The dwindling RBA reserve

The dwindling RBA reserve

My fellow guest on Your Money Your Call, Christopher Joye, shot an email around that I thought you might be interested in…

While his article discusses the impact of a 5% devaluation of FX and gold reserves, history shows that a 5% positive revaluation is also a possibility that cannot be ruled out.

Nevertheless, the column does quite rightly raise awareness of the issue and queries how the RBA got to this point.

“In the Financial Review Jacob Greber and I have an exclusive news story revealing that a Coalition government would inject up to $4 billion of emergency cash into the RBA’s capital base to ensure it does not fall into reputationally damaging ‘negative equity’ (where its liabilities are worth more than its assets). A 5% decline in the value of the RBA’s FX and gold reserves would wipe out its capital buffer.

‘I am not aware of the government having to put any capital into the RBA since the early days of it being established,’ said the RBA’s official historian, Selwyn Cornish.”

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Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

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