Many people are aware of the Reserve Bank’s role in setting monetary policy, and in particular
in the cash rate target announcements that occur every month. What many people aren’t
aware of, however, is the Bank also provides banking services; it is in actual fact a bank.
The Bank’s principles customers are other central banks, overseas international organisations
such as the Organisation for Economic Cooperation and Development. But our most important banking
customer is in fact the Australian government and the various agencies and departments of
the government. At a very high level there are two parts to our banking services,
our core banking service and our transactional banking service.
Core banking service is a service that’s very similar to what we would find if we looked
at many other central banks around the world. It is essentially a service whereby the Reserve
Bank maintains the government’s core set of accounts, this is around half a dozen accounts
that the government holds, through which almost all of its payments and receipts flow. Money
is moved into, and out of, the core bank accounts on a daily basis and on average each day around
three billion flows out and roughly the same amount moves back in again.
It’s very important for the government to ensure that the payments that it makes go
out on time and that the money that it’s expecting to receive comes in on time as well.
It’s important for those systems to ensure that the movement of funds is just on time,
the systems themselves are sophisticated enough to ensure that the government doesn’t have
idle balances sitting around and that its payments are made just when the government
intends to make them. Transactional banking services is more the
kinds of service that you would see in a commercial bank whereby various customers hold accounts
and the Bank will facilitate movements in and out of those accounts. So the Reserve
Bank provides accounts for various government departments and agencies and will facilitate
the process of moving funds in and out of those accounts. The transactional banking
service is unique compared to the core banking service
in that we are required to compete with the commercial banks to provide that service.
On an annual basis there are around 350 million transactions through our transactional banking service
with a total value, over the course of the year, of just under a trillion dollars.
The kinds of payments and transactions that occur through the transactional banking services
are the ones that many people in the public would probably be aware of. They include pension
payments, social security benefits, child support transactions. They go through the
Reserve Bank’s banking service, and also emergency payments, so in times of natural
disasters for example, when the government is keen to ensure that victims of natural disasters
have access to funds in order for them to purchase food and other items,
emergency payments will flow through the Reserve Bank’s transactional banking system.