The grant, which Mr Hockey said would strengthen the RBA’s financial position and enhance its independence in conducting its operations, was in response to a request from the Bank to increase its Reserve Fund from the current 3.8 per cent of assets at risk to 15 per cent.
“Australia’s financial system relies on the financial strength of the Reserve Bank and the credibility of its monetary policy and foreign exchange operations,” Mr Hockey said in a statement.
“This injection of funds puts beyond any doubt the Reserve Bank’s continued ability to perform its core monetary policy and foreign exchange functions, in an environment of heightened financial market volatility,” he added.
Mr Hockey said the grant followed a commitment he made in opposition in February when he told the Committee for Economic Development of Australia Economic and Political Overview he would, “as a matter of urgency” if he became treasurer, discuss funding requirements with the RBA.
The Bank’s Reserve Fund, which serves as its funding buffer, has been depleted in recent years as a result of losses from the sustained appreciation of the Australian dollar, Mr Hockey stated.
He also took a swipe at the previous government, saying Labor had taken “extraordinary dividends” from the Reserve Bank during its time in office.
This included a decision in August 2012 by then-treasurer Wayne Swan to determine that $500 million of the Bank’s total earnings in 2011/2012 (of $1.1 billion) be credited to the Commonwealth as a dividend in 2012/2013, according to Mr Hockey.
“Today’s decision ensures the RBA is able to maintain a strong balance sheet over the medium term in what is likely to continue to be a volatile global economy,” he stated.
