House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer,the Hon Peter Costello, MP)

10 - Schedule 7 Amendment of the reserve bank Act 1959

Item 1

10.1 This amendment will correct a grammatical error in the Reserve Bank Act 1959 (Reserve Bank Act) .

Items 2-4, 6-7, 9-11, 14-18

10.2 Currently, the Governor-General is responsible for appointing, terminating the appointment of, and receiving resignations from, members of the Reserve Bank and Payments System Boards. These roles are normally undertaken on the basis of advice from the Treasurer, and, in the case of appointments, following a decision by Cabinet.

10.3 This amendment passes these responsibilities to the Treasurer, and streamlines the process of appointing and terminating members of the Reserve Bank and Payments System Boards. Resignations would also be addressed to the Treasurer under the new provision.

Item 5

10.4 Currently, for Reserve Bank Board members excluding the Governor, Deputy Governor, and Secretary to the Treasury, there are several grounds for the termination of their appointment. Current drafting of Section 18 of the Reserve Bank Act makes it unclear if only one, or all of the grounds need to be met for the termination of a Board members appointment.

10.5 The proposed amendment will make it explicit that only one of these termination conditions need to be met for the termination of the appointment of a member from the Reserve Bank Board.

Item 8

10.6 Under Section 22 of the Reserve Bank Act, if the Secretary to the Treasury is unable to attend a meeting of the Reserve Bank Board, the Secretary may nominate, in writing, for a Deputy Secretary to attend.

10.7 Following the restructuring of the Treasury, there is no longer a position entitled Deputy Secretary. The proposed amendment allows the Secretary to nominate in writing an appropriate senior Treasury employee to attend a Reserve Bank Board meeting as their replacement.

Items 12 and 13

10.8 Currently, for the Governor and Deputy Governor of the Reserve Bank, there are several grounds for the termination of their appointment. Current drafting of the Reserve Bank Act makes it unclear if only one or all of the grounds need to be met for the termination of the appointment of the Governor or Deputy Governor.

10.9 The proposed amendments will make it explicit that only one of these termination conditions need to be met for the termination of the appointment of the Governor or Deputy Governor.

Item 19

10.10 Section 70 of the Reserve Bank Act requires the Bank to maintain a superannuation fund for its staff, and to consult the Minister for Finance and Administration regarding the operation of the fund. It is proposed that the section be repealed.

10.11 The Reserve Bank will no longer be required under the provisions of the Reserve Bank Act to provide a superannuation fund for staff. The existing fund will continue to operate, but with reduced administrative complexity in not needing to consult with the Minister of Finance on changes to the funds rules.

Item 20

10.12 Section 74(2) of the Reserve Bank Act requires that the head office of the Reserve Bank not be in the same building as the head office of any authorised deposit-taking institution (ADI). This provision is anachronistic and unnecessarily restricts the ability of the Reserve Bank, in the event of an unexpected occurrence, to find alternative short-term accommodation.

10.13 The proposed amendment would not restrict the head office of the Reserve Bank from sharing a building with the head office of an ADI.

Item 21

10.14 The proposed amendments to the clauses relating to the appointment and resignation of members of the Reserve Bank Board will only apply to appointments and resignations made after the commencement of the proposed Schedule.

Commencement

10.15 These amendments will commence the day after the day on which this Act receives the Royal Assent.