Who owns reserve bank of australia

Internal research by the RBA through the later part of the s backed what other central banks were discovering — an inflation target was key to interest rate setting. It often used emotive posters such as these to entice Australians to help fund the defence effort.

When the Commonwealth started on January 1, , currency was produced by private banks and by the Queensland government. There was no central bank. The Labor government of Andrew Fisher passed laws giving it control of our currency in , outlawing state governments from printing notes and taxing private banks that did so. The next year, the government created its own trading and savings bank — the Commonwealth Bank.

The first note — for 10 shillings — was printed in early on a press in Flinders Street, Melbourne. There was only one problem — Page did not really explain to the Commonwealth Bank what he wanted. The bank was opened by then prime minister Billy Hughes. The bank itself was made up mostly of people versed in day-to-day banking. They had little knowledge of central banking. Giblin notes this situation went on for some time. So confused was the bank that it asked the governor of the Bank of England to visit Australia.

He turned down the chance, but sent a senior official out in New treasurer Ted Theodore proposed the day-to-day trading activities of the Commonwealth Bank be hived off into a new entity, leaving a standalone central reserve bank to focus on monetary policy and the circulation of notes.

He also proposed the bank board have nine members: the governor, no more than two deputy governors, the Treasury secretary and five outside individuals who would be, or had been, actively engaged in agriculture, commerce, finance, industry and labour. The entire plan went down in the Senate where the then conservative opposition feared this new, broader board would extend the powers of the central bank.

It would take another 30 years before the Reserve Bank was separated from its private day-to-day banking activities. But the notion of a board made up of senior executives and people from the broader economy overseeing the bank had been planted and remains today. Through the s, the Menzies government took a series of steps that ultimately led to the Commonwealth losing its central banking roles to a brand new institution — the Reserve Bank of Australia that started operations on January 14, Credit: Sun News.

While the RBA was created by government, it is certainly not under its thumb. The Treasurer of the day appoints the bank governor for a seven-year term. The bank and Treasury have a list of possible board members but, ultimately, the choice sits with the treasurer.

But after that the government has almost no control over the bank and its decisions. There is scrutiny of the bank. But in most cases, this turns more into a political point-scoring effort by the assembled MPs rather than a deep inquisition of monetary policy settings. Senior staff take questions from the public after the many speeches they present through the year.

But it was only in that the governor faced a press conference - albeit two virtual ones - to answer questions about major policy changes. Through the s and s, the importance of monetary policy being set independently of politicians became clear to economists, academics and, finally, the political class. Central banks have since used this independence to make tough calls that have caused politicians plenty of problems. Just days out from the federal election, the Reserve Bank used its traditional Melbourne Cup Day meeting to lift official interest rates by a quarter percentage point to 6.

Then treasurer Peter Costello, in his autobiography, noted that prior to him taking the job, the treasurer of the day would announce an interest rate change. Credit: Dominic Lorrimer. Central bankers can get blamed for all sorts of things. Current governor Philip Lowe has noted on many occasions the letters of complaint he receives from people who have savings, upset at another cut in deposit rates. This contributed towards an uptick in inflation with the Reserve Bank increasing official interest rates on three separate occasions that year.

However, these were only temporary wartime powers. With the expiration of these powers at the end of the Second World War, new legislation was passed — the Commonwealth Bank Act and the Banking Act It formalised the Bank's powers in relation to the administration of monetary policy, interest rates, banking policy and exchange rate control. This was the first time the Bank had been formally given a legislated responsibility to pursue macroeconomic objectives. Further organisational delineation of the Bank's central banking functions took place when the Commonwealth Trading Bank was given a separate legal status in This left the remaining entity, the Commonwealth Bank, as the nation's central bank.

By the late s, the dual functions of the Commonwealth Bank as both a central bank and a trading and savings bank had become problematic. For some decades, the privately owned commercial banks in Australia had held the view that the Commonwealth Bank's involvement in these two areas simultaneously could give it an unfair advantage over other trading and savings banks operating in Australia. The previous structural reconfigurations did not fully address these criticisms.

The government felt that, in order to maintain public confidence in the nation's central bank, these two functions should be formally separated. The Reserve Bank would act as the nation's independent central bank, and the Commonwealth Banking Corporation would continue operating as a trading and savings bank.

When the Reserve Bank commenced operations on 14 January, , its legislated objectives were to contribute to:. The decision to locate the Bank's headquarters in Sydney rather than Canberra was based on the desire to maintain the Reserve Bank's independence from the political sphere. The location also maintained continuity with the Reserve Bank's established presence in Martin Place — the heart of Sydney's banking precinct.

Branch offices were also established in each state capital. The Commonwealth Banking Corporation remained a publicly owned savings and commercial bank until its privatisation in From this time it has been known as the Commonwealth Bank.

There have been several changes to the roles and functions of the Reserve Bank of Australia since the s, though its overall objectives have remained the same. Direct controls over banking activities gave way to market-orientated methods of implementing monetary policy.

While the Bank remains accountable to parliament and the Australian people, its political independence in conducting monetary policy is central to its mission and effectiveness as a modern central bank.

The floating of the Australian dollar in resulted in the abolition of the Reserve Bank's controls over the exchange rate, though it retains the ability to intervene in the event of significant market dislocation. The function of the Reserve Bank as a prudential supervisor regulatory agency for the banking sector was transferred to the newly created Australian Prudential Regulation Authority APRA in The same year, the Reserve Bank Act was amended to create a new Payments System Board, which is chaired by the Governor of the Reserve Bank, with a mandate to promote the safety, efficiency and competitiveness of the Australian payments system.

Its responsibility is to determine the Reserve Bank's payments system policy. It must exercise this responsibility in a way that will best contribute to controlling risk in the financial system; promoting the efficiency of the payments system; and promoting competition in the market for payment services, consistent with the overall stability of the financial system.

The CFR members work together to contribute to the efficiency and effectiveness of regulation and to promote stability of the Australian financial system. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights.

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Your Practice. Popular Courses. Economy Monetary Policy. The bank maintains Australia's monetary policy and manages its currency, the Australian dollar.