Hon Nicola Willis
Minister of Finance

The Government and the Reserve Bank board have agreed a funding agreement that will reduce budgeted operating expenses for the bank by about 25 per cent in the coming year.

“The new five-year agreement reflects the need for all government entities to identify cost savings and demonstrate value for money, Finance Minister Nicola Willis says.

“The bank initially sought funding of $1.03 billion for the coming five years, but the Treasury advised me that that amount did not represent good value for money.

“The new agreement allocates the bank operating expenses of $750 million and capital expenditure of $25.6 million for the period.

“That equates to average operating expenditure of $150 million a year, 25 per cent less than the bank’s $200 million operating expenses budget for the current financial year.

“The Reserve Bank has grown hugely in recent years. Fulltime equivalent staff numbers increased from 255 in the 2017/18 year to 660 in January this year.

“Benchmarking analysis performed by the Treasury shows that several of the Reserve Bank’s non-legislative functions, particularly in the People and Communications teams, appear overstaffed.

“The new agreement will ensure that the Reserve Bank has adequate resources to fulfil its legal responsibilities while promoting heightened cost efficiency.

“Both the board of the Reserve Bank and the Treasury are of the view the new expenditure limits are appropriate.”

Unlike most other agencies, which are funded annually through the Budget process, the Reserve Bank’s board negotiates five-year funding agreements with the Minister of Finance, who receives advice from the Treasury. The structure of these agreements is to support the Reserve Bank to maintain its independence from the government of the day.

The new agreement will apply from 1 July 2025.

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