Reserve Bank of Australia

Overview

The Reserve Bank of Australia (RBA) is Australia's central bank, established under the Reserve Bank Act 1959 (Cth). The RBA is responsible for conducting monetary policy, maintaining a stable and efficient financial system, managing Australia's foreign exchange reserves, and issuing Australia's banknotes.

The RBA's overarching duty, as defined in the Reserve Bank Act 1959, is to "contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people." The RBA operates with a mandate that balances multiple policy objectives, primarily focused on:

• Maintaining price stability (inflation targeting)
• Promoting full employment
• Ensuring the overall stability and efficiency of the Australian financial system

As a Layer 1 regulator with binding legal authority, the RBA's decisions and regulatory frameworks are directly enforceable and supersede state-level banking regulations.

Basic Identity

Classification

Inclusion Justification

What This Entity Oversees

Systemic Risk Monitoring

The RBA monitors systemic risks to the Australian financial system and coordinates with other regulatory agencies to identify and mitigate potential stability threats. This includes:

• Monitoring credit conditions and leverage in the financial system
• Assessing the impact of international financial developments on Australia
• Evaluating risks from housing market dynamics and household debt levels
• Tracking emerging risks from non-regulated financial entities and shadow banking activities

Financial Stability Report

The RBA publishes a Financial Stability Review twice annually (typically in April and October), which provides detailed analysis of risks to Australian financial stability. This report informs policy discussions and helps guide regulatory coordination.

Coordination with Prudential Regulators

The RBA works closely with the Australian Prudential Regulation Authority (APRA), which regulates banks, insurers, and superannuation funds. Coordination mechanisms include:

• Regular formal and informal consultation between RBA and APRA leadership
• Participation in the Council of Financial Regulators (CFR), which coordinates financial system regulation across agencies
• Joint assessments of systemic risks and regulatory responses

Lender of Last Resort

The RBA serves as the lender of last resort to the Australian financial system, providing emergency liquidity support to authorized deposit-taking institutions during periods of financial stress.

Regulatory Powers

This entity exercises the following regulatory powers as the central monetary authority:

Regulatory Role and Function

Legal Foundation

Statutory Framework

The RBA derives its powers, functions, and governance structure from the Reserve Bank Act 1959 (Commonwealth legislation). Significant amendments were enacted through the Reserve Bank Amendment (Governance and Other Matters) Act 2024, which took effect on 1 March 2025.

Key provisions of the Reserve Bank Act 1959 include:

• Section 10: Establishes the RBA's primary functions, including the conduct of monetary policy and management of the Australian payments system
• Section 11: Requires the RBA Governor to maintain regular contact with the Australian Treasury on matters of mutual concern; grants the Treasurer power to determine RBA policy in cases of fundamental disagreement, subject to formal procedures
• Sections 13-18: Establish the RBA Board structure and governance arrangements
• Sections 26-44: Define the RBA's monetary policy objectives and decision-making processes

2024-2025 Governance Reforms

Recent amendments clarified the RBA's overarching objective and specific monetary policy objectives. These reforms:

• Enhanced the accountability of the RBA Governor and Board to the Australian Parliament
• Established a new governance structure for the RBA Board
• Strengthened the RBA's role in contributing to financial system stability

Operational Independence

The RBA maintains operational independence in the conduct of monetary policy, subject to the statutory objectives defined in the Reserve Bank Act 1959. The Governor's appointment is made by the Governor-General on the advice of the Federal Treasurer, with terms typically lasting seven years.

Licensing and Authorization Relevance

Retail Central Bank Digital Currency (Retail CBDC)

As of 2026, the RBA has determined that there is no current strong case for a retail CBDC in Australia. The Australian payments system is functioning effectively, and consumer preferences for digital payment methods are already being met by existing bank accounts and payment solutions.

However, the RBA remains open to reassessing this position as technology evolves and international experience with retail CBDCs develops.

Wholesale Central Bank Digital Currency (Wholesale CBDC)

The RBA has prioritized development and research into wholesale CBDC, which would be used for interbank settlements and financial infrastructure purposes. The RBA assesses that wholesale CBDC offers more promising benefits with fewer implementation challenges compared to retail CBDC.

CBDC Research and Pilot Projects

• The RBA and Digital Finance Cooperative Research Centre (CRC) completed a joint research project exploring potential CBDC use cases
• The project involved issuing a limited-scale pilot CBDC that was a real legal claim on the RBA
• Selected industry participants used the pilot CBDC to demonstrate innovative payment and settlement services
• Findings from this research informed the RBA's ongoing strategic approach to digital money

Three-Year Digital Money Work Plan

The RBA and Australian Treasury released a coordinated three-year plan for future work on digital money, including:

• Continued research into wholesale CBDC applications
• Monitoring of international CBDC developments
• Engagement with industry on digital payment system improvements
• Regular reassessment of retail CBDC case as circumstances change

Payments and Money Movement Relevance

The RBA plays a critical role in overseeing and managing Australia's payment system infrastructure. Key responsibilities include:

Payment System Regulation and Oversight

• Operates the Reserve Bank Information and Transfer System (RITS), which processes high-value interbank payments
• Manages the Real-Time Gross Settlement (RTGS) system for Australian dollars
• Conducts regulatory oversight of payments system operators and participants

Cash Management

• Issues and manages Australian banknotes and coins in circulation
• Maintains the integrity and security of the Australian currency
• Manages the cash distribution network in coordination with commercial banks

Payments Infrastructure Development

• Works to develop and modernize Australia's payments infrastructure
• Coordinates with other financial authorities (ASIC, APRA) on regulatory matters affecting the payments system
• Develops strategic initiatives to improve payments efficiency and resilience

Inflation Targeting Framework

The RBA conducts monetary policy using an inflation-targeting framework, with a target band of 2-3 percent per annum over the medium term. This framework was formally established in 1993 and has provided price stability guidance for monetary policy decision-making.

Official Cash Rate (OCR)

The primary tool of monetary policy is the Official Cash Rate (OCR), which is the interest rate at which the RBA conducts transactions with authorized deposit-taking institutions (ADIs). The OCR is set by the RBA Board at monthly meetings (typically held on the first Tuesday of each month).

Decision-Making Process

• The RBA Board meets monthly to assess economic conditions and set the OCR
• Decisions are informed by economic data, forecasts, and consultations with financial markets and industry
• The Governor announces decisions at 2:30 PM (Sydney time) following each Board meeting
• Official statements and detailed reasoning are published on the RBA website

Employment Objective

In addition to price stability, the RBA has an explicit mandate to support the achievement of full employment in Australia. This objective gained formal statutory recognition through the 2024 amendments to the Reserve Bank Act 1959.

Payment Systems Governed or Overseen

The Reserve Bank of Australia (RBA) operates and/or oversees the national payment and settlement infrastructure of Australia, encompassing both large-value and retail payment systems, securities settlement, and emerging digital payment platforms. As of 2024-2025, the RBA's payment system responsibilities include:

Large-Value Payment Systems

Retail and Batch Payment Systems

Securities and Market Infrastructure

Digital and Mobile Payment Systems (Retail/Emerging)

International Payment Systems (RBA Participation)

Regulatory and Operational Framework

RBA's Responsibilities:

• Direct operation and risk management of RITS and FSS for high-value payments
• Oversight of payment system stability, efficiency, and accessibility
• Setting standards for payment system participants
• Coordination with APRA on prudential regulation of payment providers
• Participation in Council of Financial Regulators (CFR) for coordinated financial system oversight

Decommissioning Timeline:

• BECS: June 2030 decommissioning; NPP designated as receiver system for vast majority of BECS transactions
• Individual BECS transactions: To be settled on gross basis via FSS post-2030

2024-2025 Assessment Status

RITS Compliance (2024 Assessment):

The RBA underwent comprehensive assessment of RITS against Principles for Financial Market Infrastructures (PFMI) in May 2024:

• Observes all PFMI except:
• Principle 2 (Governance) — broadly observed
• Principle 3 (Comprehensive risk management) — partly observed
• Principle 17 (Operational risk) — partly observed

Sources and References

Payment system information sourced from:

• RBA - RITS About Page
• RBA - 2024 RITS Self-Assessment
• RBA - Payments System Board Reports
• RBA - ISO 20022 Migration for Australian Payments System
• RBA Payment System Infrastructure Publications (2024-2025)

Relationship to Other Regulators

The RBA participates actively in international financial policy coordination, including:

Bank for International Settlements (BIS)

• Participates as a member central bank
• Engages in the policy committees and working groups of the BIS
• Contributes to international standards development for payment systems and financial regulation

International Monetary Fund (IMF)

• Participates in Article IV consultation processes
• Contributes to global financial stability assessments
• Engages with IMF research and policy initiatives

Regional Cooperation

• Participates in the ASEAN+3 Macroeconomic Research Office (AMRO)
• Engages with central banks in the Asian and Pacific region on financial stability matters
• Coordinates on regional payment system development initiatives

Financial Stability Board (FSB)

• Participates in the FSB, which coordinates financial regulatory policy across major economies
• Engages in development of international standards for financial regulation
• Contributes to global assessment of systemic risks

Geography and Jurisdiction Notes

Important Departments and Divisions

Key Public Resources

Primary Contact Information

Leadership

Key Department Contact Points

• Monetary Policy Inquiries: RBA Economics Department (published contact via website)
• Payment System Matters: RBA Payments and Infrastructure Department
• CBDC and Digital Currency: RBA Innovation and Infrastructure Team
• Media Inquiries: RBA Media Office (contact details on official website)
• Public Submissions: RBA accepts public consultation submissions on policy matters (submission processes published on website)

Important Resources

• RBA Policy Statements: https://www.rba.gov.au/monetary-policy/
• Financial Stability Review: https://www.rba.gov.au/publications/fsr/
• RBA Board Meetings: https://www.rba.gov.au/monetary-policy/int-rate-decisions/
• CBDC Information: https://www.rba.gov.au/payments-and-infrastructure/central-bank-digital-currency/
• Annual Reports: https://www.rba.gov.au/publications/annual-reports/
• Payment System Regulation: https://www.rba.gov.au/payments-and-infrastructure/
• Reserve Bank Act 1959: Requires verification from official sources https://www.legislation.gov.au/

Notes on Naming and Language