Essay on the Reserve Bank of Australia and the Australian Prudential Regulation Authority

Essay by AzuresHigh School, 11th gradeA+, November 2006

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Reserve Bank of Australia (RBA)

The Reserve Bank of Australia plays an important role in the Australian economy. Without it, the prices would be rising sharply and uncontrollably and all the financial institutions would just do whatever they like and create chaos in the economy. In the next paragraphs, I'll be explaining the functions and importance of the presence of the Reserve Bank of Australia.

The Reserve Bank of Australia's (RBA) is Australia's central bank. The RBA was created in 1959 under the Reserve Bank Act 1959 and it has the role of controlling a country's money and banking system and it's different from other banks. Its primary purpose is not for making profit, but its main objective is the overall management of the financial sector in the Australian economy.

The Reserve Bank of Australia has 3 main objectives: the stability of Australia's currency, the maintenance of full employment, and the economic prosperity of the people of Australia.

In recent years, its major aim is to sustain low inflation.

The structure of the Bank when based on groupings of related function is: Economic group, Financial Markets Group, Financial System Group, Business Services Group, Corporate Services Group, Information Department, Audit Department, Personnel Department, Secretary's Department, and Risk Management Unit.

Tim Dixon, John O'Mahony, The Market Economy p.183

RBA's most important function is to conduct the monetary policy. It can be defined as the RBA's action to influence the cost and availability of money in the Australian Economy through influencing the general level of interest rates. RBA influences the interest rates through the Domestic Market Operations (DMO). It refers to the purchase and sale of second hand government securities (such as Treasury notes and Treasury bonds) by the Reserve Bank to influence the interest rates.

Banks need to hold a...