RDP 8807: The Cost of Capital: Some Issues Appendix I: Some Regulatory Changes Relevant to the Cost of Capital

Nigel Dews

August 1988

Mar. 1965 Banks were permitted to proceed with limited activities in the commercial bills field.
May 1968 Trading banks were given approval to undertake lease financings on a modest scale, outside the maximum overdraft interest rate arrangements.
Mar. 1969 Certificates of Deposit were introduced.
Sep. 1969 Extra borrowing rights on the domestic market were introduced for foreign companies which admitted some Australian equity.
Feb. 1972 Maximum overdraft rate no longer applied to loans of greater than $50,000.
Sep. 1972 Embargo imposed on borrowing from overseas of amounts with less than two years to maturity.
Oct. 1972 The Companies (Foreign Takeovers) Act was introduced, applying to foreign purchase of equity holdings in Australian companies with assets of more than $A1 million.
Dec. 1972 Variable Deposit Requirement imposed consisting of 25 per cent on borrowings from overseas exceeding two years. During 1973 it was extended.
Nov. 1974 Variable Deposit Requirement suspended. Embargo on borrowing from overseas reduced from two years or less to six months or less.
Feb. 1976 Size of overdraft subject to maximum interest rate controls increased from $50,000 to $100,000.
Apr. 1976 Foreign Investment Review Board created. New foreign investment had to yield a large net economic benefit to Australia. Where benefits were judged to be small, an effective partnership had to exist with Australian interests.
Jan. 1977 Embargos on foreign borrowing were extended and Variable Deposit Requirements reintroduced, although certain borrowing for mining and manufacturing investment was exempt from the VDR. VDR was suspended, once more, in July 1977.
June 1978 Embargo on Overseas Borrowing suspended.
Jan. 1979 Treasurer announced that the Government had no objection to the establishment of currency futures trading facilities, provided such facilities were established on the basis of existing exchange control policy. In June of that year, trading banks began operating a currency hedge market. In March 1980, trading in currency futures on the Sydney Futures Exchange began.
Dec. 1980 Ceilings on trading bank deposit interest rates were removed.
Nov. 1981 Trading banks were granted approval to offer line of credit facilities, with some restrictions.
June 1982 Reserve Bank withdrew quantitative lending guidelines on growth in trading bank advances.
Aug. 1982 Relaxation of Savings Banks required asset structure.
Sep. 1982 Approval, in principle, was granted to a bank to issue Eurobond floating rate notes. The first issue was made by an Australian bank in March 1973.
Dec. 1983 Treasurer and the Reserve Bank announced that the spot exchange rate would be determined by the market and that a major part of existing exchange controls would be abolished, effective 12 December.
Aug. 1984 Controls over current accounts abolished. All remaining controls over the maturity period for term deposits were removed.
Sep. 1984 Treasurer announced the abolition of the “30/20 rule” which provided for higher taxation of life offices and superannuation funds which did not hold at least 30 per cent of their assets in public securities, of which at least 20 per cent had to be Commonwealth Securities.
Feb. 1985 Treasurer announced that 16 foreign bank licences would be granted.
Sep. 1985 Treasurer announced that a full imputation system for company income tax will commence in the 1987/88 income year. The marginal personal income tax rate will equal the company tax rate (49 per cent) from the introduction of imputation. Other measures announced included a capital gains tax.
July 1986 Treasurer announced relaxations of foreign investment policy in respect of manufacturing and real estate.
Nov. 1986 Restrictions on investments at interest in $A-denominated securities by foreign governments and their agencies were removed.