Reserve Bank of Australia Annual Report – 1966 Public Statements

Public statements by the Reserve Bank in 1965/66.

6th OCTOBER, 1965

In discussions with savings banks it had been agreed that they would aim to maintain a steady and substantial volume of lending for housing. Notwithstanding the possibility that the lower rate of growth in their deposits would continue, they were confident that they would be able to maintain their housing loan approvals at about the same levels as in recent months.

20th OCTOBER, 1965

Grants for the promotion of primary production totalling $498,000 had been approved for 1965/66 from the Rural Credits Development Fund.

3rd DECEMBER, 1965

As the first step in a programme of reductions in the Statutory Reserve Deposit ratio, related to the expected decline in bank liquidity during 1965/66, the ratio was being reduced by 1 per cent to 12.8 per cent — effective 7th December. The Bank would continue to adjust the Statutory Reserve Deposit ratio as necessary to permit the banks to maintain lending at an appropriate rate for the needs of a sound economy, including particularly those arising from drought conditions.

3rd DECEMBER, 1965

The Bank had asked the savings banks to explore the possibility of increased housing finance being made available over the remainder of the financial year. An increase for a time seemed appropriate to provide an offset to the declining trend in new dwelling commencements.

10th JANUARY, 1966

Full descriptions and photographs of new decimal currency notes in denominations of $1, $2, $10 and $20 were released by the Bank. As a special matter, authority was also given for photographs of the new notes to be published.

1st APRIL, 1966

The Statutory Reserve Deposit ratio was being reduced by 2.4 per cent to 10.4 per cent — effective 5th April. Of the reduction, 1.5 per cent was part of the programme of reductions commenced on 7th December, 1965. The other 0.9 per cent was associated with the establishment of the $50 million Farm Development Loan Fund and the augmentation of the existing Term Loan Fund.

21st APRIL, 1966

The Statutory Reserve Deposit ratio was being reduced by 1 per cent to 9.4 per cent — effective 26th April. This was in continuation of the programme of reductions related to the decline in bank liquidity.

Extract from a statement by the Commonwealth Treasurer on 13th May, 1965, on the Commonwealth Government's general attitude to capital raisings in Australia by overseas owned or controlled companies.

“We welcome arrangements which provide for Australian equity participation in undertakings that would otherwise be financed wholly by overseas capital. It seems to us that there are important advantages to be gained from this sort of association between overseas and Australian enterprises and resources.

Local borrowings by overseas-controlled organisations are, on the other hand, different in certain respects from share issues by such bodies since they carry a commitment to pay interest, normally at fixed rates, instead of dividends and the Australian lenders have no standing in the management of the enterprise.

We would not, for example, wish to see money borrowed in Australia by overseas interests for the purpose of facilitating the remittance of funds abroad. That would amount to an export of capital and, in the main, we are not in a position to become exporters of capital except perhaps for limited and specific purposes which are of clear advantage to Australia.

Nor would we, as a general rule, be keen to see overseas interests borrowing money here where it is evidently in substitution for funds which normally they would have obtained from overseas sources.

It can be a different matter, on the other hand, where overseas businesses have been well established here over a long period. Often enough such businesses will have brought in substantial capital and have re-invested to a considerable extent from the profits they have earned in Australia. In all probability they will have made and will still be making a real contribution to the progress of our economy and are doing so on terms which we can only regard as being fair to ourselves, even though they are also profitable to the overseas interests concerned.

In such cases, we have long regarded it as quite the normal and proper thing for such enterprises to borrow to some extent from Australian banks or other institutions or on the market. They are, in other words, using and paying for the ordinary financial facilities of the country just as locally-owned firms do and we can see no reason why they should not be able to use such facilities.

Again there can be the case of new ventures starting up here which are bringing in capital of their own but which are also providing for substantial Australian participation in the shareholding of the enterprises. They may also contemplate borrowing in Australia a certain amount of the money they require for the development of their undertakings as well as borrowing from sources abroad. Within the limits of our capital market to accommodate such borrowings, and keeping in view the needs of our own enterprises, we are inclined to regard this as also being a fair and reasonable arrangement.

Necessarily, of course, arrangements for the financing of enterprises in Australia will take many different forms and it would not be possible to lay down detailed criteria as to what we would regard as acceptable in each and every case. What I have said is simply by way of providing broad guidance in the matter but we think it would be helpful both to ourselves and to the interests concerned if they were to consult generally with the Reserve Bank of Australia as to the calls they envisage making on the market and especially where there is any doubt as to whether the particular arrangements they have in view would be conformable with the Government viewpoint.”