The Reserve Bank is paying a $500 million dividend to the government this year after paying nothing last year. At face value, the $500 million is a decent contribution towards the government's efforts to lock in a surplus for 2012-13, but the truth is that the dividend is peanuts compared to the payments the RBA used to pay to the government. It is yet another unfortunate revenue shortfall that the Gillard government has to confront as it works hard to move the budget towards surplus.
At a time when tax revenue is vulnerable to the downside as the terms of trade fall away, the government would have been delighted to have the bank paying a lot more. But it was not to be.
This year’s Reserve Bank $500 million dividend is about 0.14 per cent of the budget-time estimate of total revenue for 2012-13. After nothing last year and a payment that was 0.25 per cent of revenue in 2010-11, the average RBA dividend over the past three years has averaged just 0.13 per cent of total government revenue.
When Peter Costello was Treasurer in the Howard government, the average annual RBA dividend to the government coffers was 0.97 per cent of total government revenue. In 2012-13 dollar terms, that equates to a dividend of around $3.6 billion, more than seven times the dividend being paid this year. In 1998-99 and 1999-2000, the RBA dividend was 1.8 per cent of total revenue which in 2012-13 dollars is a stonking $6.7 billion.
The RBA notes that the reasons for the current run of very low dividends are the current phase of extremely low interest rates and the sustained strength of the Australian dollar.