Reserve Bank of Australia Annual Report – 1970 Public Statements

Summarised below are public statements on policy matters which were issued by the Bank during the period under review.

Banking policy (31 July 1969)

Maximum trading bank deposit and lending rates of interest were increased by 0.25 per cent per annum, effective 1 August 1969. A new maximum deposit rate of 5 per cent per annum was applied to both fixed deposits and certificates of deposit. The Bank also concurred in certain adjustments to the term and rate structure proposed by the trading banks within the new fixed deposit maximum. The maximum overdraft interest rate chargeable by trading banks was increased to 7.75 per cent per annum.

The Statutory Reserve Deposit ratio of the major trading banks would be increased from 9 per cent to 10 per cent. An increase of 0.5 per cent would be made on 18 August and a second increase of 0.5 per cent at a later date. (The latter increase was made on 3 October.)

Savings bank deposit facilities (4 December 1969)

Approval was given to a proposal for the establishment of a new type of savings bank account on which interest may be paid at rates up to 4.7 per cent per annum, almost 1 per cent per annum above the general deposit rate paid by most savings banks of 3.75 per cent per annum. Holders of these accounts would be required to give three months' notice before withdrawals could be made. The accounts must also have a minimum balance of $500 and transactions would be in minimum amounts of $100. Each savings bank could decide whether it wished to offer the facility.

Trading bank interest rates (6 March 1970)

Maximum trading bank deposit and lending rates of interest were increased by 0.5 per cent per annum, effective 9 March 1970. The maximum overdraft interest rate was increased to 8.25 per cent per annum. This increase would generally apply throughout the whole range of trading bank lending; for personal instalment loans, on which a flat rate of interest applies, the maximum interest rate for wholly unsecured loans would rise by 0.25 per cent per annum to 6.5 per cent per annum flat. The maximum deposit rate applying to new (or renewed) fixed deposits and certificates of deposit was increased to 5.5 per cent per annum. The Bank agreed with the trading banks that, within this maximum, certain specified rates of interest would apply for fixed deposits of less than $50,000. For fixed deposits of $50,000 and over for periods of 30 days to two years and on certificates of deposit for periods of three months to two years (minimum subscription unchanged at $50,000) rates of interest would be a matter for negotiation between banks and their customers, subject to the maximum of 5.5 per cent per annum.

Savings bank interest rates (26 March 1970)

Increases in savings bank interest rates from 1 April 1970 were approved. It would be left to individual banks to announce their own rates on savings bank deposits; for some types of balances these could range up to 5 per cent per annum. The maximum amount in any one account on which savings banks were permitted to pay interest would be increased from $10,000 to $20,000. Savings banks could also increase the interest rates charged on their loans. Although savings banks were permitted to charge lending rates up to the trading bank maximum overdraft rate, their loans for housing were generally being made at rates around 6/6.25 per cent per annum. After 1 April, most loans by savings banks for housing would be at rates of up to 7 per cent per annum.

Trading bank rural interest rates (2 April 1970)

The increase of 0.5 per cent per annum in maximum trading bank lending rates of interest, which became effective on 9 March 1970, was modified. Subsequent to this increase, the Prime Minister, the Deputy Prime Minister and the Treasurer had consulted the Governor of the Bank about the impact of the higher interest rates on rural producers. The Ministers had stated the Government's view that having regard to the special difficulties suffered by a number of rural industries at present, and the financial problems facing many rural producers, it would not be appropriate that there should be a general increase in trading bank lending rates on loans to rural producers.

The matter had subsequently been reviewed by the Bank and after discussions with the trading banks it had been decided that in present circumstances the banks would apply a selective exemption of rural borrowers from the increase. The objective would be to avoid adding to the cost of servicing bank borrowings by rural producers who were in a depressed situation. It was not intended that the exemption would be extended, for example, to individuals or companies whose main business was not farming or to borrowing by rural producers to finance new property purchases or new expenditure not related to rural production.

Finance for housing (23 July 1970)

It was announced that, in the course of its contacts with savings banks, trading banks, and life offices, the Bank had asked these institutions to maintain, and in the case of savings banks, to the extent practicable to increase, the volume of their housing loans in coming months. This action followed the recent falling-off in dwelling approvals by local government authorities and indications of a decline in housing commencements.

Savings banks, whose housing lending had been steady in the March and June quarters of 1970, would be making a substantial increase in their housing lending over the next few months, and this would give valuable support to the home building industry.