Reserve Bank of Australia Annual Report – 1973 Papua New Guinea

The Australian and Papua New Guinea governments have reached agreement in principle about future banking arrangements in Papua New Guinea following consideration of the final report of the Committee on Banking in Papua New Guinea. This Committee comprised representatives from the Papua New Guinea Administration, the Department of External Territories, the Australian Treasury and the Reserve Bank. Two of the main principles on which the Papua New Guinea banking system is to be established are that:

• responsibility for control of banks and financial institutions operating in Papua New Guinea be vested in the Papua New Guinea authorities as soon as practicable; and
• a central bank be established in Papua New Guinea on the basis of the Port Moresby office of the Reserve Bank of Australia and be endowed with a full range of powers to act as a central monetary authority for a separate banking system, even though some of these powers may not be used in the immediate future.

The necessary legislation to establish The Bank of Papua New Guinea as the country's central bank and to form the structure of control of the banking and financial system is to be introduced shortly in the Papua New Guinea House of Assembly. Complementary legislation will be introduced in the Australian Parliament.

Present planning is that The Bank of Papua New Guinea will commence operations before 1 December 1973 (the date tentatively set for self-government). Concurrently, the Reserve Bank of Australia will close out its operations in Papua New Guinea; virtually all of its existing assets and responsibilities there will be taken over by the new bank.

It is expected that close liaison will continue between the Reserve Bank of Australia and The Bank of Papua New Guinea after the latter's establishment. Collaboration will obviously be necessary while Papua New Guinea continues to use Australian currency and to have access to Australia's overseas reserves. The Papua New Guinea Government has decided in principle that Papua New Guinea should have its own currency, to be issued on a one-for-one parity with the Australian dollar. However, the Government will not seek to introduce the new currency before December 1974. A committee has been established to handle detailed planning.

The Bank has agreed to provide technical assistance to The Bank of Papua New Guinea during the early stages of its existence. A number of the Reserve Bank's Australian staff will be on secondment to the new bank in operational or training roles. However, the great majority of the new bank's staff will be Papua New Guineans at present on the staff of the Reserve Bank in Port Moresby. Training of local staff to assume positions of responsibility has been a primary objective of the Reserve Bank in Papua New Guinea. At present, almost 85 per cent of its total staff in Port Moresby are Papua New Guineans.

Plans are also in hand for a new commercial bank to be owned by the Papua New Guinea Government. This will be known as the Papua New Guinea Banking Corporation and will absorb most of the existing business and assets in Papua New Guinea of the Commonwealth Banking Corporation. The Commonwealth Banking Corporation is playing a major role in the establishment of the new commercial bank which is expected to commence operations early in 1974.

The Australian commercial banks presently in Papua New Guinea will be permitted to continue operations there subject to appropriate changes in structure and procedures to accord with any conditions which might be laid down by the Papua New Guinea authorities. The exact nature of any such changes has yet to be detailed. However, it has been announced that there will be no legal or institutional separation of savings banks and trading banks as is the case in Australia and has been, to date, in Papua New Guinea.