Reserve Bank of Australia - overall financial system stability Objectives of RBA: stability of Australia's economy (prevention of fall of a financial system that could cause a substantial reduction of economic activity), maintenance of full employment and economic prosperity/welfare of Australians Realistic focus: sustain low inflation Functions of RBA: Stability of economic system - provides guidelines for APRA to foster the financial system's stability Control of currency - controls the amount of currency printed, varying according to community demands Regulation of payments system - ensures stability/efficiency in payment methods (electronic cash, travellers' cheques, stored value cards etc.) conducted by Payments Systems Board Banker to banks - it holds banks' exchange settlement accounts (used to settle debts between banks). It is also a banker in the sense that it is used to buy/sell govt. securities to financial institutions, known as open market operations. Holds reserve of foreign currency/gold - used to make international payments and in the FOREX market Government banker and economic advisor for the government - govt. lodges excess funds and obtains funds (through treasury bills) in RBA and raises short term and long term loans (pays interest on these). The RBA's assessments on the state of the economy influence the government's economic policy. Conducting the Monetary Policy - the monetary policy: when...