The Reserve Bank is facing a sea of red ink that will affect its operation and the federal budget bottom line for years.
COVID-19 has cost the Reserve Bank more than $51 billion, punching another $4.2 billion hole in its bottom line over the past 12 months and in effect preventing it from supporting the federal budget for years to come.
The losses are largely due to the $330 billion of government bonds the RBA bought during the pandemic to keep interest rates on official debt at ultra-low levels. Since then, interest rates have climbed, hitting the bank’s bottom line.“The loss reflects the fact that returns on most of our assets were fixed at the low rates prevailing in 2020 and 2021, but the cost of our liabilities rose with the cash rate target,” Bullock said.
Before the pandemic, the federal government received dividend payments from the bank, which helped improve its budget. In 2020-21, it paid $2.7 billion to the then-Morrison government. “Negative equity does not affect our operations or ability to perform our policy functions, but the Reserve Bank board considers it important that the RBA’s capital be restored over time,” she said.
But figures released by the Finance Department on Friday show these signs of improvement are being carried by ordinary taxpayers.
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