Reserve Bank of Australia Annual Report – 1984 The Bank's Services

The Reserve Bank operates a substantial banking business and provides a range of financial and other services. Major developments during 1983/84 are outlined in the following paragraphs.

Banking Operations

The Bank is the principal banker to the Commonwealth Government and the governments of four of the States and the Northern Territory. Other customers include Australian banks, overseas central banks and international organisations, clients of the Bank's Rural Credits Department and the authorised dealers in the short term money market.

During 1983/84 the Bank's branches paid approximately 95 million cheques drawn on the accounts of its government customers – about three per cent less than in the previous year. Most of these cheques were regular welfare payments by the Commonwealth Government. The Commonwealth departments involved are working towards crediting most welfare payments directly to beneficiaries' accounts with banks and other organisations. The Bank supports this approach.

During the year computer processing of customers' accounts commenced at the Bank's Hobart and Canberra branches. Darwin is now the only branch where customers' accounts are not processed by computer but facilities will be extended to that branch during 1985.

Besides providing banking services, the Bank's branches have an important role in relation to the financial and business communities in the States and Territories. They are the major points of contact between the Bank and the financial institutions located in the various centres. This liaison function provides a wide information base for the Bank and a means of keeping local communities informed about the Bank and its policies.

The Bank participated during the year in a number of committees involved with matters related to the banking industry. These included:

• the Australian Clearing House Committee – responsible for the administration of the Clearing Houses conducted by banks;
• the Cheques Act Committee – formed by banks to consider proposed new legislation relating to cheques; and
• the Ad Hoc Committee on Banking Practices and Procedures – formed by the National Companies and Securities Commission to consider bank arrangements for the retention of paid cheques and other banking records.

Note Issue and Cash Operations

The Bank handled record volumes of cash in 1983/84. An important factor was the introduction of the $100 note (on 26 March 1984) and the $1 coin (on 14 May 1984). Following the introduction of the $1 coin, $1 notes are being withdrawn from circulation.

Demand for the new $100 note was strong. By end June, six million of these notes ($600 million) had been taken up. By contrast, issue of the first six million pieces of the $50 note, in 1973, took 15 months. Distribution of initial supplies of the $1 coin to bank branches throughout Australia was a major task. By the issue date, almost 40 million coins (weighing approximately 360 tonnes) had been distributed. By end June about 110 million $1 coins were on issue, and about 40 per cent of the 96 million $1 notes previously on issue had been withdrawn from circulation.

High-speed currency verification and sorting machines are now operating in the Bank's Sydney, Melbourne and Brisbane branches and will shortly be introduced at Adelaide and Perth. These machines process and authenticate used notes and sort out and destroy unfit notes.

Other features of the Bank's cash handling activities in 1983/84 were:

• about 430 million Australian notes were produced at the Bank's Note Printing Branch at Craigieburn, Victoria, compared with 370 million pieces the previous year. Some 12 million items of security printing were also produced there;
• the value of notes on issue totalled $7,237 million at end June 1984,12.8 per cent higher than a year earlier; in 1982/83 the rise was 9.9 per cent;
• the Bank issued 2,892 million coins of all denominations during the year, about 6.7 per cent more than in the previous year. Coin returned by banks totalled 2,435 million pieces, about 5.5 per cent more than the previous year. The resulting net issue of coins – 457 million pieces – was about 14 per cent more than in 1982/83.

As noted in last year's Report, processing and wrapping of coin for reissue is a costly service. Since October 1983 the Bank has charged banks for this service for the high volume, low denomination coins. A charge was introduced for supplies of wrapped 10 cent coins from 1 August 1984.

The Bank keeps in touch with institutions overseas and in Australia about technological developments which may improve the security and production of currency notes. Recent developments of thinking in this area concern the feasibility of embodying non-graphic security features in notes.

In this context, arising out of earlier exploration by the Bank and CSIRO, Note Printing Branch has been working on the development of a more secure and durable polymer-based form of note. Equipment was installed during the year to produce experimental batches of such a note substrate. It is likely to be some time before the feasibility of this development can be assessed.

Commonwealth Government Securities

The Commonwealth Government's very large domestic loan raisings in 1983/84 added substantially to workloads within the Bank. Aside from operating Registries of Commonwealth Inscribed Stock at each of its Australian branches, the Bank conducts Treasury note and Treasury bond tenders on the Government's behalf and handles the issue of Australian Savings Bonds (ASBs). During the year, Treasury notes with a face value of $7,400 million were allotted through tenders to the public. Nine Treasury bond tenders were held, resulting in the allotment to the public of bonds with a face value of $9,650 million (see panel on page 12). Gross issues of ASBs were $3,564 million and redemptions were $1,605 million.

Activity at Registries was again at a high level. The number of stock accounts rose to 278,000 in June, an increase of 23 per cent over the year. During the year 323,000 applications for ASBs and 108,000 redemptions were processed. Development of a major new computerised system for the Registries is progressing; installation is expected to commence in 1985.

During the year, Commonwealth legislation was enacted which limited future issues of Commonwealth Government securities to inscribed stock and widened the categories of persons eligible to hold stock. Effective 2 July 1984, bearer securities are not available for new issues of Treasury notes, Treasury bonds or ASBs; they remain an option for issues before that date. Trustees and a broad range of unincorporated bodies may now hold Commonwealth inscribed stock.

In June 1984, the Treasurer announced some changes to Treasury bond tender arrangements and to conditions applying to ASBs. Non-competitive bids at bond tenders may now be submitted by mail provided they reach nominated post office boxes by the time tenders close. The ASB changes were aimed mainly at lessening the scope for early redemptions. Concurrent with these changes the Bank extended the emergency facility available through its branches for investors to dispose of small parcels of bonds. The facility, which is available over the counter or by mail, allows investors to sell to the Bank bonds with a face value of up to $25,000 in a day at market-related prices. The Bank makes a charge of 25 cents per $100 face value for the service.

The Government has decided to issue indexed securities along the lines recommended by the Martin Group. The securities will be sold at public tender. The timing of the first issue and other details have yet to be announced.

Research Grants and Fellowships

Demand was again strong for grants from the Rural Credits Development Fund. These grants are for promotion of primary production including agricultural and pastoral activities, fishing and forestry. The Bank's long-standing interest in imaginative and innovative projects has undoubtedly encouraged many institutions to look to the Bank for support. In 1983/84, 79 grants totalling $2.2 million were approved from the Fund, for projects to be undertaken over the next three years. These included projects associated with salinity, agricultural engineering, post-harvest treatment of horticultural produce and molecular and cellular genetics for improved animal and plant production. Four Research Fellowships (Agriculture) were also awarded.

The Bank also makes grants from its Economic and Financial Research Fund, for post-graduate research outside the Bank in economic and financial topics relevant to the Australian economy. Grants totalling $65,000 were awarded. One Professorial Fellowship and one Senior Research Fellowship in Economic Policy were also awarded.

Rural Credits

Primary production was boosted substantially in 1983/84 by improved seasonal conditions. Lending by the Bank's Rural Credits Department to marketing boards and rural co-operatives reached a peak for the year in March of $419 million, a little lower than the peak of $432 million in 1982/83. Advances were made to a slightly smaller number of borrowers this year. The major advances were for dairy produce, canned fruits and cereals. Other commodities financed included dried fruits, cotton, eggs; sugar, superphosphate, and wine and spirits.

The table below shows interest rates applying on Rural Credits Department loans during 1983/84.

Interest Rates

(% p.a.)

	Range
1 July 1983	14.50–15.50
24 August	14.00–15.00
21 September	13.50–14.75
12 October	13.25–14.75
23 November	13.05–14.75
14 December	12.75–14.50
5 January 1984	12.25–14.00
16 March	13.25–15.00
13 April	14.25–16.00

Information Services

The Bank is keenly aware of the importance of wide community understanding of its role and performance. To this end, continuing efforts have been made to improve and expand the range of the Bank's information services.

Senior officers gave a number of public addresses. There were also meetings with professional associations, with staff at universities and other tertiary institutions, and with school teachers and student groups. A wide range of enquiries was handled by the Bank's Press Office. Press releases – some of them daily – were issued as appropriate to outline developments in financial markets or changes to the Bank's operations.

Publication of the Bank's monthly Bulletin was continued. As well as extensive statistics, the Bulletin carries regular reviews of economic and financial developments and the Bank's market operations, and reproduces the main public addresses by its senior officers. The Bulletin also features special articles on issues of economic policy (see inset).

Other publications issued during the year included:

• Company Finance, and Financial Flows (annual Supplements to the Bulletin).
• Occasional Papers. Australian Economic Statistics 1949/50 to 1982/83: No. 8A Tables; No. 8B Graphs. (The data in Occasional Paper 8A are also available on microfiche and a machine-readable tape.)
• Reserve Bank of Australia: Functions and Operations. This was revised following the changes to foreign exchange arrangements from 12 December 1983.

Freedom of Information

During the year the Bank received 17 requests for access to documents under the Freedom of Information Act – two relating to research funds administered by the Bank, one relating to an exchange control matter and 14 from officers of the Bank in relation to personal matters. 13 requests were granted in full and one in part. Three were declined. The reasons for refusal of access were that the documents were exempt documents or were documents relating to matters which are exempted from the operation of the Act.

Two requests for internal review were received. In one case, the earlier decision was confirmed; in the other, access was granted to a number of documents.

The total cost to the Bank of administering the Freedom of Information Act in 1983/84, including staff time and overheads, is estimated to have been approximately $21,000. Fees were not charged in respect of any of the requests.

Footnote

Reprints of most articles may be obtained free of charge on application to The Secretary, Reserve Bank of Australia, Box 3947 G. P0., Sydney, N.S.W 2001. [*]