December 2017
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Reporting Australia's Foreign Reserve Holdings
The Reserve Bank of Australia reports details of Australia's official reserve assets, foreign currency liquidity and net foreign reserves on a monthly basis. This article details changes that will make the Bank's reporting methodology consistent with current guidelines published by the International Monetary Fund (IMF). Data will be revised back to January 2015. While the new methodology implies a reduction in the reported gross level of Australia's official reserve assets, net foreign reserves will remain unchanged.
The Reserve Bank's Collateral Framework
The Reserve Bank, like other central banks, holds collateral to reduce the risk of financial loss in its domestic market operations. The Reserve Bank's collateral framework sets out how the diverse portfolio of collateral assets is managed and ensures that collateral of sufficient quality and value is held at all times. Over the past two decades, the framework has been adjusted to address changes in collateral supply, changes in market functioning during the global financial crisis, payment system innovations and new banking regulations. This article explores the rationale for these changes and discusses the key features of the current framework.
Housing Accessibility for First Home Buyers
The ability of Australians to purchase their first home (‘housing accessibility’) has been an important topic of public debate recently. In this article, we construct an indicator of housing accessibility that suggests that the median potential first home buyer can currently afford about one-third of homes in Australia. However, accessibility varies significantly with geographic location, and the quality of housing affordable to potential first home buyers has declined, particularly in Sydney.
Underlying Consumer Price Inflation in China
Underlying inflation measures seek to look through the volatility often inherent in headline inflation, and can be useful for assessing inflationary pressures in a given economy. This article describes new trimmed mean measures of underlying inflation that we have constructed for China and compares their performance with other measures of underlying consumer price inflation. A range of underlying inflation measures suggest that inflationary pressures have increased gradually since early 2016, although they remain low by historical standards.
Ageing and Labour Supply in Advanced Economies
Population ageing is a global trend, which is most evident in advanced economies. This article details the impact of demographic developments on labour supply in advanced economies. The ageing of the workforce has tended to reduce labour supply. This has been mostly offset by increased labour force participation of women and older people. These trends are occurring in Australia, although strong migration has mitigated some of the impact of ageing.
Recent Developments in the ATM Industry
The ATM industry in Australia is undergoing a number of changes. Use of ATMs has been declining as people use cash less often for their transactions, though the number of ATMs remains at a high level. The total amount spent on ATM fees has fallen, and is likely to decline further as a result of recent decisions by a number of banks to remove their ATM direct charges. This article discusses the implications of these changes for the competitive landscape and the future size and structure of the industry.
The Availability of Business Finance
Access to business finance has improved markedly since the global financial crisis, and debt-servicing costs are near historic lows. Nevertheless, small businesses continue to face challenges accessing finance. This article looks at the sources and availability of finance for Australian businesses. It also explores several innovations, such as comprehensive credit reporting and alternative finance platforms. These could make financing more accessible for small businesses in the start-up or expansion phase.
Foreign Currency Exposure and Hedging in Australia
The latest Survey of Foreign Currency Exposure confirms that Australian entities' financial positions are well protected against a depreciation of the Australian dollar. Consistent with previous surveys, the net foreign currency exposures of the banking sector are fully hedged. This means that the sector's overall foreign currency liability position would not in itself be a source of vulnerability in the event of a sudden depreciation of the Australian dollar.
Foreign Exchange Derivative Markets in Asia
Activity in foreign exchange derivative markets in Asia has increased in recent years, along with greater incentives to hedge exchange rate risk. But these markets are more developed for the currencies of advanced Asian economies than emerging Asian economies. Foreign exchange derivative markets also tend to be deeper for Asian economies that are more integrated into global financial markets and have flexible exchange rates.
Central Counterparty Margin Frameworks
A central counterparty's (CCP's) margin framework can affect the activity of market participants and the broader functioning of the financial system. This potential impact on financial stability is an area of focus for authorities – in Australia and overseas – particularly as central clearing has grown in recent years. Additionally, the margin collected by CCPs is the first layer of financial resources held by a CCP to cover counterparty credit risk, so it is critical that a CCP's margining system is effective.
Some graphs in this publication were generated using Mathematica.
ISSN 0725–0320 (Print)
ISSN 1837-7211