RBA deputy governor Michelle Bullock
The Reserve Bank of Australia is unlikely to pay any dividend to the government “for a number of years”, as the bank faces the costs of its pandemic era bond purchase program.
On Wednesday, the RBA released its review of the program, one judged to have “worked broadly as intended, without materially affecting market functioning”.
In terms of the general government balance sheet, “the BPP resulted in government debt being issued at a lower fixed cost than otherwise,” the RBA’s self-assessment said.
“There will be an ongoing, albeit diminishing, saving on debt issued over the next 10 years, as the Bank's holdings gradually mature. The economic stimulus from the BPP also contributed to a budget saving for the government via its positive effect on economic activity and nominal income. In addition, the debt-to-GDP ratio is lower than otherwise as a result of the boost to nominal economic activity.”
Still, the BPP has the amusing – but not unprecedented – effect of playing havoc with the central bank’s balance sheet.
“In 2021/22 the Reserve Bank recorded an accounting loss of A$36.7 billion,” Michele Bullock, the RBA’s deputy governor said in a speech on Wednesday.
“While underlying earnings were $8.2 billion, valuation losses were $44.9 billion.
“This will be recorded as accumulated losses on the bank's balance sheet. This means that the bank has negative equity.”