Economic Essay

The ARAB is Australia’s central bank Its main roles are to conduct monetary policy and oversee the stability of the financial system Controls a country’s money and banking system Set up as a financial business with the desire to make profit and it does not deal with ordinary customers Its primary purpose is the overall management of the financial system in accordance with the economic objectives of the Commonwealth Government Created in 1959 under the Reserve Bank Act 1959 Prior to that, limited central banking operations were conducted by the Commonwealth Bank

Functions of ARAB Conducting monetary policy on behalf of the government: Monetary policy is defined as Reserve Bank action designed to influence the cost and availability of money in the Australian economy through influencing the general level of interest rates Reserve Bank conducts monetary policy with the aim of achieving a sustained low inflation rate while encouraging economic growth System stability: Reserve Banks traditional role of prudential supervision of banks is now the responsibility of the Australian Prudential Regulation Authority (PARA) ARAB retains rotational responsibility for the overall stability of the financial system Provides guidelines to foster the stability of individual financial institutions, and these guidelines are enforced by the PARA ARAB also seeks to maintain long-term financial stability of the financial system by avoiding (or at least reducing the risk of) financial crisis This protects deposits of members of public Control of note issue: Reserve Bank is the sole issuing authority for Australian currency All Australian currency is manufactured by Note Printing Australia, which is a division of the ARAB Volume of notes and coins on issue at any particular time will vary according to the communists demand for funds ARAB seeks to accommodate for different demands for cash at different times during the year Regulation of payments system: ARAB is responsible for the payments system They ensure the efficiency and stability of payment methods such as credit cards, electronic cash, travelers’ cheeses and stored-value cards This function is carried out by the Payments Systems Board within the ARAB Banker to the banks:

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now

Banks hold exchange settlement accounts with the ARAB ARAB HAS Economic Essay By Assignments at the end of each days trading Also used by banks to buy and sell government securities from the ARAB Responsibility for holding Australia’s reserves of gold and foreign currency dealings: Arab’s reserves provide the funds that can be used to make international payments, or for Reserve Bank operations in the foreign exchange market The ARAB also oversees dealers in the foreign exchange market Banker and source of financial and economic advice to governments: The ARAB revised banking and financial agency services to the Commonwealth Government, as well as some state governments Government can lodge excess funds with the ARAB, and obtain funds through the issue of Treasury bills Treasury bills see the ARAB print new money that the government needs ARAB also acts as a financial agent for the government, raising short-term (Treasury notes) and long-term (government bonds) loans, making interest payments on these loans, and buying them back on maturity ARAB acts as a source of financial and economic advise to the government They publish regular assessments of the state of the economy and financial markets Its publications are highly respected and have a significant influence on economic policy-making QUESTIONS 1 . Go to Monetary Policy and About Monetary Policy and define monetary policy and outline its objectives as listed in the ARAB Act (1959). 2. Describe the main objective of monetary policy since 1993. 3. Define the cash rate. 4. Describe what determines the cash rate. 5.

Explain how the ARAB influences the cash rate. 6. Explain the role of Seas in influencing the cash rate. 7. How often does the ARAB engage in Doom’s? 8. Describe how quickly the cash rate affects the structure of all deposit and lending 9. Describe how long it takes for interest rate changes to affect economic activity and inflation levels. 10. Explain the different mechanisms by which interest rate changes affect economic activity. 11 . Locate recent cash rate changes and describe changes in the last 12 months 12. Locate the most recent monetary policy statement by ARAB Governor, Glenn Stevens, and identify and describe factors influencing monetary policy decisions.