Reserve Bank of Australia Annual Report – 1979 Banking, Issue and Other Functions

Banking Operations

As banker to the Commonwealth Government and the governments of four of the States and the Northern Territory, the Reserve Bank paid approximately 94 million cheques during 1978/79. The majority of these cheques were regular welfare payments made by the Commonwealth Government and were processed through the Bank's computer installations at its Sydney, Melbourne and Brisbane branches. There was a small reduction in the volume of welfare cheque payments and the total volume of government cheques processed showed a decrease of about two per cent on the previous twelve months.

The Bank has continued to co-operate with its principal clients and other banks in the development and introduction of various arrangements designed to improve the flow of payments and reduce the volume of cheques passing through the banking system. The arrangements between banks for exchange of cheques with amounts encoded in machine-readable figures to facilitate direct computer processing continued to expand during the year. The Bank is able to offer other banks “amount encoded” cheques at most of its Australian branches. While the Bank has not yet been able to enter into these reciprocal arrangements with all banks at all points, approximately 96 per cent of the total volume of other banks' cheques was so encoded by the Bank in 1978/79. Some 49 per cent of the total volume of the Bank's paper received from other banks was “amount encoded”.

Bonds and Stock

On behalf of the Commonwealth Government, the Bank maintains an inscribed stock registry at each of its branches; at 30 June 1979 there were about 155,000 stockholder accounts, representing an increase of 7,200 during the previous twelve months. The registries also manage the issues of Commonwealth securities to the public and the payments associated with them. The face value of the Commonwealth Government debt administered by the Bank increased by $2.4 billion over the year to $22.7 billion. The debt comprised Australian Savings Bonds $2.7 billion, Special Bonds $0.5 billion, Treasury bills $2.0 billion, Treasury notes $1.4 billion and other Commonwealth securities $16.1 billion.

As described briefly on page 28, the Loan Council during the year decided on major changes in the methods of marketing Commonwealth securities. These changes are expected to come into effect during 1979/80.

The Bank also maintains a register of Income Equalization Deposits on behalf of the Australian Taxation Office. Transactions in 1978/79 showed a decrease over those in the previous year; deposits totalled $33 million compared with $44 million in 1977/78 and withdrawals totalled $21 million compared with $14 million in 1977/78. At 30 June 1979, there were 9,000 deposit accounts and aggregate balances were $79 million.

Note Issue

The value of Australian notes in circulation rose by $425 million to $4,113 million during 1978/79; this represented an increase of 12 per cent, the same as during the previous year. The $50 denomination, first issued in October 1973, now accounts for 35 per cent of the value of notes outstanding. The $20 denomination continues to account for the largest proportion at about 43 per cent.

The Bank's Note Issue Department printed 376 million notes during 1978/79, about 4 per cent above the figure for the previous year. A little more than half of the notes printed was in the $1 and $2 denominations which, because of their higher frequency of use in cash transactions by the public, become unfit for circulation more quickly and need to be replaced more often than do the higher denominations.

During the year the Bank commenced production of $5 notes with serial numbers in the type style introduced in 1976 for $2 notes. Serial numbers in the same style are also to be used for other denominations. The new type style is designed to fit in with developments in the machine reading of serial numbers.

In addition to Australian notes, the Note Issue Department printed some 896 million other items of security printing, mainly postage stamps, in 1978/79.

The Bank has continued to co-operate closely with the commercial banks in developing arrangements to improve the security and efficiency of distribution of the increasing volume of currency required by the community.

Rural Credits

The Bank's Rural Credits Department continued to provide seasonal finance to assist the marketing, processing or manufacture of primary produce. Outstanding advances at 30 June 1979 totalled $521 million ($413 million to marketing boards and $108 million to co-operatives), compared with $479 million a year earlier. The level of advances fluctuated widely during 1978/79. A peak of $1,196 million was reached in March 1979 ($1,129 million for marketing boards) as against $819 million in February 1978, while the low for the year was $210 million in December 1978.

Finance for wheat remained the major influence on lending. Excellent seasonal conditions resulted in the Australian Wheat Board receiving a record of almost 18 million tonnes from the 1978/79 harvest; this was about 5 million tonnes higher than the early estimate on the basis of which the Wheat Board's seasonal advance was approved. With overall monetary conditions in mind, the Bank took the view that financing by the Rural Credits Department of the Wheat Board's additional requirements would be inappropriate. The Government considered alternative arrangements and decided that the Wheat Board should refinance part of its requirements through issues of commercial bills. Bills amounting to $155 million were accepted by the trading banks and placed by them with the non-bank sector. Subsequently, the Wheat Board acceded to a request, for reasons of broad policy, from the Bank to reduce its indebtedness on the 1978/79 season's accounts by $300 million; this was done through further issues of commercial bills which were handled in the same way.

Barley and other grains benefited from the good growing conditions and the average level of advances for these was well up on the previous year. Financing of most other commodities was also at a higher level.

Interest rates charged on advances by the Department were reduced by 0.5 of a percentage point from 1 December 1978; rates now range from 9 per cent to 9.5 per cent.

Research Grants

Half of the net profits of the Rural Credits Department is, in terms of the Reserve Bank Act, transferred each year to the Rural Credits Development Fund. During 1978/79, grants totalling $1.3 million were approved from the Fund for projects aimed at promoting primary production. Two Research Fellowships in Agriculture were also awarded. The grants and fellowships were awarded after obtaining advice from a committee drawn from universities and other organisations.

In 1978/79 the Bank approved grants totalling $114,000 from its Economic and Financial Research Fund for post-graduate research on economic and financial topics relevant to the Australian economy. A Professorial Fellowship and two Fellowships in Economic Policy were also awarded.

Bank Premises

Work has continued on the construction of the new note printing works at Craigieburn, Victoria and on the extension to the Bank's Head Office building in Sydney. Inclement weather and industrial unrest have caused delays to both projects. The major construction phase of the Craigieburn project was about 45 per cent complete at 30 June 1979. Completed areas of the extension to Head Office building are being handed over progressively and, on current indications, the work should be finished early in 1980.

Publications

Activities of the Reserve Bank are described in a booklet titled “Functions and Operations”. The monthly Statistical Bulletin produced by the Bank contains data for which the Bank is the original source as well as a wide range of banking, other financial and general economic statistics; it also includes notes describing trends in financial markets and economic conditions and changes in financial policy. An annual Company Supplement and Financial Flow Accounts Supplement to the Bulletin are produced; a Financial and an Economic Supplement are published from time to time. The second edition of “Exchange Control”, a booklet summarising exchange control policies, was published in 1978. The Bank also produced a volume on the 1977 Conference in Applied Economic Research.