Dow Jones Newswires: RBA suffers huge accounting losses from bond-buying program

by | Sep 20, 2022 | Stock Market

SYDNEY — The Reserve Bank of Australia has suffered huge accounting losses as a result of the government bond-buying program it undertook through the pandemic, leaving it temporarily in a position of negative equity. RBA Deputy Gov. Michele Bullock said in a speech Wednesday that in the year to June 30, the central bank recorded an accounting loss of 36.7 billion Australian dollars (US$24.55 billion). Underlying earnings were A$8.2 billion, but valuation losses were A$44.9 billion, she added.

After full accounting, the net equity position stands at A$12.4 billion, Bullock said. The RBA introduced bond buying in November 2020 as part of a second package of monetary-policy measures in response to the pandemic. It was a complement to other measures such as a three-year yield target when the official cash rate had fallen to a record low of 0.10%. All up, the RBA bought A$281 billion of Australian, state and territory government bonds. “If any commercial entity had negative equity, assets would be insufficient to meet liabilities and therefore the company would not be a going concern. But central banks aren’t like commercial entities,” Bullock said. The federal government provides a guarantee against the RBA’s liabilit …

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