The head of the Reserve Bank says he supports the government's commitment to guarantee all bank deposits, regardless of the amount.
That's despite reports suggesting the RBA warned against the guarantee, claiming it could damage some financial institutions.
Governor Glenn Stevens says it’s a sensible move that will benefit Australia's banks and their customers.
“It will ensure that Australian institutions, some of which are amongst the highest rated banks in the world, are able to retain adequate access to wholesale funding,
“Steps in these directions, in the context of what other countries are doing, were sensible and the RBA supports them.
A report in The Australian newspaper today says the government ignored the RBA's concerns about the impact of an unlimited guarantee scheme for all Australian deposit-taking institutions from October 12.
The unsourced report claims the RBA says that decision is creating serious dislocation in the financial system.
The report had prompted the federal opposition to accuse the Rudd government of misleading Australians on the advice it received from the RBA before the government announced a blanket guarantee on bank deposits.
Treasurer Wayne Swan on Tuesday morning issued a statement, saying the decision had been taken in consultation with the financial regulators, including the RBA.
But he also said the scheme could be fine-tuned.
"The government announced the blanket guarantee on deposits on October 12 with the support of the Treasury and our regulators, including the RBA governor," Mr Swan said.
"Today's report is wrong to claim otherwise."
He said the government would consider any necessary refinements, following consultation with industry and further discussions with the regulators.
"That remains the case and I'll have more to say on these matters, in time," he said.
Finance Minister Lindsay Tanner said he knew of no concern from the RBA on the bank deposits guarantee.
"Throughout the international financial crisis, the government has been in very regular contact, almost constant contact, with the key regulators including the Reserve Bank and we have paid a lot of attention to the advice we have received from the regulators," he told Sky News on Tuesday.
"I can assure you that we will continue to pay very close attention and take a lot of notice of the advice that we receive from the Reserve Bank, from APRA (Australian Prudential Regulation Authority) and Treasury."
But the federal opposition, which has been pushing the government to release advice on which it based its banking package and $10.4 billion stimulus package, seized on the report.
Opposition Leader Malcolm Turnbull earlier said the report went to the core of Prime Minister Kevin Rudd's integrity.
"It is very clear that the prime minister's failure to act strictly in accordance with the advice of the regulators, to mislead the public about his conduct, to represent himself as having acted on advice of the Reserve Bank, when clearly he has not ... underlines the importance of parliament," he told reporters.
"The time has come for the prime minister to start answering questions and to start being accountable.
"These reports ... do not just go to questions about the stability of the financial system or indeed to the competence of the government, they go to the very core of the integrity of this prime minister."
Opposition finance spokesman Joe Hockey said he was concerned by Mr Tanner's comments.
"Alarmingly he said this morning on television, that he was the acting treasurer when these decisions were made, but he didn't understand them and he had no role to play in those decisions."