Reserve Bank – Role and Functions

Role and Functions
Glenn Stevens, Governor I
suppose the role that people most hear about
is the monetary policy one, where we make a monthly decision about interest rates. And
the main purpose of those decisions really is to try to preserve the stability of the
value of money over time, a stable money is a foundation for a prosperous economy and
it’s really that simple. So that’s the thing probably people hear about most frequently.
But we actually do a lot of other things besides set that one interest rate.
For most people the closest connection to us that they probably have is they’re carrying
these around. We print these brightly coloured pieces of plastic and there’s $60 billion
worth of that floating around out in the community that is used for everyday transactions. So
pretty much everybody is carrying that in their pocket every day of the week and that’s
their closest connection to us actually. It’s about many other things just other than
the physical cash that you’re carrying around, so one of those is the Reserve Bank runs the
nations electronic payments system. We clear about $180 billion every day through that
system of electronic transfers all of that goes across our books as the private banks settle with each other. That has to be run to a very high standard of reliability and
efficiency. We have a broad mandate for stability of the
financial system, this is in a way hard to define precisely because usually you can only
define what financial stability means by thinking about its absence. So in recent years we’ve
seen in other countries an absence of stability, we’ve seen banks failing or under pressure,
we’ve seen the system seize up in moments of crisis and our job is to try to prevent
that happening by maintaining sound banks, sound financial institutions, well-functioning
financial markets, and central banks generally, and the Reserve Bank is no exception, have
always felt an obligation to try to foster that stability to the limits of our ability.
We are the Government’s banker, most people if they’ve received a cheque from the Tax
Office, if you’re lucky enough to get a refund, or you’ve received a payment of a pension,
a social security benefit, a payment from Medicare, all of these things are across accounts
at the Reserve Bank, so we run those accounts on a daily basis and there are some 200 million
or more electronic payments processed by the RBA every year, so quite a major player in
that space. We hold Australia’s foreign exchange reserve
assets, these are assets held offshore as custodian for the nation, so we hold them
in United States dollars, Euros, some Yen, some Canadian dollars and recently some Chinese
RMB. And these are held really against a rainy day, they’re held in case one day a situation
arises where we need to have access to foreign funds, there’s about $40 billion available
there and our job is to hold those essentially in trust for the nation, we’re the owner,
but we’re holding them on behalf of the country. A lot of people think of the Reserve Bank
as an institution in Sydney and certainly that’s where our Head Office is, but we maintain
a presence around the State capitals on the mainland. We’re the nation’s central bank
we’re not just a Sydney institution, we’re a national institution, our obligations are
national not just Sydney, and we take that obligation very seriously.

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