Reserve Bank of Australia Annual Report – 1977 Banking and Issue Functions

Banker to Governments

In its capacity as banker to the Commonwealth Government, four State Governments and the Administration of the Northern Territory, the Bank processed approximately 98 million cheques during 1976/77, the majority of which were for regular welfare payments by the Commonwealth Government. In 1976/77, the volume of government cheques processed by the Bank was slightly less than in 1975/76; this follows a number of years when growth in the volume of cheques processed was rapid. The main reason for the pause in growth in 1976/77 was a reduction in the number of Medibank cheques issued because of the change in health insurance arrangements.

The inscribed stock registries which the Bank conducts on behalf of the Commonwealth Government at each of its branches handle the Government's domestic cash and conversion loan operations, including those for Savings Bonds and Treasury notes. Their work also includes maintenance of accounts for inscribed stock holders (approximately 137,900 at June 1977 compared with 125,700 at June 1976) and the payment of loan interest and redemptions. During 1976/77, the face value of the Commonwealth Government debt managed by the Bank increased by $2,404 million to $18,984 million. The main components of this debt, at 30 June 1977, were Australian Savings Bonds, $1,743 million, Special Bonds, $729 million, Treasury bills, $1,300 million, Treasury notes, $370 million and other Commonwealth Government securities, $14,842 million.

During the year, the Bank undertook, on behalf of the Australian Taxation Office, the establishment and maintenance of a Register of Income Equalisation Deposits. These deposits were introduced by the Commonwealth Government on 20 December 1976 to provide eligible primary producers with means to spread fluctuations in their taxable incomes over several years. In view of the imminent introduction of these deposits, the issuing of Drought Bonds ceased on 31 August 1976.

Banks' Clearing House Arrangements

Following a review of clearing house arrangements initiated by the Australian Bankers' Association, a new Deed of Agreement was executed by all participating banks, including the Reserve Bank, establishing an Australian Clearing House Association. The Bank is now for the first time represented on the various clearing house committees, including the national governing committee. Under the new arrangements, although settlement for items exchanged between banks at clearing houses is still effected on the following business day, interest is applied to unsettled balances between banks at the current rate for 13 week Treasury notes.

Rural Credits

As Chart 19 shows, the fluctuations in Rural Credits Department advances outstanding during 1976/77 were wider than in earlier years. The peak level of advances was $658 million ($596 million for marketing boards) in April 1977. Advances outstanding at 30 June 1977 at $568 million ($480 million for marketing boards and $88 million for co-operatives) were higher than at the end of 1975/76.

Finance for wheat marketing was again the main component of lending. For other products, advances were generally lower both at the peak and on average during the year. In terms of the average level of advances, financing of wheat and other grains represented 64 per cent of the total, and dairy products 17 per cent. Interest rates charged on advances remained unchanged in the range of 9.5 to 10.0 per cent per annum.

19 Rural Credits and Note Issue

Note Issue

The Bank's Note Issue Department produced 343 million Australian notes in 1976/77. In addition to 1,081 million pieces of other security printing, including bonds, stamps and postal orders, notes were also printed for the Bank of Papua New Guinea.

The value of Australian notes in circulation rose by 14 per cent during 1976/77 to $3,319 million. This rate of increase was a little below that of the previous financial year. The $50 denomination, which was first issued in October 1973, accounted for 26 per cent of the value of notes on issue at June 1977, compared with 22 per cent twelve months earlier. The share of each of the other five denominations fell. Chart 19 shows the composition, by number, of notes on issue.

Throughout the year, the Bank has worked with Australian commercial banks towards developing more efficient and secure arrangements for the distribution of currency throughout the banking system.

Research Grants

Half of the net profits of the Rural Credits Department are transferred each year to the Rural Credits Development Fund. During 1976/77, grants totalling $1,079,000 were approved from the Fund for research, development and extension projects concerned with the promotion of primary industry. Two Research Fellowships were also awarded. The grants and Fellowships were awarded on the basis of advice from a committee drawn from university and other research institutions. The Board wishes to express its appreciation of the work of the committee.

In 1976/77, the Bank also approved grants totalling $104,000 from the Economic and Financial Research Fund for post-graduate research on economic and financial topics relevant to Australia. A Professorial Fellowship and a Fellowship in Economic Policy were also awarded.