Australia doomed: debt ceiling raised $200b, central bank given $8.8b

The Federal Government has given the Reserve Bank of Australia a $8.8 billion one-off grant to help it manage future economic crises.

The money will be added to a fund used to offset the central bank’s exposure to risky financial assets.

Federal Treasurer Joe Hockey says Australia’s economy continues to grow, but financial instability in the United States presents serious risks for global growth.

He says there is a looming threat of another debt-ceiling stand off in the United States.

“[The] United States has not resolved its structural issues,” he said.

“They’ve kicked the can along the road, closer to the mid-term elections. I don’t see a way forward out of that.

“And we’re not going to allow Australia to become in anyway as vulnerable as the United States and other jurisdictions may be over the month and year ahead.”

RBA Governor Glenn Stevens ‘requested payment’

Mr Hockey says RBA governor Glenn Stevens wrote to him after September’s federal election to request the payment.

“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 per cent of the bank’s assets at risk,” he said in a statement.

“Accordingly, the Government injection of $8.8 billion into the Reserve Bank Reserve Fund to meet the 15 per cent target will ensure that the bank is properly resourced.”

The Treasurer says the balance of the fund has been depleted by the high value of the Australian dollar over recent years.

Federal Treasurer Joe Hockey

Australian Federal Treasurer Joe Hockey

But Opposition treasury spokesman Chris Bowen says the former Labor government never received a request for such a grant.

He says Mr Hockey must detail the exact nature of Mr Stevens’s request.

“To casually issue a media release for the expenditure of $8.8 billion with the associated impact on the underlying cash balance in 2013-14 is simply not good enough,” Mr Bowen said in a statement.

“By making this grant, Treasurer Hockey has added nearly $9 billion to the deficit.

“To create the perception that the RBA urgently needs $8.8 billion could in fact undermine confidence in the Australian economy.

“The Treasurer must immediately detail: the exact advice from the Reserve Bank of Australia, whether a specific request for the funds was made, how it was initiated, and any related advice from Treasury.”

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Payment follows increase in debt limit

The payment comes a day after Mr Hockey announced plans to raise the Commonwealth’s debt limit by $200 billion dollars and a six-month audit into Government finances.

The debt increase will take Australia’s borrowing limit to $500 billion.

Mr Hockey says the increase is necessary to avoid the kind of debt crisis seen in the United States in the past few months.

He says the latest Treasury show Australia’s debt could peak at above $400 billion.

Australian dollar vs US dollar since 1984

Australian dollar vs US dollar since 1984

RBA ‘fully equipped’ for challenges ahead

Mr Hockey says the payment to the RBA will its capacity to conduct monetary policy and foreign exchange operations, while ensuring it is “fully equipped for whatever challenges lie ahead”.

“Australia’s financial system relies on the financial strength of the Reserve Bank and the credibility of its monetary policy and foreign exchange operations,” he said.

“This injection of funds puts beyond any doubt the Reserve Bank’s continued ability to perform its core monetary policy and foreign exchange functions, in an environment of heightened financial market volatility.”

The move comes amid warnings from the RBA about the destabilising affects of the persistently high Australian dollar.

During a speech in Sydney last week, Mr Stevens said the RBA was limited in its capacity to lower the value of the local currency.

The dollar hit a new five-month high of 97.03 US cents today as the US dollar declined, but later fell slightly. It was buying 96.5 US cents around 3.30pm AEST.

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  1. “Wake up people”. Pft… Have you tried talking to an average “aussie” lately about these points. 99% of people have no idea and dont want know. Spout anything bout our economy and you’ll hear “its fine, look how strong our dollar is”.
    Aussie’s in general, are lazy fat sheeple. Just like our brothers and sisters in the USA. Atleast USA are smart enough to hold onto their guns. All it took was one false flag shooting in tasmania long ago and we gave our libertys away. We are going down the same path. Think it wont happen here. Ha. The gun’s are long gone but the banks bail-out scheme is in affect and just waiting to collapse the economy.
    Keep an eye on New Zealand also. The biggest banks will be the ones to watch.
    The US dollar collapse is gonna cause a world wide butterfly effect. Stocks, currency value, interest on loans, mortgage repayments etc. The Federal bank has been planning this for ages. Aussies will only care when its on our TV, telling us when its too late.

    • I agree, Project Mayhem….the Aussie ‘she’ll be right’ mindset will be our downfall, historically
      we have not felt threatened, everything appears to happen over there, elsewhere, we are not
      ready for this……I love our Aussie laid back attitude to life, sady it does not fit into the context
      of this world of hidden agendas!

  2. WHY are we funding a PRIVATELY owned bank/corporation with PUBLIC funds…this is absolute criminal insanity!!!

    WAKE UP PROPLE, please, take action before its too late, you owe it to your family, children and grandchildren…they will have NO FUTURE if we do not RISE UP and make out voices heard!!!

    It’s time for FULL transparency of government and the reminder that they WORK for US!!

  3. Australia joins its western partners in mutually acquired self destruction…..we’re screwed!

  4. This alone is the answer to the definition of insanity that is my abolute favorite, to do the same over and over again in hope of a different result, manly done by morons that neither is capable of simple mathemathic skils, and a long time ago lost every grain and sence of logic, to sutch an extent that bugs would have been ashamed.

    And, like the BRICS, witch have just steadily kooked the books, ignored reality, made up a financial fairytale, a grand saga of dilerium tremdes, to hide the simple facts. They stil accumulate debth, and as long the moronic monetary policy is upheld, God help the people in this lands. What they should have done is something totaly different, Annihiliate the to bigg to fail, and the problem is gone, and the owners whom slept on their own f… watch is whining, dont help, they/goverment will never cover My gambling debth, will they.
    Why should we.

    To soscialise private made debth.
    To induce an atrificiale stimuli, is the real problem, the Bailots and the following bill, for it, the Austerety messurments, the robbing of peoples value/money.
    This is no where even remotely near anything conected with Capitalism, this plain f… thefth of OUR money, handeled to people that have already shown their lack of trust, when the f…. up their own economy/corps, and now wants Mama to pay the Bill.
    Do the f… math and this stupidity and ignorance is the shurest road to hell, humanity have invented, it works every f… time.

    The Ausis have just one thing to do, apart from putting the beercan down, is to be pissed and tell them the truth, and never, ever forgett the simplest test ever inevted to be convinced on, that if You live in a so caled demoCrasy, is Your rights to say No.


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