Reserve Bank of Australia Annual Report – 1989 The Bank's Services and Other Activities

The Reserve Bank's “core” functions are the conduct of monetary policy and the surveillance of the financial system. As well, like many other central banks, it provides a range of banking and other services to the community. Among these are inscribed stock Registries maintained on behalf of the Commonwealth Government, the printing and distribution of Australia's currency notes, and banking facilities for governments and other relevant bodies.

In keeping with the general trend towards increased efficiency and cost-effectiveness in financial services, the Bank has had all its operating procedures under close review over the past couple of years. It aims to recover its costs for services provided and to avoid subsidisation.

Some of these reviews are already yielding savings in resources and, in part, help to explain the overall large fall in staff numbers in recent years (see page 65). More recently, the Bank has had the operations of its Note Printing Branch reviewed by external consultants (see below).

The Bank's services are provided through its branches in Australian State capital cities, Canberra and Darwin, and through its offices in London and New York. The branches and offices fulfil a valuable additional role in maintaining contact with the financial and business community and by assisting in the supervision of banks. The Note Printing Branch at Craigieburn in Victoria, together with the cash processing and distribution facilities at other branches, underlie the Bank's currency issue and distribution functions.

Australia's increased integration with international financial markets has heightened the importance of the London and New York offices. These assist with the investment of the Bank's holdings of foreign currency reserves and with its foreign exchange operations. They also maintain contact with other central banks and international institutions, provide a point of liaison with overseas financial markets, monitor economic and financial developments in the northern hemisphere, and are becoming increasingly involved with the prudential supervision of Australian banks' overseas operations. London office also provides banking services in the U.K. for the Bank's customers.

Banking operations

As the central bank, the Bank provides clearing accounts for banks. It is also the principal banker for the Commonwealth Government, the governments of Queensland, Western Australia, South Australia and Tasmania, a number of statutory authorities, and the authorised dealers in the short-term money market. As is international practice, it provides some banking services in Australia for other central banks and multinational agencies.

In recent years, the Bank has been willing to make gold loans on a limited and fully-secured basis to major dealers in the Australian gold market.

In seeking to maintain efficient banking operations, the Bank has continued to upgrade the banking services provided to its customers. During 1988/89, it extended direct electronic data communication links to several customers and completed installation of new cheque-processing equipment in all Australian branches. Almost 70 million customer transactions, both electronic and paper, were processed during 1988/89.

These changes, together with a substantial adjustment of staff structures in the Bank's branches, provide a firm base for the delivery of fully-efficient banking services. At the same time, activities which have become unessential or more appropriately done by others have been phased out. The Rural Credits Department was wound up during 1988/89 after the last customer loan was repaid in January 1988. The Rural Credits provisions (Part VI) of the Reserve Bank Act were repealed during the year.

Registry operations

The Bank advises the Commonwealth Government on aspects of its debt management, domestic loan raising and debt servicing operations, and on behalf of the Government conducts Registries of Inscribed Stock at its Australian branches. The Registries issue securities, predominantly by tender, maintain records of ownership, pay interest to registered owners and arrange redemption of securities at maturity. There is also a facility for investors to purchase or sell parcels of Treasury bonds at market prices up to a daily limit of $50,000 face value.

Installation of a new computer system was completed in 1988/89, enabling a more efficient service to be provided to stockholders. Plans are in hand to provide an electronic transfer and settlement system for Commonwealth Government securities. The system is to be integrated with Austraclear which also provides transfer and settlement facilities for private and semi-government paper. Securities traders will be able to record transactions using computer facilities linked to a computer at the Bank, thereby eliminating much of the paperwork currently needed to settle transactions.

The number of stockholders' accounts maintained by Registries is expected to fall substantially with the approaching maturity of some heavily-subscribed series of Australian Savings Bonds.

Note printing

The operations of Note Printing Branch have been reviewed in conjunction with external consultants. The review followed changes to the scale of the Branch's operations, with the withdrawal of smaller-denomination notes in recent years. The Branch will be restructured to place it on a largely self-sufficient “business enterprise” footing.

While retaining its primary role as printer of Australia's currency notes, the Branch plans to build on its capacity to meet other demands and to exploit the plastic-based technology embodied in the Commemorative $10 note issued in 1988. It has for some time printed currency notes for other countries, as well as security documents and stamps. Greater use of the resources available should lower the costs of printing Australia's currency notes.

Some 380 million Australian currency notes were produced during 1988/89 in denominations of $5, $10, $20, $50 and $100. This total was below production levels in other recent years, with production of the $2 note having ceased in 1987/88.

Following the release of the $10 Commemorative note in January 1988, about 17 million had been put into general circulation by the end of 1988/89. They will continue to be reissued, as with other notes, while they remain fit for circulation. Some 850,000 of the notes were also issued in souvenir form. This note incorporates totally new technology developed by the Bank and the Commonwealth Scientific and Industrial Research Organisation. It is printed on plastic instead of paper and includes an optically variable device, surrounded by a transparent area, and other deterrents against counterfeiting, making it among the foremost in the world for security and durability.

A study conducted in the area around Newcastle, NSW, where a higher proportion of $10 notes was issued in Commemorative form, indicated that the new note is more robust than paper notes and has been generally well received by the public.

The Note Printing Branch is continuing research on a number of projects which it is hoped will contribute to greater security and reduced production costs for banknotes. Successful production of a fast-setting printing ink, which was previously imported, has already reduced costs.

Currency processing and distribution

The Bank co-ordinates the distribution of notes and coin. Notes are initially distributed from Note Printing Branch to the Bank's other Australian branches. Coin is transported from the Royal Australian Mint in Canberra to holding points across the country. From these points, notes and coin are provided to banks or armoured car companies. In nine country centres, note distribution facilities are provided under an agency arrangement.

During the year to June 1989, the Bank issued notes valued at $42 billion and received back notes valued at $41 billion; these compared with $36 billion and $35 billion, respectively, in 1987/88.

21 VALUE OF NOTES ON ISSUE
as at 30 June

Notes that are surplus to the community's requirements or which are soiled are returned to the Bank. These notes are processed through high-speed automated equipment that counts and checks them for authenticity, sorts them according to fitness, packs those fit for reissue and destroys those no longer fit. These arrangements help to maintain the quality of notes in circulation and assist with the detection of counterfeits.

The volume of notes on issue reflects community demand, with the level fluctuating during the year in response to seasonal and other influences. Most of the growth over 1988/89 was accounted for by the $100 denomination (see table).

The Bank is no longer closely involved in the processing of coin (counting, wrapping, etc.) on its premises. Much of this work is done on behalf of the Bank by armoured car companies which draw on, and deposit to, pools of Bank-owned coin.

During 1988/89, there were net issues to the public of the new $2 coin, but a net return to the pools of some other denominations. As there appeared no immediate need for the latter, the Bank returned $50 million of coin to the Mint, as it had done in 1987/88.

Media, information and other services

The Bank has continued to expand its media and information services.

The Media and Information Office handles enquiries and arranges distribution of the Bank's publications. These include press releases and the monthly Bulletin, which contains articles and commentaries on economic conditions and financial markets together with a wide range of associated statistics. Current information on financial markets and monetary conditions is also displayed on Reuters Monitor and AP/Dow Jones Telerate electronic screen services. All the Bank's publications may be obtained at any of its offices.

The Bank also recognises the need to inform the wider community of policy and institutional developments. The Governor, Deputy Governor and staff of the Bank meet and address community groups, business organisations and students and teachers. The Bank has also increased its public information displays and involvement in community events.

An Exhibition and Display Gallery has been established at Note Printing Branch. The Gallery gives visitors the opportunity to see currency being printed and to inspect a range of exhibits dealing with the design and printing of Australia's banknotes; it also incorporates a shop where souvenir note items can be purchased. Over 13,000 people visited the Gallery during 1988/89.

The Bank supports outside research, through its Economic and Financial Research Fund, on topics relevant to its activities. In 1988/89, projects supported included modelling of foreign exchange markets and a short-run forecasting model of the Australian economy.

The Bank hosted a Conference on Money and Credit in June 1989 which brought together business, government and academic economists to discuss recent work by the Bank's research staff. Papers and proceedings of the Conference will be published later in 1989. Plans are currently in hand for a similar conference in 1990 on topics directly related to the Bank's responsibilities.

In 1988/89, the last awards were made from the Rural Credits Development Fund of the Rural Credits Department, which has now been wound up. Grants and fellowships awarded this year totalled $2½ million for research projects in agriculture, fishing and forestry. The awards brought the amount made available since the Fund was established in 1925 to more than $40 million.

Relations with other central banks

The Bank is a shareholder in the Bank for International Settlements and is represented at regular meetings of member central banks. In 1988/89, Bank staff also participated in Australian delegations to meetings of the Asian Development Bank, International Monetary Fund, International Bank for Reconstruction and Development, and Organisation for Economic Co-operation and Development.

The Bank also maintains a wide range of contacts with other central banks at an operational level.

Relationships with central banks in Asia and the Pacific are of particular importance to the Bank. The SEANZA group of 17 central banks from the region, including Australia, offers a forum for this contact.

In October and November 1988, the Reserve Bank hosted the 17th SEANZA Central Banking Course at the Bank's newly completed H.C. Coombs Centre for Financial Studies in Sydney. The first two SEANZA Courses had been in Sydney in 1957 and 1958. Since then Courses have been held in alternate years in the various member countries.

The seven-week Course was divided into weekly segments with a Programme Director in charge of each. Programme Directors and visiting specialists were drawn mainly from central banks and universities in the SEANZA region and other countries and from international institutions. The success of the Course was due largely to their efforts.

The Course concluded with a Symposium in which governors or their representatives from 12 of the 17 SEANZA member banks joined course participants to discuss some current central banking issues.

The Programme Directors' summaries of each Course segment have been brought together in a volume Issues in Central Banking which is available from the Bank without charge.

Freedom of information

Twenty requests for access to documents under the Freedom of Information Act were received in 1988/89, compared with 23 in the previous year. All were from staff or former staff. 19 were granted in full and one in part. In the la1tter, the balance of the documents to which access was requested were exempt under the Act.

The cost to the Bank of administering the Act in 1988/89 is estimated to have been approximately $7,300, including staff and overheads.