Reserve Bank of Australia Annual Report – 1969 Public Statements

Summarised below are public statements on policy matters which were issued by the Bank during 1968/69.

Savings bank interest rates (10 July 1968)

The maximum interest rate payable on savings bank deposits would be increased by 0.25 per cent per annum, effective 1 August 1968. Increases of up to 0.5 per cent per annum in some savings bank lending rates might follow.

Banking policy (11 October 1968)

The maximum overdraft interest rate chargeable by trading banks would be increased by 0.25 per cent per annum to 7.5 per cent per annum, effective 14 October 1968, and the Statutory Reserve Deposit ratio of major trading banks would be increased from 8.0 per cent to 9.0 per cent—by 0.5 per cent on 23 October 1968 and by 0.5 per cent on 15 November 1968.

Savings bank deposit facilities (7 March 1969)

Approval was given for savings banks which wished to introduce progressive savings accounts to pay on such accounts a rate of interest up to 1 per cent per annum higher than the rates paid on ordinary deposit accounts. The maximum amount on which interest could be paid would be $10,000. In any such scheme, a depositor must agree to make regular deposits and no withdrawals over a period of at least three years.

Certificates of Deposit (12 March 1969)

Approval was given for the trading banks to issue marketable certificates of deposit. These could be issued in amounts of $50,000 or over for terms ranging from three months to two years to yield up to a maximum of 4.75 per cent per annum.

The Australian Resources Development Bank was also permitted to make limited issues of marketable short-term certificates of deposit. Authorised money market dealers would be permitted to deal in certificates of deposit and hold a limited proportion of their portfolios in this form.

Short-term money market (24 April 1969)

Authorised dealers in the short-term money market would be allowed rather more flexibility in their operations by giving them scope to handle a somewhat wider range of assets and by dispensing with certain requirements which could be eliminated without prejudice to the efficient and safe operation of the market.

Government securities would continue to form the great bulk of dealers' portfolios, but these could be securities maturing within five years instead of the previous maximum of three. The arrangements for dealers to deal in and hold other assets would be varied to cover short non-bank commercial bills, as well as bank endorsed or accepted commercial bills and certificates of deposit; in addition a small part of dealers' funds could be invested in such other assets as they might choose.

The Bank would continue as lender of last resort to dealers but henceforth only Government securities would be accepted as security for these loans.

Dealers had previously been required not only to lodge securities with lenders for amounts placed with them but also to hold additional amounts of Government securities (margins) with the Reserve Bank; from a date to be announced by the Bank, this margins requirement would be withdrawn. Determination of the appropriate security margin for each dealer would then be a matter for negotiation solely between lender and dealer.

The announcement also mentioned that it appeared that some lenders to the market were under the impression that the Bank not only ensured the liquidity of dealers' assets (as it would continue to do for Government securities under the lender of last resort arrangements) but also accepted responsibility for the repayment of loans to individual dealers and for their solvency generally. This of course was not, and never had been, the case.