RBA Reports AU$4.2 Billion Loss, Marking Fourth Consecutive Year Of Deficits

The Reserve Bank of Australia (RBA) has reported an accounting loss of AU$4.2 billion for the last financial year, exceeding total losses by AU$51 billion since the onset of COVID-19.

RBA governor Michele Bullock announced the central bank incurred a loss of AU$4.2 billion, during 2023-24, recording its fourth consecutive year of accounting losses.

The bank suffered shortfalls of AU$6 billion in 2022-23, a record AU$36.7 billion in 2021-22, and AU$4.3 billion in 2020-21, The Sydney Morning Herald reported.

As a result, the bank's total accumulated losses have now reached AU$34 billion, all incurred within the past three years, and the negative equity has reached AU$20.4 billion on June 30, according to its annual report.

"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.

Much of RBA's financial troubles stem from its pandemic response, which involved acquiring a portfolio of AU$330 billion in government bonds and other assets at low interest rates to meet the economic challenges during the critical period. However, as the economy recovered, interest rates began to rise in response to inflation and other economic factors.

As a result, the interest the RBA earned on the government bonds it purchased at low rates was lower than what it paid the commercial banks on deposits. This mismatch has led to a financial strain for the RBA.

While Bullock emphasized that the bank's board believed restoring the institution's finances was crucial, she noted that the process might take another decade. The board has communicated to the government its "strong expectation" that future earnings be retained to help offset the losses accumulated in recent years, she stated.

"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," Bullock stated in the 2023-2024 annual report.

The lack of dividends from the RBA has been accounted for in the budget, which is performing better than expected so far this financial year. However, the latest figures by the Finance Department on Friday indicated these improvements were being supported by regular taxpayers.

The central bank has completed a review report on the various measures implemented during the pandemic. Led by former senior public servant Robyn Kruk, along with economist Angela Jackson and infectious diseases expert Professor Catherine Bennett, the report was expected to be released to the public soon.