for the odd occasion when it has cash mismatches (i.e. it runs out of cash for short periods of time).

Is the RBA the banker to the government?

rba-govt-banker

Yes - the RBA manages the bank account of the government. However, as stated above - the RBA does not lend money to the government on a regular basis.

What is the Reserve Requirement for banks?

The Reserve Requirement is generally stated as a percentage - and historically it was set by central banks to limit the ability of commercial banks to lend money. Within this context - a figure of 0% indicates that banks can monetize as much debt as they please, while a figure of 100% indicates that they can only lend out to the total value of their deposits.

As can be seen from the Wikipedia entry below - there is no reserve requirement on Australia banks.

rba-reserve-requirement

end of FAQ

 

FAQ on the RBA web site

Below are some FAQ that are posted on the RBA web site. We have replicated these here for your benefit.

What is the Reserve Bank of Australia and who owns it?

The Reserve Bank of Australia is Australia's central bank. Its role is set out in the Reserve Bank Act 1959.

The Bank conducts the nation's monetary policy and issues its currency. It seeks to foster financial system stability and promotes the safety and efficiency of the payments system. It also offers banking services to government.

The Bank is wholly owned by the Australian Government, but is not a government department. For more information see about the RBA.

How does the Reserve Bank set interest rates?

The Reserve Bank Board makes monetary policy decisions in terms of the cash rate – the interest rate on overnight loans in the money market. These decisions affect a range of other market and institutional interest rates. For details see about monetary policy.

Who is on the Reserve Bank Board and how are they appointed?

The Reserve Bank Board has up to nine members. Three of these are ex officio: the Reserve Bank Governor (Chairman), the Deputy Governor (Deputy Chairman) and the Secretary to the Treasury. The Governor and Deputy Governor are appointed by the Treasurer for terms of up to seven years.

The other six (non-executive) members are appointed for terms of up to five years. Board members are appointed by the Treasurer and there is no limit on the number of terms they may serve. See Reserve Bank Board for more information, including details on current and previous members of the Board.

Can I open a bank account with the Reserve Bank?

The Reserve Bank is not a commercial bank and so does not provide banking facilities to the general public. It does, however, provide banking services to some government, commercial bank and other clients.

end of FAQ