Key Highlights

•  The RBA recorded an accounting loss of $8.5 billion in 2025/26, against an $11.0 billion profit a year earlier, and net equity fell to negative $11.3 billion at 30 June 2026.

•  Unrealised valuation losses of $9.9 billion, linked to rising domestic bond yields and a higher Australian dollar, were the main driver, alongside underlying earnings of negative $1.7 billion.

•  The RBA's Governance Board says negative equity does not affect its ability to perform its functions, and the cash rate is not set to repair the bank's accounts.

The Reserve Bank of Australia's 2025/26 Annual Report, published on 15 October 2026, matters because it shows the central bank's own balance sheet absorbing part of the cost of the inflation fight. The RBA recorded an accounting loss of $8.5 billion, against an $11.0 billion profit a year earlier, and its net equity fell to negative $11.3 billion at 30 June 2026. The RBA says this does not affect its ability to operate, but it changes how the bank's finances should be understood by taxpayers.

Where the loss came from

According to the report, underlying earnings were negative $1.7 billion. The RBA pays interest on Exchange Settlement balances at a rate linked to the cash rate target, while most domestic assets it bought during the pandemic earn low fixed returns. That mismatch has produced net interest expenses since 2022, although the report says the shortfall improved as pandemic-era assets matured.

The larger swing came from valuation movements. Unrealised valuation losses totalled $9.9 billion, which the RBA attributes to rising domestic bond yields and a higher Australian dollar. These were partly offset by realised valuation gains of $3.1 billion, including from foreign exchange swaps and maturing domestic bonds. Gold valuation gains bypass the profit result and go directly to a revaluation reserve.

What happened to the money

Unrealised losses were absorbed by the unrealised profits reserve. That left $1.4 billion, drawn from underlying earnings and realised gains, which the Treasurer determined should be applied to reducing accumulated losses. The Reserve Bank Reserve Fund stood at nil at 30 June 2026, and accumulated losses of $33.3 billion were beyond what it could absorb. Net equity had been negative $5.3 billion at 30 June 2025.

The RBA's view

The RBA's Governance Board takes the view that negative equity does not affect the bank's capacity to perform its functions. The Treasurer has also endorsed rebuilding capital over time by retaining future profits, though the report notes retention remains at the Treasurer's discretion. It says a return to the Reserve Bank Reserve Fund target probably remains more than a decade away.

The foreword, signed by Governor Michele Bullock on 10 September 2026, says the Monetary Policy Board raised the cash rate target three times in the first half of 2026. It also expects underlying earnings to reverse over coming years.

Uncertainties and limits

The result depends heavily on bond yields and the exchange rate, which move daily. The expectation that negative equity will shrink over the next few years is based on market expectations at 30 June 2026, and could change if those markets move differently. We reviewed the earnings section and foreword, not every part of the report.

What to watch next

The Monetary Policy Board meets on 2 and 3 November 2026. The Monetary Policy Decision Statement and Statement on Monetary Policy are due at 2.30 pm AEDT on 3 November, with a media conference at 3.30 pm. Rate decisions are made on inflation and employment grounds, not to repair the bank's accounts.