The Reserve Bank of Australia (RBA) was established 14 January 1960 as Australia’s central bank. Under the legislation, the Reserve Bank Act 1959, the RBA has various responsibilities and aims it strives to achieve. In this summary, the function, aims and instruments of the RBA will discussed. In the end of the summary there will be a concluding statement on how suitable a central bank of this style would be for a developing country.
There are three main objectives the Reserve Bank of Australia aims to maintain through its function. These are maintaining full employment, stability of the currency, and the welfare and economic prosperity of the people of Australia. Through creation of economic incentive, the RBA keeps the Australian economy stable and prevent ‘overheating’. This means preventing inflation, when there is overproduce and excess production capacity. Inflation was also the main cause of the Great Depression in the early 20th century. Other than these objectives, the Reserve bank also functions to ensure the production of the following:
• provide special banking services to foreign official institutions and to government, such as payments, collections, general account maintenance and reporting
• the production and design of Australia's banknotes, as well as handling the issues to …show more content…
These includes asset price channels, interest rate channels and credit price channels. One common tool used by the RBA is called the open market operations. This tool is commonly known as setting the interest rate, used to target the cash rate on exchange settlement accounts. It can also be used to manipulate the value of the Australian dollar through buying and selling currencies on the foreign exchange market. These channels and tools initially determine how the RBA reaches its
There are three main objectives the Reserve Bank of Australia aims to maintain through its function. These are maintaining full employment, stability of the currency, and the welfare and economic prosperity of the people of Australia. Through creation of economic incentive, the RBA keeps the Australian economy stable and prevent ‘overheating’. This means preventing inflation, when there is overproduce and excess production capacity. Inflation was also the main cause of the Great Depression in the early 20th century. Other than these objectives, the Reserve bank also functions to ensure the production of the following:
• provide special banking services to foreign official institutions and to government, such as payments, collections, general account maintenance and reporting
• the production and design of Australia's banknotes, as well as handling the issues to …show more content…
These includes asset price channels, interest rate channels and credit price channels. One common tool used by the RBA is called the open market operations. This tool is commonly known as setting the interest rate, used to target the cash rate on exchange settlement accounts. It can also be used to manipulate the value of the Australian dollar through buying and selling currencies on the foreign exchange market. These channels and tools initially determine how the RBA reaches its