Reserve Bank of Australia
The Reserve Bank of Australia
is the central bank of Australia, with head office in Sidney. The bank was established at the end of 1959 with the Reserve Bank Act, which became in effect in January 1960. The Commonwealth Bank of Australia established in 1911, was the precursor of the Reserve Bank of Australia. The commercial and savings banking functions of the Commonwealth Bank of Australia were shifted to a new financial institution which preserved the original bank’s name, and the central banking
functions were assumed by the Reserve Bank of Australia.
The Reserve Bank of Australia has several important responsibilities, with the most important one being setting the monetary policy
of the country. The bank is also responsible for the stability of the Australian financial system. The RBA works to ensure smooth and safe financial payment system. The Reserve Bank of Australia manages the Australian foreign and gold reserves, and is the sole issuer of Australian banknotes. The bank acts as a banker to the government of Australia as well.
The main responsibility of the Reserve Bank of Australia is planning and putting in practice the country’s monetary policy. The main objective of the bank’s monetary policy is to ensure price stability by targeting low inflation. The Reserve Bank Board is responsible for creating the monetary policy of the country. The board meets 11 times a year to set the target interest rate on overnight loans. The Reserve Bank of Australia uses open market operations to control the money volume
in the economy, thus influencing interest rates in attempt to keep them as close as possible to the target interest rate.
Financial System Stability
The Reserve Bank of Australia has an instrumental role in maintaining the stability of Australian financial system. The bank monitors the health of the financial system, and acts as appropriate to ensure that the system is not threatened. In rare cases, if a deposit-taking financial institution becomes illiquid, the reserve Bank of Australia can lend funds to the institution if the problem is a threat to the financial system as a whole.
The Reserve Bank of Australia is the only issuer of Australian currency
banknotes. The bank takes care of the banknotes production, issue and termination. The Royal Australian Mint in Canberra produces the Australian coins.
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