The Reserve Bank of Australia (RBA) is Australia’s central bank and derives its functions and powers from the Reserve Bank Act 1959. Its duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people. It does this by setting the cash rate to meet an agreed medium-term inflation target, working to maintain a strong financial system and efficient payments system, and issuing the nation’s banknotes. The RBA provides certain banking services as required to the Australian Government and its agencies, and to a number of overseas central banks and official institutions. Additionally, it manages Australia’s gold and foreign exchange reserves.
The Reserve Bank of Australia is Australia’s central bank. It conducts monetary policy, works to maintain a strong financial system and issues the nation’s currency. As well as being a policy-making body, the Reserve Bank provides selected banking and registry services to a range of Australian government agencies and to a number of overseas central banks and official institutions. It also manages Australia’s gold and foreign exchange reserves.
The role and functions of the Reserve Bank are underpinned by various pieces of legislation. The Bank is a statutory authority, established by an Act of Parliament, the Reserve Bank Act 1959, which gives it specific powers and obligations. In terms of the Act, there are two Boards: the Reserve Bank Board and the Payments System Board.
The Reserve Bank Board’s obligations with respect to monetary policy are laid out in Sections 10(2) and 11(1) of the Act. Section 10(2) of the Act, which is often referred to as the Bank’s ‘charter’, says:
‘It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank … are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:
a. the stability of the currency of Australia;
b. the maintenance of full employment in Australia; and
c. the economic prosperity and welfare of the people of Australia.’
Section 11(1) of the Act covers the need to consult with Government;
‘the Reserve Bank Board is to inform the Government, from time to time, of the Bank’s monetary and banking policy.’
The ‘charter’ of the Payments System Board is defined in section 10B(3) of the Act as follows:
‘It is the duty of the Payments System Board to ensure, within the limits of its powers, that:
a. the Bank’s payments system policy is directed to the greatest advantage of the people of Australia; and
b. the powers of the Bank under the Payment Systems (Regulation) Act 1998 and the Payment Systems and Netting Act 1998 are exercised in a way that, in the Board’s opinion, will best contribute to:
i. controlling risk in the financial system;
ii. promoting the efficiency of payments system; and
iii. promoting competition in the market for payment services, consistent with the overall stability of the financial system; and
c. the powers and functions of the Bank under Part 7.3 of the Corporations Act 2001 are exercised in a way that, in the Board’s opinion, will best contribute to the overall stability of the financial system.’
The Reserve Bank of Australia is an independent central bank with responsibility for monetary, financial system and payments system policies, and other financial matters. The Bank has two boards: the Reserve Bank Board, which has responsibility for monetary policy and financial stability and the Bank’s policy on other matters excluding payments system policy; and the Payments System Board, which has responsibility for matters relating to payments system policy. This governance structure is set out in the Reserve Bank Act 1959. Subject to those matters, the Bank is managed by the Governor. The Public Governance, Performance and Accountability Act 2013 (PGPA Act) also imposes particular responsibilities on the Governor concerning management of the Bank.
The Reserve Bank Board has an Audit Committee and a Remuneration Committee. The primary objective of the Audit Committee is to report to the Board on matters relevant to the fulfilment of the Bank’s statutory financial reporting and other obligations in terms of the Reserve Bank Act and the PGPA Act. The Committee assists the Governor and the Board in fulfilling their obligations relating to financial reporting, risk management and fraud control, and regulatory compliance. The Remuneration Committee makes recommendations to the Board on the remuneration of the Governor and Deputy Governor in terms of the Reserve Bank Act and the framework and guidelines set by the Remuneration Tribunal, and is also kept informed of the general remuneration arrangements for Reserve Bank staff.
Following appointment to the Reserve Bank Board or Payments System Board, each member is required under the Reserve Bank Act to sign a declaration to maintain secrecy in relation to the affairs of the particular Board and the Reserve Bank. Further, by law, members must comply with the general duties of officials of Commonwealth entities, as set out in the PGPA Act. Over and above these requirements, members of each Board have also adopted a Code of Conduct in recognition of their responsibility for maintaining a reputation for integrity and propriety on the part of the Reserve Bank Board, the Payments System Board and the Reserve Bank.
- Promotion of the public interest
- Intelligent inquiry