RDP 2014-10: Financial Reform in Australia and China Appendix A: Time Line of Australian Financial and Capital Account Liberalisation

Alexander Ballantyne, Jonathan Hambur, Ivan Roberts and Michelle Wright

September 2014 – ISSN 1320-7229 (Print), ISSN 1448-5109 (Online)

1931 The Australian pound is pegged to the UK pound sterling (at a depreciated rate, having previously traded at par with the UK pound sterling)
1939 Foreign exchange controls are introduced
1966 Decimalisation of the currency; the newly created Australian dollar is pegged to the UK pound sterling
1967 The Australian dollar is revalued upwards by 17 per cent against the UK pound sterling
1971 Credit directives (i.e. qualitative and quantitative lending controls) are removed
  Banks are given permission to trade as principals in foreign exchange markets
  The Australian dollar is pegged to the US dollar
1972 The interest rate ceiling on large loans (more than $50,000) is removed
  An embargo on offshore loans with a maturity of less than two years is introduced
  The variable deposit requirement (VDR) on offshore borrowing is introduced and set at 25 per cent
  Capital flows from the sterling area are no longer exempted from exchange controls; other capital controls are also strengthened
  The Australian dollar is revalued upwards by 7 per cent against the US dollar
1973 The interest rate ceiling on certificates of deposit is removed
  The Australian dollar is revalued upwards by 11 per cent against the US dollar, and subsequently by a further 5 per cent
  The VDR is increased to 33.3 per cent
1974 The ‘seven-day’ rule – which stipulated that foreign exchange forward cover (for trade-related transactions) could only be obtained from the RBA within seven days of assuming exchange rate risk – is introduced
  The VDR is returned to 25 per cent in June, then reduced further to 5 per cent in August, before being suspended in November
  The embargo on offshore loans with a maturity of less than two years but more than six months is revoked; the embargo on loans with a maturity of less than six months is maintained
  The Australian dollar is pegged to a trade-weighted basket of currencies and at the same time is devalued by 12 per cent against the US dollar
1976 The interest rate ceiling on loans valued between $50,000 and $100,000 is restored
  Credit directives are restored
  A flexible peg to a trade-weighted basket of currencies is introduced; in the process, the Australian dollar is devalued by 17½ per cent on a trade-weighted basis
1977 The embargo on offshore loans with a maturity of between six months and two years is reintroduced
  The VDR is reimposed and set at 25 per cent in January
  The VDR is subsequently suspended again in July and the embargo on offshore loans with a maturity of between six months and two years is once again revoked
1978 The embargo on offshore loans with a maturity of less than six months is removed
1979 Exchange controls are eased to allow some offshore income to be held offshore
  A government inquiry into the Australian financial system (the Campbell Committee) is established
  A tender system for the primary issuance of Treasury notes is introduced
1980 All interest rate ceilings on deposits are removed
  Currency futures are first traded on the Sydney Futures Exchange
  The rules regarding offshore investment by residents are partially relaxed
1981 The Campbell Committee issues its final report
1982 The RBA announces that there will be no more quantitative lending controls
  Savings banks are permitted to accept some wholesale deposits
  A tender system for the primary issuance of Australian Government bonds is introduced
1983 A package of measures is introduced to stabilise capital flows; it includes changing the time of the announcement of the US dollar mid rate to the afternoon and allowing banks to set forward rates (essentially allowing the forward rate to float)
  The Australian dollar is floated on December 12
  41 non-bank foreign exchange dealers are authorised by the RBA
1984 All remaining (non-price) controls on deposits, including on size and maturity, are removed
1985 The restrictions on interest-bearing investments in Australia by foreign private banks are removed
  The remaining ceilings on lending rates are removed, apart from those applying to owner-occupier housing loans valued at less than $100,000
  16 foreign banks are invited to take up banking licences in Australia
1986 The interest rate ceiling on owner-occupier housing loans valued at less than $100,000 is removed