1301.0 - Year Book Australia, 2004  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 27/02/2004   
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Contents >> Financial system >> Money and the payments system

The payments system supports trade and commerce in a market economy. Notes and coin are one means of payment. Liquid balances held at financial institutions are also available potentially for transactions needs, under cheque and other forms of transfer facilities, and thus add to the money supply.

From 1 July 1998 a new financial regulatory framework came into effect, in response to the recommendations of the Financial System Inquiry. Under these arrangements the Reserve Bank has stronger regulatory powers in the payments system in accordance with the Payments Systems (Regulations) Act 1998 (Cwlth), to be exercised by a Payments System Board within the Bank.

Money

Australia has a decimal system of currency, the unit being the dollar, which is divided into 100 cents. Australian notes are issued in the denominations of $5, $10, $20, $50 and $100 and coins in the denominations of 5c, 10c, 20c, 50c, $1 and $2. $1 and $2 notes were replaced by coins in 1984 and 1988 respectively, and 1c and 2c coins ceased to be issued from 1 February 1992. Table 26.32 shows the value of notes on issue on the last Wednesday of June in the last three financial years. Table 26.33 shows the value of coin on issue at the same time points.

26.32 VALUE OF AUSTRALIAN NOTES ON ISSUE

Last Wednesday in June

Units
2001
2002
2003

$2
$m
45
45
45
$5
$m
428
530
515
$10
$m
657
802
762
$20
$m
1,982
2,801
2,514
$50
$m
11,887
14,718
14,918
$100
$m
11,935
13,057
13,406
Total
$m
26,936
31,954
32,161
Increase
%
5.9
18.6
0.7

Source: Reserve Bank of Australia.

26.33 VALUE OF AUSTRALIAN DECIMAL COIN ON ISSUE

Last Wednesday in June

Units
2001
2002
2003

1c
$m
22
22
22
2c
$m
29
29
29
5c
$m
131
143
148
10c
$m
121
135
140
20c
$m
172
198
203
50c
$m
248
281
290
$1
$m
414
483
506
$2
$m
626
748
796
Total
$m
1,763
2,039
2,134
Increase
%
4.6
15.6
4.6

Source: Reserve Bank of Australia.

Money supply measures

The money supply, as measured and published by the Reserve Bank, refers to the amount of cash held by the public plus deposits with specified financial institutions. The measures range from the narrowest category, money base, through to the widest category, broad money, with other measures in between. The measures mainly used are as follows:

Money base - comprises holdings of notes and coin by the private sector, deposits of banks with the Reserve Bank, and other Reserve Bank liabilities to the private sector.

M3 - is defined as currency plus bank deposits of the private non-bank sector.

Broad money - is defined as M3 plus borrowings from the private sector by non-bank financial intermediaries (including cash management trusts) less their holdings of currency and bank deposits.

The money supply under each of these measures at 30 June for the last three years is shown in table 26.34.

26.34 MONEY SUPPLY MEASURES - 30 June

Units
2001
2002
2003(a)

Money base
$m
29,607
34,936
35,041
M3
$m
439,990
473,715
538,314
Broad money
$m
517,690
546,375
619,089
Percentage change(b)
%
7.5
5.5
13.3

(a) Series break due to other changes in bank reporting.
(b) Of broad money, over level at end of preceding June.
Source: Reserve Bank of Australia.

Payments system

Following recommendations by the Financial System Inquiry, the Payments System Board was established within the Reserve Bank on 1 July 1998. The Payments System Board has responsibility for determining the Reserve Bank's payments system policy, under the powers set out in the Payments Systems (Regulation) Act 1998 (Cwlth). The payments system has components for settling large amounts, and components for settling retail amounts.

The High Value Clearing System (HVCS) was implemented in August 1997. The HVCS allows all holders of Reserve Bank exchange settlement accounts to settle large value payments through a system designed to process a high volume of transactions. On 1 March 1999 the Payments System Board announced easing of restrictions on eligibility for holding exchange settlement accounts. APRA-supervised institutions and some institutions not supervised by APRA potentially now have access.

Initially, the settlement of payments was on a net deferred basis, where settlement of interbank obligations was not completed until 9 am on the day following the sending of payment instructions. This was changed to a real-time gross settlement basis on 22 June 1998. This new settlement basis, where payments are settled immediately, contributes substantially to the reduction of settlement risk and systemic risk in the Australian payments system.

About 75% of the value exchanged in the payments system is cleared via the HVCS.

Table 26.35 shows the number of points of access to the payments system. Branches are access points staffed by employees of financial institutions. Agencies are staffed by other than employees of financial institutions such as postmasters or storekeepers, and exclude school agencies and giroPost agencies. giroPost provides a limited range of services at Australia Post offices on behalf of participating financial institutions. Electronic points of access include ATM and electronic funds transfer at point of sale (EFTPOS) terminals.

26.35 POINTS OF ACCESS TO THE AUSTRALIAN PAYMENTS SYSTEM - 30 June

2001
2002
2003

Branches
Banks
4,789
4,728
n.y.a.
Building societies and credit unions
1,356
1,236
n.y.a.
Agencies
Banks
n.y.a.
n.y.a.
n.y.a.
Building societies and credit unions
n.y.a.
n.y.a.
n.y.a.
giroPost
2,821
2,962
2,990
ATM
13,289
16,398
21,603
EFTPOS terminals
375,883
415,167
n.y.a.

Source: APRA; Australian Payments Clearing Association Limited.



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