Posted on 09/24/2022 1:31:22 PM PDT by EBH
The Reserve Bank’s role in shoring up Australia’s economy during the Covid pandemic has seen it post an accounting loss for the 2021-22 year of almost $37bn, leaving it with negative equity, the bank’s deputy governor, Michele Bullock, has revealed.
At a speech in Sydney on Wednesday, Bullock said accounting methods used by the central bank had to adjust for the reduced value of billions of dollars of government debt the RBA had bought to support economic activity during the lockdowns.
For the 2021-22 year, that left valuation losses of $44.9bn which, after deducting for $8.2bn in underlying earnings, left a net loss of $36.7bn, Bullock said. The bank’s Reserve Fund of accumulated profits could only absorb part of those losses, leaving the RBA with negative equity of $12.4bn, she said.
While private companies in such a predicament “would not be a concern”, Bullock said the government provided a guarantee and the bank itself could also print money to meet its obligations, and “so it is not insolvent”.
“The negative equity position will, therefore, not affect the ability of the Reserve Bank to do its job,” she said.
Even so, it remained important that the RBA returned to a positive equity position “over time”, and there would likely be an impact on the federal budget in the form of a lack of dividends as the bank rebuilt its equity.
(Excerpt) Read more at theguardian.com ...
they can just print the money
What they need is more lockdowns....
We lose waaaaay more zeroes than that. :-(
Is this the same bank that won’t give loans on gas vehicles???
Bingo!
The USA Federal Reserve Bank owns something like $9 trillion of corporate and other bonds.
Next up will be the FED marking those bonds to market and reporting huge losses.
Biden Economics.
Without the Directors salaries, expenses, bonuses, perks, etc., the loss was only 250 dollars.
Wonder if an audit showed money missing and they found a note on a desk gaday mates
Re: "The bank ended up buying up $281bn of federal, state and territory debt between November 2020 and February 2022."
In theory, the cash value of Australian government bonds should be at least 100% of the face value of the bonds - because the Australia Central Bank can print more money and buy (or issue) more bonds.
The only thing I can guess at here is that the public retail bond market values the Australian bonds at less than 100%, and the Central Bank is required to value their bonds at market prices.
Interesting post - but I do not completely understand what is happening.
It sounds like they were buying bonds to prevent the market from functioning and increasing the interest rate from 0% (or near enough), to give the government “free” money to spend.
Now with higher interest rates they have a big capital loss if the bonds are priced normally.
I don’t know what the real effect is. I guess that if they just don’t sell the bonds and wait to get paid then it will net out for the bank, but since the government is the borrower they’ll probably try to pay off the principal with new bonds and will have to raise a lot more than the value of the original bonds, so the loss will be transferred from the bank to the government debt anyway.
They have to keep raising interest rates to try to keep up with the Fed. If they continued to print money to suppress interest rates then their currency would collapse even faster (it’s already down 40% over the last decade and over 10% in the last year).
Thanks - interest rates do explain it.
I was thinking that the Central Bank would hold everything to maturity, which does not make sense.
the bank is in negative numbers...broke...
so they’ll just print more money, because they can
RBA is basically devalued to the point of bankruptcy, but unlike a regular bank can print MORE MONEY.
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