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1360.0 - Measuring Australia's Economy, 2003  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 03/02/2003   
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Contents >> Section 8. Financial Markets >> M3, Broad Money and Credit

Over the period from 1992 to 2002 the amount of money in circulation in the Australian economy, as measured by the money supply measure "broad money", increased from $271.3b in June 1992 to $545.7b in June 2002. Money supply grew slowly from June 1992 until late-1993. Strong growth was then recorded from late 1993 to 2002.




SELECTED MONETARY AGGREGATES
Period
M3(a)

$m
Broad money(b)

$m
Total credit(c)

$m

SEASONALLY ADJUSTED
June 1997
322,689
385,790
488,138
June 1998
342,341
408,816
539,516
June 1999
375,989
452,826
590,015
June 2000
406,581
481,361
648,264
June 2001
439,744
517,348
709,144
2001–2002
July
435,722
513,661
709,384
August
443,312
519,516
714,711
September
451,923
527,838
722,196
October
456,884
531,930
726,942
November
463,317
536,126
735,295
December
469,644
545,580
735,055
January
475,759
549,591
739,076
February
479,104
552,088
743,536
March
486,745
556,354
748,666
April
474,077
545,734
776,249
May
477,050
548,047
781,068
June
473,702
545,663
790,562

(a) Currency plus current deposits with bank plus deposits of the private non-bank sector.
(b) M3 plus borrowings from the private sector by non-bank financial intermediaries less holdings of currency and deposits of NBFIs.
(c) Loans, advances and bills discounted to the private sector (does not include loans to other financial intermediaries).

Source: Reserve Bank of Australia Bulletin.


Explanatory Notes

There are a number of ways in which the supply of money can be measured. Monetary aggregates have long been used by central banks as indicators of the effects of monetary policy. Aggregates used in Australia are currency, M1, M3, broad money and credit. The most commonly referred to are M3 and broad money.

The definitions of the measures are as follows:

Currency is notes and coins on issue less holdings of notes and coins by all banks and the Reserve Bank.

M1 is currency plus current deposits with banks.

M3 is M1 plus other deposits from building societies and credit unions with banks.

Broad money is M3 plus borrowings from the private sector by non-bank depository corporations less holdings of currency and deposits of non-bank depository corporations.

Credit is loans, advances and bills discounted to the private sector (it does not include loans to other financial intermediaries).

Currency has become less significant with the increasing use of credit cards and other alternative means of payment such as EFTPOS; hence the reduced focus on this aggregate.

Between 1976 and 1985 the authorities established targets for M3 growth as part of monetary policy. Relationships between money and credit, economic growth and inflation are complex. In the period following deregulation of the financial system in 1983, these relationships changed and targeting was discontinued. Monetary aggregates are now treated as one of a set of economic indicators and the authorities target economic growth, employment and inflation directly.

Further Reading

Australian National Accounts: Financial Accounts (5232.0)
Shows the level (stock) of financial assets and liabilities of each sector of the economy; the market for each of the conventional financial instruments; and inter-sectoral transactions in financial assets and liabilities.

Monetary Aggregates
Monthly Reserve Bank of Australia press release containing Australia’s monetary aggregates.

Reserve Bank of Australia Bulletin
Contains monthly levels of selected monetary aggregates for Australia.

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