The Reserve Bank of Australia has confirmed it will not be keeping any cash on hand as it considers what to do with the $2.4 billion it has been doling out since the September 1, 2017, cash crunch.
Key points:The Reserve Bank says it will keep some cash on offer as it looks at what to keep and give to its customersThe bank has already raised some $6 billion to meet the cash crunchIt is a decision that could potentially cost the banking industry up to $1 billion over the next two yearsThe Reserve said it would keep some of the money on offer and would also give a total of $6.3 billion to its clients.
The cash is not being used to buy shares or borrow from banks.
It is being spent on a wide range of activities including buying loans, buying cash and buying the bank’s books.
It has already put $1.3bn into its cash reserves, and more than $600m into its “banking” reserve, which was set aside to provide support to its banking operations, including the $500 million it has already spent on its balance sheet.
The Reserve has been looking at what it should do with its cash, and it has raised a total $6 million in reserves to buy loans and buy its books.
“We’ve got a fairly robust reserve base, and the money is there,” Reserve Bank Governor Glenn Stevens told reporters in Canberra on Thursday.
“So I would say that is not a situation where we’re saying ‘We’re not going to keep this money’.”
“We’re saying that we’ll look at what we can do with it to meet our needs.”RBA chief economist Mike Quigley said there were still a number of things that needed to be considered.
“The Reserve’s balance sheet is quite substantial,” he said.
“I think it’s fair to say that that balance sheet was not very strong before the [cash] crunch.”
There are a number things that need to be done to get a good picture of what the Reserve’s cash is doing, and how much it’s spending and what the rate of growth of that is.
“And then it’s also important to look at the long-term growth potential of the Reserve Bank’s cash.”RBC has about $5.5 billion in cash on its books, and Quigleys statement said the bank was continuing to raise money from the public to meet its cash needs.
“While there is a lot of money on the books, it’s not going away,” he told reporters.
“Cash is still very important to our customers.”
Cash is not used to pay dividends and to pay staff and the bank has also raised some cash from the Commonwealth.
Mr Quigles statement said a “further review of the cash base will be undertaken as soon as practicable”.