Which of these is not a function of the Reserve Bank of Australia?

Question

BlackTom AI · Accepted Answer

To understand which item does not describe a function of the Reserve Bank of Australia (RBA), we need to recall the core roles of the RBA in Australia’s monetary and financial system.
Option a: 'control over Australia’s reserves of foreign currency' – The RBA does maintain and manage the country’s international reserves, and this is a recognized function aimed at ensuring external stability and supporting monetary policy. This option aligns with the RBA’s responsibilities, so it is consistent with what the central bank does.
Option b: 'supervision of banks’ cash reserves' – This statement is not accurate. While the RBA interacts with banks and provides services such as clearing and settlement, the specific function of supervising banks’ cash reserves falls outside the RBA’s remit. Bank supervision typically falls under prudential regulators (in Australia, APRA handles prudential regulation and supervisor roles). Treating bank reserve supervision as a primary function of the RBA would misstate the institutional structure, making this option incorrect.
Option c: 'act as banker to the banks' – This is a classic central banking role. The RBA acts as the lender of last resort and provides banking services to the banking system, including settlement and liquidity support. This option describes a genuine function of the RBA.
Option d: 'act as financial agent to the Federal Government' – The RBA performs this role by handling government debt management, issuance, and related financial operations for the government. This is indeed a function of the RBA.
In summary, each option is evaluated against the known duties of the RBA: foreign reserves management (true), supervision of banks’ cash reserves (not a standard RBA function, thus incorrect), acting as banker to banks (true), and acting as financial agent to the government (true). The statement that does not fit the RBA’s functions is the one about supervising banks’ cash reserves, which is handled by other regulators rather than the central bank.

Dashboard Term 2 Assessable Quiz 4 - Money, Banking & Monetary Policy

Which of these is not a function of the Reserve Bank of Australia?

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