SYDNEY, Oct 23 (Reuters) - Australia’s new conservative government said it will make a one-off A$8.8 billion ($8.5 billion) grant to the Reserve Bank of Australia (RBA) to strengthen its finances, a day after it announced plans to lift the national debt ceiling by more than two thirds.
Treasurer Joe Hockey said on Wednesday the cash injection would enhance the central bank’s capacity to conduct monetary policy and foreign exchange operations.
“The Governor of the Reserve Bank has written to me indicating that the Reserve Bank Board believes that it would be appropriate for the Reserve Bank Reserve Fund to be increased to 15 percent of the bank’s assets at risk,” Hockey wrote in a press statement.
The RBA’s current reserve fund sits at A$1.95 billion, or 3.8 percent of assets, well below the central bank’s comfort zone. The enhanced reserves will equal 11 percent of the RBA’s assets at risk as at Oct 16.
The fall in the value of the reserves, was largely caused by the appreciation of the Australian dollar.
The Aussie surged to an all-time post-float high of $1.1081 in 2011 to last trade at $0.9654.
Earlier this week, the government said it would raise Australia’s debt ceiling by 74 percent to A$500 billion. It currently holds A$287 billion in outstanding debt which represents around 19 percent of the country’s GDP. ($1 = 1.0299 Australian dollars) (Reporting by Cecile Lefort; Editing by Eric Meijer)