Monday, 3 June 2013
The Assistant Treasurer will be aware that I have long taken a strong interest in the Reserve Bank Reserve Fund, so it will not be a surprise to him that today I wish to draw the attention of the Assistant Treasurer to some information that was recently provided in the public sphere as a result of the freedom of information documents that were released.
Firstly, let me remind the Assistant Treasurer that since 2001 the Reserve Bank board has aimed to keep the Reserve Bank reserve funds balance to at least 10 per cent of the assets at risk. This was a level that they deemed appropriate for being able to absorb losses where required. As the Assistant Treasurer would also be aware, over the past two years the balance has fallen well below that target. Now unlike typical banks, the Reserve Bank Act provides no recourse for the Reserve Bank to seek a capital injection from its shareholder, which is of course the government. This means that the bank can only increase its capital by retained earnings.
We heard earlier this year at the Standing Committee on Economics hearing that the Governor of the Reserve Bank conceded that he had provided advice to the Treasurer that a dividend of half a billion dollars should not be paid to the government, but should be instead retained and transferred into the Reserve Bank Reserve Fund, as should all of the profit made by the Reserve Bank. The Governor wrote to the Treasurer on 13 July 2012 advising that the RBA's 2011-12 accounting profit was estimated at around $1.1 billion. The bank sought approval at that time to transfer all of the bank's distributable earnings to the Reserve Bank Reserve Fund. The Treasurer agreed to this initially, in the first advice that was provided. In the 201 annual report, the Reserve Bank Governor said: 'the prudent course will be to apply future earnings to rebuilding'—the Reserve Bank Reserve Fund—'before the resumption of dividend payments.' Advice was provided to the Treasurer by the Treasury and by the Reserve Bank Governor on 6 September 2011, 27 October 2011, 20 April 2012, 3 August 2012 and 24 August 2012. The Treasurer ignored the advice that was provided by both the Treasury and the Reserve Bank Governor.
My question to the Assistant Treasurer is this: does he concede that the Treasurer, in ignoring the explicit advice from the Reserve Bank Governor, has been highly irresponsible? Or are the Reserve Bank Governor and the Treasury wrong?