Reserve Bank of Australia Annual Report – 2006 The Reserve Bank in the Community
Accountability
The Reserve Bank is accountable to Parliament. This report complies with Section 9 of the Commonwealth Authorities and Companies Act 1997, which requires an annual report to be tabled in both Houses of Parliament. Parliamentary accountability has been increased since 1996 through twice-yearly appearances before the House of Representatives Standing Committee on Economics, Finance and Public Administration. In 2005/06, the Governor and senior officers appeared at hearings of the Committee in Melbourne in August and in Canberra in February; the next hearing of the Committee is scheduled to be held in Sydney in August 2006. The hearings in 2005/06 covered a wide range of issues, including the domestic and international economic outlook, the resources boom and Australia's terms of trade, inflation, household sector developments, payments system reform, central bank governance and, of course, monetary policy.
The Statement on Monetary Policy, published quarterly, provides an analysis of the state of the economy, the outlook for inflation and the reasons for recent Reserve Bank Board decisions on interest rates. These statements inform the financial markets, the media and the wider community about the Reserve Bank's thinking on monetary policy and provide a basis for the Parliamentary Committee's questioning.
Communication
In addition to the formal requirements, Reserve Bank accountability is fostered also by regular communication with the financial markets and public more generally. During 2005/06, the Governor, Deputy Governor and senior officers gave speeches on topics such as the economic conjuncture and outlook, reform of the payments system, financial co-operation in Asia, global imbalances, the financial implications of ageing, and risk and the macroeconomy.
The Reserve Bank Bulletin is a monthly record of media releases and comprehensive statistics, plus articles on numerous topics; in the past year, these included household sector developments, trends in savings and investment, Australia's foreign assets and liabilities, banking fees and measuring house prices. In addition, the Bulletin reproduces most of the speeches made by senior staff.
The Financial Stability Review is published in March and September each year and gives a detailed assessment of the overall condition of Australia's financial system. It also provides analysis of specific issues, including, in the past year, residential mortgage-backed securities, banks’ foreign currency lending practices and developments in the low-doc loan market.
Research work undertaken by staff is published in the Research Discussion Paper (RDP) series. In 2005/06, 13 RDPs were published. A wide variety of topics were covered, including the determinants of manufactured exports in the Australian states, the measurement of housing prices, the determinants of corporate investment, and the relationship between credit and the macroeconomy. Although this work is primarily of interest to professional economists, non‑technical findings of some of the papers are published in the Bulletin to be available to a wider audience. In addition to these publications, some staff have also had work published externally. This has included a paper on the effectiveness of central bank intervention in foreign exchange markets, published in the Journal of International Economics, and a paper on the external vulnerability of economies, published in The Journal of Policy Reform. Much of this research work is on issues relevant to monetary policy, although the views expressed are those of the authors and do not necessarily reflect the views of the Reserve Bank. These publications are aimed at promoting discussion and debate among researchers in the field.
The Reserve Bank's annual two-day economic research conference was combined with a G-20 workshop in Sydney, jointly hosted with the Australian Treasury and titled ‘Demography and Financial Markets’. This workshop brought together academics, officials from the Reserve Bank and the Australian Treasury and their counterparts from the participating G-20 nations. As with previous Reserve Bank conferences, which began in 1989, the papers presented at the workshop will be published in a volume later in the year.
The Reserve Bank publishes all this information in both electronic and hardcopy formats. Demand for hardcopy publications has been declining as use of the website has grown strongly.
The Reserve Bank continues to convene its Small Business Advisory Panel. This panel was established in 1993 and meets annually to discuss issues relating to the provision of finance for small businesses. Membership of the Panel is drawn from a wide range of industries across the country. The Panel continues to represent a valuable source of information on the financial conditions faced by small businesses.
Activities of the Regional Offices
An important dimension of the Reserve Bank's presence in the community is its Regional Offices. Located across the country[1], these have two main roles. One is economic intelligence gathering, with economists in the Regional Offices seeking timely information about business conditions; this economic intelligence feeds into the monthly assessments of the economy provided to the Reserve Bank Board and other core work of the Reserve Bank. A second role is representation, where the presence of Reserve Bank staff in regional locations facilitates greater communication between the Reserve Bank and the wider community.
The liaison function of the Regional Offices sees staff interact with a broad cross-section of the community. The Reserve Bank has cultivated a pool of over 1,500 contacts with whom liaison is regularly conducted, and a total of nearly 5,000 interviews have been conducted since the inception of the program. While the bulk of these contacts are firms, a valuable part of the program is liaison with industry associations and government agencies. In the normal course of liaison, Reserve Bank staff meet with around 100 contacts per month. With the program having reached a mature stage, relationships with many contacts are now well established, enhancing the dialogue between the Reserve Bank and the community and the quality of information obtained.
In addition to their interaction with businesses and other agencies, Regional Office staff are the first point of contact with the Reserve Bank for the general public in their States, fielding a large number of enquiries about the role of the Reserve Bank, economic statistics and monetary policy decisions. Regional Office staff also give presentations to the public in their capital cities and increasingly in provincial centres. Over the past year, presentations have been given in the Northern Territory, various provincial cities in Queensland and Victoria, Albany and the goldfields of Western Australia, and Mount Gambier in South Australia. These presentations have been to industry bodies and community groups, and many have been to teachers’ associations and students (from both high schools and universities). They have generally been about the framework for monetary policy or current economic conditions. Other Reserve Bank staff from Head Office have visited the regions and given talks on published research work.
The Reserve Bank's presence in the community has been further raised by the hosting of functions in the Regional Offices. The Offices on occasion host Reserve Bank Board meetings, and briefings on the Statement on Monetary Policy have become a regular occurrence in each State capital. These briefings are given by senior managers, who communicate the main themes of the Statement to liaison contacts and engage in discussion with participants.
Museum of Australian Currency Notes
The Museum, which opened in March 2005, exhibits the story of Australia's currency notes against the background of the nation's broader history. After an introductory stage on developments before Federation, which includes Australia's first gold coins (see below), visitors can review the various series of notes produced since the first Australian notes in 1913–1915. The final stage in the Museum focuses on Australia's polymer currency notes, including information on their design, security, recycling and other features. Polymer note technology has placed Australia at the forefront of currency note development and visitors can see examples of the many polymer notes that have been issued by other countries.
As well as viewing the original notes, visitors can learn about the men and women represented on the notes over the years, about the artwork used in their design and about some of the key historical episodes in Australian history through the Museum's displays of archival film, photographs and documents.
Since March 2005, about 11,000 people have visited the Museum. Most of the information in the Museum is on the Reserve Bank's website, where visitors can also take a virtual tour of the Museum. Around 150,000 visitors have so far experienced the Museum online, half of those from other countries.
Disposal of Gold Coins
The Reserve Bank held for many years a large quantity of gold coins, accumulated prior to 1976 when Australian law required that the public exchange gold coins for Australian currency. The total value of these coins was minor, at less than one-tenth of 1 per cent of the Reserve Bank's assets.
The Reserve Bank, which is responsible for the issue of currency notes but not coins, decided that it did not need to continue to hold this large quantity of coins. Some coins identified as having historical value were transferred to the Royal Australian Mint's National Coin Collection. Those coins with no numismatic value – worth only their weight in gold metal – were melted and sold as gold bullion, while those with small numismatic value were sold at tender to coin dealers in a number of bulk lots. Some 5,850 coins were assessed as having significant numismatic value; these were Australian half-sovereigns and sovereigns, Adelaide pounds and some foreign coins. They were sold by public auction, together with 800 silver and copper-based coins also held by the Reserve Bank.
The auction was conducted during late November 2005 in the Old Treasury Building, Melbourne. The auction was well attended, bidding was strong and all lots were sold. The auction raised $4.7 million, well in excess of the market value of $3.1 million estimated prior to the auction.
The Reserve Bank retained a small number of gold coins for display in the pre-Federation stage of its Museum of Australian Currency Notes.
Financial Assistance for Economic and Financial Research and Education
The Reserve Bank provides assistance for a variety of research and related activities that are closely aligned with its core functions. Ongoing funding has been provided towards the costs of a monthly survey of inflation expectations, undertaken by the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne, and of a quarterly survey of union inflation and wage expectations, by the Workplace Research Centre (formerly the Australian Centre for Industrial Relations Research and Training) at the University of Sydney. During the year, the Reserve Bank joined with other central banks to support the establishment of the International Journal of Central Banking, the primary objectives of which are to disseminate the best policy-relevant and applied research on central banking and to promote communication among researchers both inside and outside central banks.
Scholarships under the Elite Executive Honours Scholarship Program, organised by Axiss Australia, the government agency charged with positioning Australia as a global financial services centre, were again supported during 2005/06. This year, two scholarships funded by the Reserve Bank under this program were for study at the University of Queensland and the University of New South Wales. In conjunction with APRA, the Reserve Bank has continued sponsorship of the Brian Gray Scholarship Program, initiated in 2002 in memory of a former senior officer of the Reserve Bank and APRA; two scholarships were awarded under this program for 2006, for honours year studies at the Australian National University and the University of Sydney.
The Reserve Bank's financial assistance to Australian universities each year includes contributions towards the costs of their organising conferences in economics and closely related fields. In 2005/06, these conferences included the annual Conference for PhD Students in Economics and Business, held this year at the University of Western Australia, the Economic Society of Australia's 34th Conference of Economists, held at the University of Melbourne, the 11th Melbourne Money and Finance Conference, held at the University of Melbourne, and the University of New South Wales’ 18th Australasian Finance and Banking Conference.
In conjunction with other central banks, the Reserve Bank agreed to continue its support of the International Accounting Standards Committee Foundation following completion last year of the initial five-year support plan. The Reserve Bank also continued its long-standing practice of contributing to the Group of Thirty to support its program of research and publications in the area of international finance.
Charitable Activities
During the year, the Reserve Bank maintained the level of its financial support for charitable organisations, contributing a total of $20,000 to 16 Australian charities that seek to address a broad range of medical problems and disabilities. In addition, the Reserve Bank made its fourth annual contribution of $50,000 to the Financial Markets Foundation for Children, of which the Governor is Chairman; along with a number of other major Australian financial institutions, the Reserve Bank has committed to support the Foundation to this extent for a further six years. In July 2006, in its first public event to raise funds, the Deputy Governor addressed the Anika Foundation; the Foundation was established in 2005 to raise funds to support research into adolescent depression and suicide.
Statutory Obligations
Equal Employment Opportunity (EEO)
As required under the Equal Employment Opportunity (Commonwealth Authorities) Act 1987, the Reserve Bank reports to the Australian Parliament each year on its EEO program. The Equity and Diversity Annual Report 2005 was tabled on 15 September 2005 and incorporates initiatives under the Reserve Bank's disability action plan consistent with the Commonwealth Disability Strategy.
The prime focus for the Reserve Bank in 2005 was its commitment to working parents, particularly women returning to work from parental leave, through the establishment of a joint-venture childcare facility in the CBD. The facility provides 20 places for pre-school-age children of staff.
Health and Safety, Compensation and Rehabilitation
The Reserve Bank is required, in terms of Section 74 of the Occupational Health and Safety (Commonwealth Employment) Act 1991 (OH&S Act) and the conditions of its licence as a Licensee under the Safety, Rehabilitation and Compensation Act 1988, to report each year on matters of health and safety, workers’ compensation and rehabilitation as they affect the Reserve Bank.
The Reserve Bank's licence to self‑insure and manage claims for workers’ compensation remains current to 30 June 2007, as is the Bank's agreement with Australia Post to undertake reconsiderations of determinations issued by Reserve Bank delegates. Both the number of OH&S incidents reported (65) and claims determined (17) were lower than in 2004/05; as in previous years, most related to travel or lunchtime sport. No requests for reconsideration of the Reserve Bank's workers’ compensation determinations were received during the period. In terms of Section 68 of the OH&S Act, two incidents were notified to Comcare as ‘dangerous occurrences’; both have been fully investigated and preventative action taken against recurrences.
The Reserve Bank has robust policies and mature systems in OH&S, claims management and rehabilitation, with a strong record of performance. These were confirmed by independent audits during the period – two in OH&S (Head Office and the Perth Regional Office) and one each in claims management and rehabilitation. In addition, Comcare undertook verification OH&S audits at Canberra Branch and the Brisbane Regional Office. All audits found the Reserve Bank to be fully compliant with the respective legislation and the Reserve Bank's conditions of licence. The Reserve Bank's performance as measured by audits and Comcare Performance Indicators was reviewed in the annual Licensee Improvement Program Report provided to Comcare at the end of March 2006. That report also reflected the Reserve Bank's commitment to continuous improvement in OH&S during 2006/07.
Freedom of Information
Section 8 statement
Organisation and functions: The Reserve Bank is Australia's central bank. It was established by Commonwealth legislation in 1911. Its functions, powers and responsibilities are specified in the Reserve Bank Act 1959, the Banking Act 1959, the Commonwealth Authorities and Companies Act 1997, the Payment Systems (Regulation) Act 1998, the Payment Systems and Netting Act 1998, the Corporations Act 2001 and the Financial Services Reform Act 2001, and in Regulations made under those Acts. An overview of the structure of the Reserve Bank is provided in the organisational chart that appears at the end of this Report.
Categories of documents: Lists of publications, including speeches, articles, occasional papers, information booklets, conference volumes, regular media releases and other publications are published from time to time in the Reserve Bank Bulletin. These publications, as well as other information about the Reserve Bank, are also available on the Reserve Bank's website (www.rba.gov.au). Other documents are held in the form of working notes and files covering policy and operational matters, statistical data, personnel, premises and general administration.
The right of access to documents in the possession of Australian Government agencies in terms of the Freedom of Information Act 1982 (FOI Act) applies to the Reserve Bank. However, the Reserve Bank is an exempt agency under the FOI Act in respect of documents concerning banking operations (including individual open market operations and foreign exchange dealings) and exchange control matters.
Facilities for access and Freedom of Information procedures: Enquiries under the FOI Act, including requests for access to documents, should be directed to the Secretary of the Reserve Bank. Applications should be accompanied by the application fee (currently $30). Facilities to inspect documents to which access has been granted are available.
Section 93 statement
One request, from a solicitor, for access to documents under the FOI Act about an individual thought to have been an employee of the Reserve Bank, was received in 2005/06. A request, from a media organisation, for access to documents under the FOI Act that was received in 2004/05 was finalised early in the year. Both requests were denied on account of the Reserve Bank not having any relevant documents.
The estimated number of staff hours spent dealing with all aspects of FOI requests in 2005/06 was around 11 hours, of which about half related to the request that was received during the year. The total cost to the Reserve Bank of administering the FOI Act in 2005/06 was estimated to have been $2,492.
Footnote
There are Regional Offices in Queensland, South Australia, Victoria and Western Australia. The Victorian Office covers Tasmania, the South Australian Office covers the Northern Territory and staff in Head Office cover New South Wales and the Australian Capital Territory. [1]