Treasurer Joe Hockey will increase this year's Budget deficit by almost $9 billion in a bid to protect the Reserve Bank.
Mr Hockey, fresh from announcing plans to increase the Commonwealth's debt ceiling by two-thirds to $500 billion, this morning said he would deliver the Reserve a grant of $8.8 billion.
It follows a run-down in the bank's "reserve fund" which it uses to deal with major swings in the value of its holdings which are principally currencies.
Bank governor Glenn Stevens had wanted a hold on dividend payments to the Federal Government to enable a substantial increase in the reserve fund.
That was partially knocked back by former Treasurer Wayne Swan who in last year's Budget garnered $500 million from the Reserve.
Mr Hockey has now agreed to Mr Stevens' request in a move that will push the Federal Budget further into the red.
"The Australian Government is determined to ensure that all of our institutions are fully equipped for whatever challenges lie ahead," he said.
"Since the election, the Governor of the Reserve Bank has written to me indicating that the Reserve Bank Board believes that it would be appropriate for the Reserve Bank Reserve Fund to be increased to 15 per cent of the bank's assets at risk.
"Accordingly, the Government injection of $8.8 billion into the Reserve Bank Reserve Fund to meet the 15 per cent target will ensure that the bank is properly resourced."
Last week figures from the Parliamentary Budget Office showed the Government's election commitments would improve this year's Budget deficit by $700 million to $29.4 billionBased on today's decision, the deficit is at least on track to reach $38.2 billion.