Reserve Bank of Australia Annual Report – 1978 Banking, Issue and Other Functions

Banking Operations

In its capacity as banker to the Commonwealth Government, and the governments of four of the states and the Northern Territory, the Bank processed approximately 95 million cheques during the year, about 3 per cent fewer than in the previous twelve months. The majority of cheques drawn on the Bank are for regular welfare payments by the Commonwealth Government. The main factor in the further decrease in the volume of cheques processed was a reduction in the number of Medibank cheques issued on the Reserve Bank during the year.

The Bank continues to maintain a close liaison with the Department of Finance, other government departments and the banking industry to promote efficiency in government payments. During the year, all savings banks agreed to accept from the Department of Social Security fortnightly pension payments for direct credit to accounts. This extended previous arrangements whereby such payments could be made direct to a cheque account with a trading bank, or to a building society or credit union. Under these arrangements, some 269,000 payments each fortnight, representing about 15 per cent of total pension payments, are being made direct to accounts with banks and other financial institutions.

Over recent years, the Bank has also participated in the development and introduction of arrangements designed to improve the flow of payments and reduce the volume of cheques through the banking system. The Bank has joined other banks in adopting a reciprocal system for exchanging “amount encoded paper” between individual participating banks for direct processing through their computer systems. As a result, manual handling and the incidence of error in cheque processing have been reduced. In 1977/78, 28 per cent of the volume of the Bank's paper received from other banks was “amount encoded”, while the Bank encoded 56 per cent of the volume of other banks' cheques exchanged by it.

The Bank undertakes domestic loan raising and debt servicing operations for the Commonwealth Government through the inscribed stock registries which it conducts, on the government's behalf, at each of its branches. Functions include the management of cash and conversion loans, issues of Australian Savings Bonds and Treasury notes, and the servicing of accounts for inscribed stockholders. The latter numbered about 148,000 at 30 June 1978, an increase of 10,100 since 30 June 1977. The face value of Commonwealth government securities managed by the Bank increased from $18.9 billion at 30 June 1977 to $20.3 billion at 30 June 1978. This figure included Australian Savings Bonds $2.3 billion; Special Bonds $0.6 billion; Treasury bills $1.5 billion; Treasury notes $0.4 billion; and other Commonwealth government securities $15.5 billion.

The Bank conducts a register of Income Equalization Deposits on behalf of the Australian Taxation Office. Over 1977/78, deposits of $44 million and withdrawals of $14 million were processed through these accounts. At 30 June 1978, 8,500 deposit accounts, with aggregate balances of $67 million, were current.

Note Issue

The Note Issue Department of the Bank printed 362 million Australian notes in 1977/78, about 6 per cent more than in the previous year. The great bulk of production was required to replace notes withdrawn from circulation. The remainder of production went to meet the community's increased demand for notes, and into reserve stocks. The proportion of the total value of notes on issue represented by $50 notes has been increasing steadily since the note was first issued in October 1973; the proportions of all other denominations have fallen.

Some 844 million other items of security printing, mainly postage stamps, were also produced in 1977/78.

The Bank has continued to work closely with the commercial banks in the development of arrangements for security and efficiency in handling the increasingly large flows of notes within the banking system necessary to meet the demands of the community.

Rural Credits

At 30 June 1978, outstanding advances of the Rural Credits Department of the Bank totalled $479 million (of which advances to marketing boards accounted for $387 million, and to co-operatives $92 million) compared with $568 million a year earlier. Advances fluctuated less than in 1976/77, and the average level was considerably higher. From a low of $381 million in October 1977, advances rose to a peak of $819 million in February 1978.

Finance for the marketing of wheat was again the major influence on lending. The average level of advances for wheat was substantially higher than in the previous year, reflecting concurrent debts during part of the year on two wheat pool advances. Advances for dairy produce, rice, barley, cotton and most other commodities were also higher; lending for canned fruit was marginally lower. As a proportion of the average level of advances, finance for wheat and other grains represented 73 per cent of the total, and dairy produce 14 per cent.

Research Grants

Half of the net profits of the Rural Credits Department is, in terms of the Reserve Bank Act, transferred each year to the Rural Credits Development Fund. During 1977/78, grants totalling $1.3 million were approved from the Fund for projects aimed at promoting primary production. A Research Fellowship and a Senior Research Fellowship in Agriculture were also awarded. The grants and fellowships were awarded after obtaining advice from a committee drawn from universities and other organisations.

In 1977/78, the Bank approved grants totalling $102,000 from its Economic and Financial Research Fund for post-graduate research on economic and financial topics relevant to the Australian economy. A Professorial Fellowship and a Fellowship in Economic Policy were also awarded.