In 1911, legislation established the Commonwealth Bank of Australia. In 1959, this original body corporate was preserved as the Reserve Bank of Australia (RBA) in legislation, specifically to carry on the central banking functions; at that same time, the commercial and savings banking functions were transferred into a new institution, which carried on the old name of Commonwealth Bank of Australia.
The Reserve Bank Act 1959 preserved the original corporate body, under the new name of the Reserve Bank of Australia, to carry on the central banking functions of the Commonwealth Bank, which had evolved over time; other legislation separated the commercial banking and savings banking activities into the newly created Commonwealth Banking Corporation. The Reserve Bank Act 1959 took effect from 14 January 1960. The Reserve Bank Board’s obligations with respect to the formulation and implementation of monetary policy are laid out in the Reserve Bank Act.
Section 10(2) of the Act, which is often referred to as the Bank’s ‘charter’, says:
It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank … are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:
- The stability of the currency of Australia
- The maintenance of full employment in Australia
- The economic prosperity and welfare of the people of Australia
The Reserve Bank of Australia’s (RBA) main responsibility is Monetary Policy decisions are made by the Reserve Bank Board, with the objective of achieving low and stable inflation over the medium term. Other major roles are maintaining financial system stability and promoting the safety and efficiency of the payments system. The Bank is an active participant in financial markets, manages Australia’s foreign reserves, issues Australian currency notes and serves as banker to the Australian Government.