Reserve Bank of Australia Annual Report – 1983 The Bank's Services

The Reserve Bank operates a substantial banking business and provides a range of financial and other services. The following paragraphs report major developments during 1982/83.

Banking Operations

The Bank is the principal banker to the Commonwealth Government and the governments of four of the States and the Northern Territory. In this capacity the Bank paid approximately 98 million cheques during 1982/83 – about 8 per cent more than during the previous year. The majority of these cheques are regular welfare payments by the Commonwealth Government.

Computer facilities for handling cheques will be extended to the Bank's Hobart and Canberra branches during the second half of 1983. The Bank co-operates with the banks and its other principal customers in developing and encouraging the use of magnetic tapes for conveying payment information. A number of customers make payments through the banking system's Central Magnetic Tape Exchange; others lodge magnetic tapes direct with individual banks under special arrangements.

During 1982/83, the Bank participated in a number of committees considering, among other matters, proposed new legislation for a separate Cheques Act and a range of procedural questions affecting the banking industry.

Note Issue and Cash Operations

1982/83 was the first full year of security printing operations in the Bank's new printing works at Craigieburn, Victoria. Total production of Australian notes amounted to 370 million pieces, considerably higher than production (210 million) in 1981/82. In addition, some 30 million items of security printing were produced during 1982/83. The increased output reflected more settled production flows following interruptions associated with the movement of operations from the old works at Fitzroy during 1981/82.

The total number of notes (both new and used notes) passing out through the Bank's cash handling centres in 1982/83 was 1,443 million, while notes returned to the Bank (both surplus reissuable notes and soiled notes for destruction) totalled 1,426 million. This was only a modest growth (3 per cent) over the volumes in the previous year. High speed equipment, which authenticates and sorts used notes, is now operating in Sydney and Brisbane branches and will shortly be installed at Melbourne.

The value of notes on issue totalled $6,414 million at June 1983. This was 9.9 per cent higher than a year earlier; in 1981/82 the rise was 14.6 per cent. The community's demand for notes of higher denominations continues to grow; at June 1983, the $50 denomination accounted for 51 per cent of the total value of the issue, compared with about 47 per cent in June 1982. The average life of notes ranges from around 10/11 months for $1, $2 and $5 denominations to almost 5 years for the $50 denomination.

The Bank keeps in touch with technological developments relating to the security, printing and processing of currency notes. As part of this process the Bank maintains technical liaison with counterpart organisations in other countries and with specialist suppliers. The Bank conducts a range of continuing research, including some concerned with the security and durability of notes. In this work it has benefitted considerably from the co-operation and assistance of other Australian organisations, especially the CSIRO.

Coin is produced by the Royal Australian Mint and the Bank acts as issuing agent. There was only slight growth over the year in overall demands on the Bank's coin processing and issuing facilities. Flowing from both its issuing responsibility and its role in the centralised cash distribution system the Bank despatched 2,709 million coins during the year. This was slightly fewer than in the previous year. It included 439 million new coins from the Mint. Bronze 1 cent and 2 cent coins accounted for about half the new coin issued. Coin returned by banks at times when they had surplus stocks totalled 2,308 million pieces, about 2 per cent more than in 1981/82. The resulting net issue of coins – 401 million pieces – was the smallest for several years. Processing (including wrapping) of coin for reissue is a costly service. From September 1983 the Bank will levy a charge on banks for wrapped coin in the high volume, low denominations to offset costs of wrapping. Unwrapped coin will be available to banks free of handling charges.

Significant changes in the currency mix are in prospect in 1983/84. As announced by the Treasurer, a $1 coin is to be introduced to general circulation around March/April of 1984. The $1 note will then be progressively withdrawn from circulation. A $100 note is planned to be introduced into circulation about March.

Commonwealth Government Securities

The Bank is closely associated with the Commonwealth Government's domestic loan raisings. It advises the Treasurer on loan programmes, forms of securities and other technical issues; it conducts tenders for Treasury bonds and Treasury notes on the Government's behalf; it handles the issue of Australian Savings Bonds (ASB's); and it operates Registries for Commonwealth Inscribed Stock at each of its branches. The Bank is also an active participant in markets for Commonwealth Government securities, both on ‘change and off ‘change, in pursuit of monetary policy and market stability objectives.

1982/83 was a year of high activity and heavy work pressures in Registries. The number of stock accounts increased by more than 25 per cent to around 225,000. This is not a complete measure of holders of securities since more holders operate through safe custody accounts with banks than direct with Registries. ASB's were the major contributor both to the increased number of accounts and to levels of activity. However, holdings of, and transactions in, conventional bonds also grew substantially, as did the range of short-term money market transactions which passed through Registries.

Early in 1982/83, the tap system for issuing Treasury bonds was replaced by periodical tenders, requiring substantial changes in the Bank's procedures. Seven tenders were held during the year; an eighth was announced on 30 June. (See panel on page 12)

Late in June the Government announced that brokerage on sales of ASB's would be extended to include authorised money market dealers and all security dealers and investment advisers licensed under the Securities Industries Code. Previously, only members of recognised stock exchanges had been eligible. Changes were also made to the Commonwealth Inscribed Stock Regulations to allow payment of interest on stock holdings to accounts with non-bank financial institutions approved by the Treasurer.

The nature of Registry operations has changed substantially in recent years reflecting the types of securities being issued and the evolving nature of financial markets. The Bank has in train a major reorganisation of its Registry functions. By making full use of modern technology and generally updating procedures, it hopes to improve its facilities and to handle the wide fluctuations in workflows with less pressure on Registry personnel. The new system is expected to be operational in 1984/85. Meanwhile, a series of less substantial changes in Registry procedures has been put in hand to ease some of the problems caused by the growth in Registry activities.

Exchange Control

Events in 1982/83 put Exchange Control Department under pressure. The very large movement of short-term capital around the time of the Federal elections in March and the subsequent devaluation of the Australian dollar was a particular instance.

The rapid pace of developments in financial markets forced continuing review of exchange control requirements and procedures. Developments included the growth of markets in futures contracts, particularly financial futures, and the uses made of them in packaging international financial transactions for a variety of purposes.

Over recent years, there has developed in Australia a strongly professional approach to foreign currency transactions. As part of this, Australian trading banks have expanded their foreign currency dealing operations both within Australia and in foreign markets. In March, the Bank wrote to the trading banks to remind them that transactions in foreign currencies, including those between two foreign currencies, should derive from customer transactions which met exchange control requirements. The banks subsequently sought some clarification of policy on this question. Proposals have also been received from other parties on policies relating to a range of external transactions, including operations in commodity and financial futures markets and transactions related to precious metals. These are being considered.

In December 1982, the need for exchange control forms was eliminated on most categories of current payments or travel funds abroad involving up to $10,000. The objective was to streamline procedures and reduce paperwork on smaller transactions. Agent banks must satisfy themselves as to the genuineness of the transactions involved.

Additional demands were made on the Bank's exchange control resources during the year as a result of wide-ranging official enquiries – in particular the (Costigan) Royal Commission on the Activities of the Federated Ship Painters & Dockers Union and the (Stewart) Royal Commission of Inquiry into Drug Trafficking. The Bank provided information from its exchange control records in response to due legal process and was called upon to advise on exchange control practices and to assist in investigations of possible breaches of the Banking (Foreign Exchange) Regulations.

Rural Credits

Advances are made by the Bank's Rural Credits Department to eligible marketing boards and co-operatives to assist them to market, process and manufacture primary produce. The advances allow borrowers to pay primary producers part of the value of their produce prior to its sale. A wide range of commodities is financed, including barley, canned and dried fruits, cotton, dairy produce, eggs, ginger, oats, peanuts, rice, sugar, superphosphate, wine and spirits.

The level of advances required by customers of the Department is influenced by seasonal conditions and commodity prices on domestic and world markets. In 1982/83 the impact of the drought, depressed prices for some commodities and retarded cash flows created generally difficult operating conditions which adversely affected the trading results of some borrowers. Advances outstanding reached a peak for the year in March of $432 million, of which $351 million was advanced to marketing board s and $81 million to co-operatives. This compared with a peak of $496 million in 1981/82. The major advances were for dairy produce, canned fruits and barley.

Lending rates applied by the Department have regard to market conditions, including movements in rates charged by other lenders, as well as the banking aspects of individual accounts. The table below shows rates operating during 1982/83.

Research Grants and Fellowships

During 1982/83, grants totalling around $2.1 million were approved from the Rural Credits Development Fund. Such grants finance a wide range of research, development and extension projects in all States; they are distributed among universities, state colleges, government departments and the CSIRO. All projects have as their object the promotion of primary production. Two Research Fellowships (Agriculture) to support such work were also awarded.

Grants amounting to $127,000 were approved from the Bank's Economic and Financial Research Fund during 1982/83 for post-graduate research in economic and financial topics relevant to the Australian economy. Such topics include aspects of inflation, employment, wages, taxation and financing. Two Professorial Fellowships in Economic Policy, for research on policy issues relevant to the Australian economy, were also awarded.

Information Services

During the year the Bank sought to improve and extend the range of material it publishes to explain its operations and to assist those active in markets or in fields where timely economic and financial data are important.

Publications issued by the Bank in the past year include:

• Reserve Bank of Australia Bulletin (monthly). This has been progressively altered and now includes, in addition to the large volume of financial and economic statistics, articles on the Bank's operations, the economy and other financial and economic topics. There are regular reviews of the Bank's market operations and of economic and financial conditions.
• Supplements to the Bulletin (annual) – Company Finance and Financial Flows.

• Occasional Papers:

  – Australian Economic Statistics, 1949/50 to 1980/81: No. 8A Tables; No. 8B Graphs. (The data in Occasional Paper 8A are also available on microfiche and a machine-readable tape.)

  – The Deterioration in Economic Performance: A study of the 1970's with particular reference to Australia: No. 9.

• Reserve Bank of Australia: Functions and Operations.

There was also strong demand for copies of the Bank's past publications.

The Bank handles a large volume of enquiries from the public about various aspects of its work. Officers of the Bank regularly address professional associations, universities, high school teachers, senior students etc.

Freedom of Information

The Bank is subject to the Freedom of Information Act except in respect of its banking operations (including individual open market operations and foreign exchange dealings) and exchange control matters.

Prior to commencement of the Act, the Bank conducted a training programme for branch and Head Office staff. Some senior staff attended seminars conducted by the Attorney-General's Department.

The Governor, as Principal Officer, has authorised the Deputy Governor and three senior officers of the Bank to make decisions in respect of requests made to the Bank. The Governor has also authorised the Deputy Governor and an Adviser of the Bank to conduct requested reviews of decisions.

No requests for access to documents under the Act have been received from members of the public. However, a small number of serving and retired officers of the Bank have sought access to documents relating to their personal affairs. Fees have not been charged in respect of these requests.

The cost to the Bank, up to 30 June 1983, in relation to freedom of information is estimated to have been $115,000. The larger part of the cost was incurred before the Act came into operation. The main element was the time of staff involved in assessing the legislation's impact on the Bank and providing advice to the Government, establishing administrative arrangements for dealing with requests under the Act, preparing material for publication and conducting training programmes.