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Reserve Bank of Australia Annual Report 2018 - rba.gov.au

Reserve Bank of Australia Annual Report2018letter of transmittalAnnual Report 2018 ContentsGovernor s Foreword 1 Part 1: About the Reserve BankOur Role 5 Governance 8 Reserve Bank Board 15 Accountability and Communication 30 Operational Structure 43 Part 2: Our OperationsOperations in Financial Markets 53 Banking and Payment Services 65 Banknotes 71 International Financial Cooperation 80 Community Engagement 92 Part 3: Management and Accountability Our People 103 Management of the Reserve Bank 112 Risk Management 117 Earnings, Distribution and Capital 124 Pro Forma Business Accounts 128 Annual Performance Statement for 2017/18 129 Statutory Reporting Requirements 141 Part 4: Financial Statements Statement of Assurance 147 Financial Statements 148 Notes to the Financial Statements 153 Independent Auditor s Report 184 Part 5: Indexes Statutory Reporting Requirements Index 191 List of Tables 193 List of Graphs 194 List of Figures 195 Abbreviations

2 RESERVE BANK OF AUSTRALIA ANNUAL REPORT 2018 | GOVERNOR’S FOREWORD PB The Reserve Bank Board held the cash rate steady at 1.5 per cent over the past year, with the most recent change in monetary policy having been

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Transcription of Reserve Bank of Australia Annual Report 2018 - rba.gov.au

1 Reserve Bank of Australia Annual Report2018letter of transmittalAnnual Report 2018 ContentsGovernor s Foreword 1 Part 1: About the Reserve BankOur Role 5 Governance 8 Reserve Bank Board 15 Accountability and Communication 30 Operational Structure 43 Part 2: Our OperationsOperations in Financial Markets 53 Banking and Payment Services 65 Banknotes 71 International Financial Cooperation 80 Community Engagement 92 Part 3: Management and Accountability Our People 103 Management of the Reserve Bank 112 Risk Management 117 Earnings, Distribution and Capital 124 Pro Forma Business Accounts 128 Annual Performance Statement for 2017/18 129 Statutory Reporting Requirements 141 Part 4: Financial Statements Statement of Assurance 147 Financial Statements 148 Notes to the Financial Statements 153 Independent Auditor s Report 184 Part 5: Indexes Statutory Reporting Requirements Index 191 List of Tables 193 List of Graphs 194 List of Figures 195 Abbreviations 196 Contact Details 198 Reserve Bank of AustraliaThis Report is available electronically in PDF and HTML formats on the Reserve Bank s website: < >.

2 The Reserve Bank welcomes comments on this Report . Feedback and enquiries about any aspect of this Report may be directed to: Secretary s DepartmentReserve Bank of Australia65 Martin PlaceSydney NSW 2000 GPO Box 3947 Sydney NSW 2001 Telephone: +61 2 9551 8111 Facsimile: +61 2 9551 8033 Email: Reserve Bank of Australia 2018. All rights reserved. The contents of this publication shall not be reproduced, sold or distributed without the written prior consent of the Reserve Bank of Australia . The graphs in this Report were generated using 1448-5303 (Print)ISSN 1448-5192 (Online) Annual Report 2018 | GOVERNOR S FOREWORD1 The global economic expansion continued over the past year. Unemployment rates in many countries have declined further and, in some cases, are at multi-decade lows. Inflation rates remain low, but have generally moved closer to central bank targets.

3 Financial conditions are still expansionary, although they are gradually becoming less improvement in the global environment is helping the Australian economy. Higher commodity prices and stronger employment growth have provided a welcome boost to incomes. Economic growth has gradually picked up and inflation is moving closer to the Reserve Bank s target. Higher levels of public and private investment are also supporting the this more positive backdrop, the Reserve Bank focused on a number of developments over the past year. The first was the risk to the global economy from a move towards protectionism. Australia is a major beneficiary of the open, rules-based international system and has a strong stake in this system continuing. A second issue was the subdued growth in wages in Australia . The slow growth in wages has boosted the number of Australians with a job, but has also led to slower income growth for many individual households and less inflation pressure than otherwise.

4 A third issue was the high level of household debt in Australia , which carries certain risks. The Bank has worked closely with the other members of the Council of Financial Regulators to ensure that lending standards are appropriate for this environment. Close cooperation between the various regulatory agencies continues to be a positive and distinguishing feature of Australia s regulatory s ForewordANNUAL Report 2018 | GOVERNOR S FOREWORDRESERVE BANK OF AUSTRALIAPB2 The Reserve Bank Board held the cash rate steady at per cent over the past year, with the most recent change in monetary policy having been in August 2016. Over this period, the Bank has sought to be a source of stability and confidence while further progress is made in having inflation return to target and the Australian economy move closer to full past year was marked by the completion of some major national interest projects by the Reserve Bank.

5 These have required significant investments in technology. One of these projects was the development of a core part of the payments infrastructure that allows Australians to move money between bank accounts easily in real time and with detailed information about the payment. As the banker to the Australian Government, the Reserve Bank has also made significant investments in its banking systems to allow government agencies to use this new payment system. A major upgrade of the arrangements for the storage and distribution of banknotes was also completed. The new highly automated and secure storage facility and processes are designed to meet Australia s banknote needs well into the future. A new high-tech $10 banknote was issued as part of the Bank s efforts to keep Australia s banknotes safe and secure.

6 This follows the issue of the new $5 note in 2016. Plans are well advanced for the issue of a new $50 banknote later this year, with the same world-leading security Reserve Bank is committed to a high degree of transparency and accountability as Australia s central bank. Over the past year, senior staff gave over 50 public speeches and had many meetings with business and community groups. The Bank has also devoted considerable resources to its public education program, with a particular focus on economics students and teachers. Our aim is to support and encourage the study and understanding of economics in the completion of some large projects, there was a small decline in the number of Bank staff over the past year and a further reduction is expected in 2018/19. The Bank s general operating costs, excluding depreciation, increased by per cent in 2017/18.

7 Capital expenditure declined by more than half, reflecting the completion of Bank recorded an accounting profit of $ billion in 2017/18. Earnings were boosted by valuation gains on the Bank s foreign assets because of the depreciation of the Australian dollar. An amount of $669 million was available for distribution to the Australian Government, comprising underlying earnings less realised valuation losses. A revised risk-based capital framework was introduced in 2016/17, with the current level of capital slightly above the Board s target level. Accordingly, the Reserve Bank Board did not seek a transfer to the Bank s reserves and the full amount of $669 million available for distribution will be transferred to the Australian Government. The Bank continues to have a strong balance Reserve Bank s staff share a strong commitment to high standards and serving the public interest.

8 They go about their work with a high degree of professionalism and have achieved much over the past year. The Reserve Bank Board joins me in thanking the staff for their work and for their service to the Australian Lowe Governor 23 August 2018 Part 1:About the Reserve BankANNUAL Report 2017 | GOVERNOR S FOREWORDRESERVE BANK OF AUSTRALIAPB4 Annual Report 2018 | OUR ROLERESERVE BANK OF AUSTRALIA5 PBIn its role as Australia s central bank, the Reserve Bank of Australia determines and implements monetary policy , fosters financial stability, undertakes a range of activities in financial markets, acts as a banker to the Australian Government, issues Australia s banknotes and has policy , supervisory and operational roles in the payments system. The Reserve Bank of Australia is established by statute as Australia s central bank.

9 Its enabling legislation is the Reserve Bank Act 1959. The Bank pursues national economic policy objectives. Its responsibility for monetary policy is set out in section 10(2) of the Reserve Bank Act, which states: 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 . Policies in pursuit of these objectives have found practical expression in a flexible, medium-term inflation target, which has formed the basis of Australia s monetary policy framework since the early 1990s.

10 The policy objective is for consumer price inflation to average between 2 and 3 per cent over time. By achieving this objective, the Reserve Bank can help promote sustainable economic growth and employment. The seventh Statement on the Conduct of Monetary policy , agreed by the Treasurer and the Governor on 19 September 2016, records the common understanding of the government and the Reserve Bank on key aspects of the monetary policy framework. This update of the statement confirmed the monetary policy framework in Australia , explicitly recognising that it is appropriate for the Reserve Bank Board to take account of financial stability considerations in determining the appropriate setting of monetary policy . The Reserve Bank works with other regulatory agencies in Australia to foster overall financial stability, which is an important underpinning of a stable macroeconomic environment.


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