Reserve Bank of Australia Annual Report – 1969 Financial Statements Notes on Annual Accounts

The year saw significant changes in the levels of major balance sheet items and some changes of principle in the interdepartmental accounting relationship of the Central Bank and Note Issue Department. A major factor determining the level of net profits this year was the continuation of the policy of rebuilding the Bank's internal reserves after the heavy calls on them associated with sterling devaluation in 1967.

PROFIT AND LOSS APPROPRIATION STATEMENT

Profits in 1968/69 from Central Banking Business and in the Note Issue Department, before deducting provisions for contingencies, showed some growth over the previous year. This was largely attributable to the increased average level of overseas assets held and the higher average interest rates earned on these investments.

Rural Credits Department profits were also higher mainly as a result of an increased average level of outstanding advances, largely associated with the record wheat crop.

In 1968/69 the net profits of the three sections of the Bank totalled $31,076,381 compared with $28,964,218 in 1967/68. Payments made from the net profits were to the Commonwealth of Australia $26,554,563, to the published reserve funds of the Bank $3,708,909 and to the Rural Credits Development Fund $812,909.

BALANCE SHEETS

Note Issue Department Balance Sheet

Limitations on the types of assets the Note Issue Department can hold, imposed by Section 38 of the Reserve Bank Act, and changes in the disposition of the Bank's overseas investments (see page 30) have led to increasing difficulty in maintaining a suitable distribution of investments between the Central Bank and the Note Issue Department. To meet this position, an interest bearing deposit has been established with the Central Bank by the Note Issue Department and an equivalent amount of assets transferred to the Central Bank portfolio. The Note Issue Department deposit is maintained at a level which is related to the proportion of overseas funds which lies outside the scope of authorised Note Issue investments. Interest is paid on the balance at an appropriate rate to safeguard the Department's income earning capacity. The deposit is included under a new heading BALANCES WITH CENTRAL BANK together with other Note Issue funds lodged with the Central Bank. The latter were previously included under “All other assets” but for comparative purposes 1968 figures have been rearranged.

“All other assets” now mainly comprises accrued items and Note Printing Branch assets following the review of accounting relationships mentioned earlier.

Aggregate Balance Sheet

Changes in some major items in the Bank's aggregate balance sheet have been referred to in earlier parts of this report. The most significant changes are summarised below.

GOLD, AND BALANCES HELD ABROAD rose by $89 million and OTHER OVERSEAS SECURITIES by $96 million. These items comprise the major part of Australia's holdings of gold and foreign exchange and changes in this item are referred to in the Balance of Payments section of the report.

AUSTRALIAN GOVERNMENT SECURITIES (INCLUDING TREASURY BILLS) decreased by $194 million; holdings of Treasury bills fell by $127 million; Treasury notes which were held in portfolio for the first time this year stood at $13 million; other Australian Government securities fell by $80 million.

Factors affecting these items are discussed in the Domestic Finance section of the report.

LOANS, ADVANCES AND BILLS DISCOUNTED increased by $302 million. This mainly reflected a rise of $251 million in advances by Rural Credits Department (see page 33) and changes in the level of advances to dealers in the short-term money market and to other Reserve Bank customers.

BILLS RECEIVABLE AND REMITTANCES IN TRANSIT were $24 million lower. The decrease was mainly in respect of exchange clearances with other banks at 30 June.

AUSTRALIAN NOTES ON ISSUE rose by $93 million in response to increased public demand during the year.

DEPOSITS, BILLS PAYABLE AND ALL OTHER LIABILITIES, which includes deposits of trading and savings banks, Australian governments, overseas institutions, other customers, and provisions for contingencies, increased by $196 million.

Changes in deposits of trading banks, savings banks and overseas institutions are disclosed in the Central Banking Business balance sheet. STATUTORY RESERVE DEPOSIT ACCOUNTS OF TRADING BANKS rose by $109 million, reflecting increases in the S.R.D. ratio and a strong growth in trading bank deposits in 1968/69 (see pages 21–2). Decreases were recorded in TERM LOAN FUND ACCOUNTS OF TRADING BANKS, $23 million, FARM DEVELOPMENT LOAN FUND ACCOUNTS OF TRADING BANKS, $22 million, and OTHER DEPOSITS OF TRADING BANKS, $12 million. DEPOSITS OF SAVINGS BANKS were $39 million higher as a result of savings banks' investment in fixed deposits of part of the increase in their depositors' balances. DEPOSITS OF OVERSEAS INSTITUTIONS rose by $51 million mainly as a result of Australian currency transactions with the International Monetary Fund by other countries.

The residual increase of approximately $54 million comprises changes in a range of miscellaneous liabilities held in the various sections of the Bank.

Interdepartmental accounts amounting to $745 million have been offset in the aggregate balance sheet. These comprise mainly:

  1. The new interest bearing deposit established with the Central Bank by the Note Issue Department (see comment under Note Issue Department Balance Sheet) and other balances of the Note Issue Department with the Central Bank including the special account established in 1967/68 to absorb the liability remaining in the Note Issue Department accounts after its available reserves had been used in writing down the Australian currency value of its sterling assets. These items are included under “Balances with Central Bank” in the Note Issue Department Balance Sheet and “Other liabilities” in the Central Banking Business Balance Sheet.
  2. Advances to Rural Credits Department by the Central Bank. These advances are reflected in “All other liabilities” in the Rural Credits Department Balance Sheet and in “Loans, advances and bills discounted” in the Central Banking Business Balance Sheet.