Joe Hockey's RBA grant hits budget deficit The Reserve Bank will receive a one-off grant of $8.8 billion to strengthen the reserve fund. In one hit Treasurer Joe Hockey has pushed up this year's projected budget deficit from around $30 billion to nearer $40 billion. Mr Hockey will give the Reserve Bank a one-off grant of $8.8 billion to strengthen the reserve fund it uses to back up its foreign currency operations. Projected to be $30.1 billion in the Treasury's pre-election fiscal and economic outlook, the 2013-14 deficit would now jump to $38.9 without any further changes. The figure is double the $18.8 billion recorded in 2012-13, which was to be the first year Labor was to return to surplus. The decision reverses those of his predecessor Mr Swan who took dividends from the bank against its express wishes to prop up his budget. As a result the Bank's reserve fund dwindled from around $6 billion to $2 billion. It's a key part of our capital. It has been depleted considerably by the effects of the rising exchange rate," Reserve Bank governor Glenn Stevens told a parliamentary hearing in February. Mr Stevens wrote in Mr Swan in 2012 asking him to allow it to allow it to direct all of the its $1 billion 2011-12 profit to boost the fund. Mr Swan rejected the request and insisted on taking half of the profit as a dividend to help achieve a budget surplus in 2012-13, leaving around $500 million to bolster the fund. "In the end it was his prerogative," Mr Stevens said earlier this year. He was perfectly entitled to do it under the Act. He made a judgment, and I had to accept that judgment. Mr Hockey said his decision to give the Bank $8.8 billion would put "beyond any doubt the Reserve Bank's continued ability to perform its core monetary policy and foreign exchange functions." "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," he said. The government injection of $8.8 billion will enable the fund to meet the 15 per cent target and will ensure that the Bank is properly resourced. The decision will also enable Mr Hockey to claim that the true budget deficit left to him Mr Swan was larger than the claimed $30.1 billion, making any improvement in subsequent years look more dramatic.