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April 11th, 2013 
TREASURER Wayne Swan rejected the central bank’s repeated requests to not pay the federal government an annual dividend this financial year.
The Reserve Bank of Australia (RBA) generated a $1.1 billion profit in 2011/12, mainly from interest income.
It wanted to transfer all the money to its Reserve Bank Reserve Fund (RBRF) after the fund lost value because of the high Australian dollar.
But, on Mr Swan’s insistence, it ended up paying the government a dividend of $500 million, received this year, according to documents released by the RBA under freedom of information laws.
The discussions about the dividend began in March 2012, when Treasury manager Nick Creagh wrote to RBA assistant governor corporate services Frank Campbell.
Mr Campbell replied by saying the RBA board was seeking to pay no dividend from its 2011/12 earnings and that the treasurer had “agreed in principle with this approach”.
The request was repeated in July when governor Glenn Stevens wrote to Mr Swan saying the fund had been “largely depleted”.
But in August Mr Swan wrote back, saying a dividend of $500 million was appropriate, although he allowed the bank to retain the remainder for its fund.
In February this year, Mr Stevens was questioned about the payment when he appeared before a federal parliamentary committee.
Mr Stevens said while he would have preferred to keep all the profits, the decision was Mr Swan’s.
“We can only keep what he has agreed to,” he told MPs.
“In the current situation he was quite amenable to us keeping more than half of the earnings available for the year, but he wished to take the 500 (million dollar) dividend.”
A spokeswoman for Mr Swan said on Thursday the government took steps in the last budget to ensure the fund was “appropriately capitalised” and had allowed the RBA to retain more than half its earnings.
“It is not the government’s intention to take a dividend from the Reserve Bank of Australia this year,” she said.
But shadow treasurer Joe Hockey said the copies of the correspondence between the RBA, Treasury and Mr Swan showed the cash-strapped treasurer had put “political survival ahead of the national interest”.
“Insisting on the payment was an attempt of the government to ‘cook the budget books’ in order to achieve their … surplus, a promise that they have since dumped,” Mr Hockey said in a statement.
“In raiding one of Australia’s most important and trusted institutions, Wayne Swan has compromised both the integrity and the functioning of the Reserve Bank.”
A February 2013 letter from Mr Campbell to Mr Creagh includes projected RBA profits for the coming four years, ranging from $863 million for this financial year to $1 billion in 2015/16.
The fund’s balance remains below the RBA’s for a level equal to 10 per cent of assets at risk.
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