Quick answer: The Reserve Bank posted an $11.3 billion loss for 2025-26 — its second-largest ever — driven by an $8.5 billion paper loss on the government bonds it bought during COVID. The bank is not broke and can still do its job, and the loss does not directly change your mortgage or savings rate. But it means no RBA dividend for the federal budget for years, and all eyes are now on the 3 November interest rate decision.
The news broke when the bank’s annual report landed in mid-October: a loss of $11.3 billion, after an $11 billion profit the year before. For a bank that sets the country’s interest rates, that sounds alarming. Here is what actually happened, why it happened, and what it means for your money — in plain English.
What the Reserve Bank reported
The headline numbers from the 2025-26 annual report:
- $11.3 billion overall loss — the bank’s second-largest loss on record.
- $8.5 billion accounting loss — the paper loss on its bond holdings, which caused most of the damage.
- Negative equity of about $11.3 billion — on paper, the bank now owes more than it owns, worse than last year’s negative $5.3 billion.
- Partly offset by gold — gains on the bank’s gold holdings softened the blow.
The timing added fuel to the story: the report came out as unemployment hit 4.7%, a five-year high, and Governor Michele Bullock’s reported $1.2 million pay package drew attention while households are doing it tough.
Why did the Reserve Bank lose $8.5 billion?
Three things went against the bank at once. None of them is complicated once you strip out the jargon.
1. The COVID bond-buying program backfired on paper. During the pandemic, the RBA bought huge amounts of government bonds at high prices — back when interest rates were near zero — to keep borrowing costs down and support the economy. When global interest rates rose, the market value of those bonds fell. The bank plans to hold the bonds until they mature, so this is an unrealised “paper” loss. It only becomes real if the bonds are sold early.
2. The stronger Australian dollar shrank its foreign holdings. When the Aussie dollar rises, the bank’s foreign currency assets are worth fewer Australian dollars. That added to the valuation hit.
3. It pays out more than it earns. The RBA pays interest on the money commercial banks park with it, at roughly the cash rate — now 4.60%. But the bonds it bought during COVID pay low fixed returns. So every year, its interest costs exceed what its old assets earn. That gap is the steady part of the loss.
So is the Reserve Bank broke?
No — and this is the part most coverage skips. A central bank cannot go broke the way a normal business can, because it creates the currency. Negative equity is an accounting position, not a cash crisis.
The bank itself said as much. Assistant Governor Christopher Kent said the accounting loss would not hurt the bank’s operations, and the Governance Board confirmed negative equity will not stop the RBA from doing its job. The plan is to rebuild capital gradually out of future profits — retained earnings, year after year — rather than anyone writing a cheque.
What the loss does not do: it does not stop the bank setting interest rates, printing banknotes, or supervising the financial system. None of that depends on showing a profit.
What does it mean for your mortgage?
Directly: nothing. The loss does not set interest rates — the Monetary Policy Board does, based on inflation, jobs and growth. Your home loan rate moves with the cash rate, which currently sits at 4.60% after a quarter-point rise on 30 September.
What actually matters for borrowers right now is the 3 November rate decision. Two things are pulling in opposite directions:
- Unemployment is at 4.7% and 39,300 jobs disappeared in September — which cooled market bets on another hike to around 10-15%.
- Inflation is still running above the bank’s comfort zone, and the bank has said it will raise rates again if needed.
The September-quarter inflation figures, released on 28 October, will likely decide it. If you have a variable-rate loan, the practical move is the boring one: check what rate you are actually paying and whether your lender’s variable rate still competes — a lot of borrowers are paying more than the advertised rates they see.
What does it mean for your savings?
Again, no direct link. Savings account and term deposit rates loosely follow the cash rate, not the RBA’s profit and loss statement. If rates stay at 4.60% or rise again, deposit rates tend to stay elevated too — good for savers, though banks are often slower to lift deposit rates than loan rates.
Worth knowing: money in the bank is unaffected by any of this. The RBA’s loss has nothing to do with the safety of deposits, and balances up to $250,000 per institution remain covered by the government’s guarantee scheme.
What does it mean for taxpayers?
This is where the loss lands most directly. In good years, the RBA pays a dividend to the federal government — free money for the budget. With an $11.3 billion loss and negative equity, there will be no dividend for years while the bank rebuilds its capital from retained earnings.
Nobody sends the RBA a bill for the loss, and no new tax pays for it. It is absorbed on the bank’s balance sheet. But the missing dividends are a quiet, ongoing cost to the federal budget — one reason the loss matters beyond the headlines.
What happens next
Three dates to watch:
- 28 October — September-quarter inflation figures. A hot number keeps a rate rise on the table; a soft one likely locks in a hold.
- 3 November — the RBA’s next interest rate decision, announced after the board meets on 2-3 November.
- 8 December — the final rate decision of 2026.
And over the longer term, the bank’s bonds will gradually mature and roll off its balance sheet, which is how the losses stop and profits eventually return. That will take years, not months.
Frequently asked questions
Can a central bank go bankrupt?
No. Unlike a company, a central bank issues the currency its debts are denominated in, so it can always meet its obligations. Negative equity is uncomfortable for its accountants, not a threat to its survival.
Who pays for the RBA’s $8.5 billion loss?
Nobody directly. The loss sits on the bank’s balance sheet. The real cost falls on the federal budget in the form of dividends the bank will not pay for years while it rebuilds its capital.
Will the loss push my mortgage rate up?
Not by itself. Mortgage rates follow the cash rate, which the board sets based on inflation and the economy — not on the bank’s own finances. The 3 November decision and the 28 October inflation data are what matter for your repayments.
Should I fix my home loan or savings now?
This article is general information, not personal advice. But as a rule of thumb: if a November hold looks likely and you are on a competitive variable rate, there is no urgency; if you value certainty over gambling on rate moves, comparing fixed-rate offers costs nothing. A mortgage broker or financial adviser can run the numbers for your situation.
When will the Reserve Bank be profitable again?
There is no timetable. As the low-yielding COVID-era bonds mature and the balance sheet shrinks, the yearly drag fades — but rebuilding $11.3 billion of negative equity out of retained earnings is a multi-year job.
