Reserve Bank of Australia Annual Report – 1972 Other Activities of the Bank

Through its various activities the Bank has a wide range of contacts in the community. It maintains close touch with many institutions and bodies engaged in finance, commerce and industry. These contacts provide valuable information and comment to the Bank and thereby assist in the continuing analysis of current economic trends and the assessment of prospective conditions; they add, for example through the economic liaison maintained with industry and commerce, a qualitative appreciation of events which enhances the available statistical material. The Bank appreciates very much the co-operation which is extended to it.

NOTE ISSUE

The face value of Australian notes in circulation rose by about 10 per cent during 1971/72 to $1,508 million. The growth was again reflected mainly in the $20 denomination and this note now accounts for about 46 per cent of the value of notes outstanding; three years ago it accounted for 40 per cent of the total. Over the financial year each of the smaller denomination notes declined slightly as a proportion of the total.

As well as handling the production of Australian notes, the Printing Division of the Bank's Note Issue Department undertakes other types of security printing. The volume of production, during each of the past four years, of the major items of security printing is shown in the table.

Over recent years there has been increasing concern about the inadequacies of the present Note Printing Works to meet with reasonable efficiency the expected future increase in production requirements. A site in the Melbourne suburb of Craigieburn has therefore been purchased and planning has commenced for a new Note Printing Works to be completed by 1979.

RURAL CREDITS

The Rural Credits Department of the Bank provides seasonal finance to assist in the marketing, processing or manufacture of primary produce. At 30 June 1972, the outstanding advances of the Department totalled $261 million compared with $308 million a year earlier. During the year, the seasonal peak in total advances outstanding, $406 million in March, was $160 million below the peak in March 1971 and $216 million lower than the record reached in March 1970. The further decline in the seasonal peak level in 1971/72 was due mainly to lower net advances to the Australian Wheat Board.

The remaining debt of the Australian Wheat Board on account of the 1970/71 Wheat Pool was repaid early in April 1972 from proceeds of a loan of $86 million made by the Commonwealth Government to the Board. This followed similar action in the previous two years when the Government provided $190 million in respect of the 1969/70 Pool and $250 million for the 1968/69 Pool. The marked fall in loans from the Government reflected record sales and a sharp reduction in intake by the Board under quota arrangements in 1969/70 and 1970/71.

The intake of wheat during 1971/72 was approximately 10 per cent higher than in the previous year but continuing substantial sales enabled the Board to operate with a smaller seasonal borrowing from the Rural Credits Department and to reduce further its stocks at the end of the financial year.

In addition to wheat, finance was provided during the year for a variety of commodities, including dairy produce, canned and dried fruits, barley, oats, rice, cotton, eggs, superphosphate, sugar, peanuts, wine and spirits. The demand for advances for canned fruits and eggs was higher but finance required in respect of barley, oats, cotton, superphosphate and peanuts was less than during 1970/71.

Interest rates on Rural Credits advances were not reduced in line with movements in other rates during the year; as was mentioned in the Bank's report for 1969/70, the rates on Rural Credits advances had been left unchanged at the time of the previous general increase in interest rates.

BONDS AND STOCK

The amount of Commonwealth debt handled by the registries which the Bank conducts in Australia for the Government rose strongly in 1971/72. The net increase was $690 million compared with $240 million in the previous year. Conventional series increased by $645 million and special series rose appreciably. There was also a considerable increase in the volume of transactions in inscribed stock; in addition to a strong growth in subscriptions and conversions there was heavy trading in the secondary market for government securities.

Investors in both conventional loans and special series have continued heavily to favour use of the free facilities for their investments to be held as inscribed stock or under the special safe custody arrangements provided by banks. The extent to which government securities are held in the form of bearer securities is comparatively small; investors are increasingly preferring to avoid the possibility of theft, loss or destruction of actual bonds and to avail themselves of the convenience offered in the case of inscribed stock and special safe custody facilities of having interest credited directly to bank accounts.

RESEARCH GRANTS

The Rural Credits Development Fund approved grants totalling $736,000 during 1971/72 for research and extension projects concerned with primary industries. The Fund is financed by a transfer each year of half of the net profits of the Rural Credits Department and grants are made on the advice of a Committee which includes representatives from universities and other research institutions.

During the year, the Bank called applications for three Senior Research Fellowships (Agriculture). Awards will be made in late 1972. The Fellowships, which were awarded for the first time in 1970/71, will provide opportunities for experienced research workers to apply their talents towards the resolution of practical problems in agriculture.

The Bank continued to provide support through the Economic and Financial Research Fund for post-graduate research in economic and financial topics with particular reference to Australia. In 1971/72 grants totalling $61,000 were made from the Fund, mainly to universities.

PUBLICATIONS

During 1971/72 the Bank published three further occasional papers, two continuing the series reporting results of the project to construct a quarterly model of the Australian economy and the third comprising a bibliography of Australian finance for the years 1900 to 1968. Preparation of the second volume of the Australian banking and monetary statistics which was foreshadowed in the previous report is nearing completion.

The Port Moresby office of the Bank commenced in December 1971 to issue a quarterly Bulletin of Statistics for Papua New Guinea which replaced the supplement on Papua New Guinea previously published with the Bank's monthly Statistical Bulletin. Further supplements (Company and Flow-of-Funds) to the Statistical Bulletin were published during the year and the Bank continued to release regular statistical and other information. The more important of the Bank's public statements are summarized on page 60 of this report.