1301.0 - Year Book Australia, 2012
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 24/05/2012
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Statistics contained in the Year Book are the most recent available at the time of preparation. In many cases, the ABS website and the websites of other organisations provide access to more recent data. Each Year Book table or graph and the bibliography at the end of each chapter provides hyperlinks to the most up to date data release where available.
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FINANCIAL MARKETS
Financial markets are used by participants to either raise funds (e.g. by issuing securities) or invest savings (by buying securities and other financial assets). The major markets in the Australian financial system are the credit market, stock market, money market, bond market and the foreign exchange market. Descriptions and tables indicating prices and activity in various financial markets are provided in this section.
A significant influence in financial markets is the participation of institutional investors controlling large pools of investment funds. These pools are accumulated by collective investment institutions and are often managed on a fee-for-service basis by investment managers. A summary of the activities of these institutions is also provided.
CREDIT MARKET
Credit may be defined broadly as funds provided to those seeking to borrow. However, analytically useful measures of credit usually exclude borrowings by financial enterprises because their main role is as an intermediary, that is, they borrow in order to lend. Also, lending and borrowing between enterprises that have a special relationship, such as between companies in the same group or between government agencies, are often excluded from credit measures because transactions between these bodies are frequently of a non-market nature. Similarly, some types of financial instrument, such as trade debts, are not considered to be part of an organised market. All of these types of transactions are omitted from table 27.15, which presents a summary of the demand for credit in Australia by the non-financial sector. It includes raisings by the issue of both debt and equity securities. Table 27.16 shows details of household demand for credit. For both tables, positive numbers indicate an increase in debt and negative numbers indicate repayment or redemption.
(b) Includes credit card and personal loans.
Source: Australian National Accounts: Financial Accounts (5232.0); Housing Finance, Australia (5609.0).
STOCK MARKET
The stock market is a mechanism for trading equities (shares), units in trusts, options and some fixed interest securities.
Operated nationally by the Australian Stock Exchange (ASX), which is responsible for the day-to-day running and surveillance of trading, the Australian system is electronic and conducted using the Stock Exchange Automated Trading System (SEATS), allowing buyers and sellers to be located anywhere in the country.
The ASX classifies listed companies according to their major activity and produces indexes based on these classifications. Table 27.17 summarises the performance of the major indexes.
Table 27.18 shows details of the equity market for listed and unlisted entities.
ISSUED BY
HELD BY
MONEY MARKET
Liquidity management by Australian corporations, financial institutions and governments is conducted through an informally arranged market for deposits, loans and placements, and by issuance, purchase and sale of short-term debt securities. Selected rates in the market at 30 June are shown in table 27.19.
Money market securities are short-term, that is, they have an original term to maturity of less than one year, often 30, 90 or 180 days. They are issued by borrowers at a discount to face value and carry no income payment other than the repayment of face value at maturity. To enhance liquidity, money market securities conform to standardised attributes concerning risk and discount rates. Because of the standardisation, the securities of different issuers are often combined in the one parcel of securities for trading purposes. There are two types of securities: bills of exchange and one name paper, both of which are covered by the Bills of Exchange Act 1909 (Cwlth). The risk of default of a bill of exchange is reduced by an acceptor or endorser adding their name to the security for a fee. Most bills of exchange traded in the market are bank-accepted bills. Promissory notes are issued by institutions whose credit worthiness is equal to or better than banks; they are not accepted by a bank and unlike bills of exchange they are not endorsed by the parties that sell them in the market. The Australian Government issues treasury notes. State and territory governments and large corporations issue commercial paper, while banks issue negotiable certificates of deposit. Table 27.20 shows the value of short-term debt securities on issue by sector of issuer and sector of holder.
HELD BY
BOND MARKET
Bonds are issued with original terms to maturity of one or more years. Usually the investors are paid a set periodic interest, called a coupon, for the life of the bond and receive their initial investment back at maturity. Some bonds have variable interest rates, some have principal repayments indexed, and there are a small number of zero-coupon or deep discount securities that are issued at a discount to face value. Governments, trading enterprises and financial institutions issue bonds to finance long-term requirements. For these entities, the bond market generally provides a cheaper source of funds than borrowing from banks and other financial institutions. Table 27.21 shows selected market yields at the end of June for a range of bonds.
Historically, the main issuers of bonds have been the Australian Government, and state and territory governments, the latter through their central borrowing authorities. Corporate bonds are issued only by very large private trading and financial enterprises. Following the onset of the global financial crisis in late 2007, government and bank issuances have increased. Details of the amounts outstanding on bonds issued and held are shown in table 27.22.
HELD BY
FOREIGN EXCHANGE MARKET
The foreign exchange market is the means whereby currencies of different countries can be bought and sold. In October 1983, the Australian Government floated the Australian dollar, allowing its value to be determined by market forces with few exchange controls and little Reserve Bank intervention. Immediately prior to 1983, the Australian dollar was pegged to a basket of currencies. The currencies in the basket were weighted according to their trading significance to Australia. Table 27.23 shows the value of the Australian dollar against major currencies.
Over the last few years, there have been significant movements in the Australian dollar against major currencies, including the US dollar, UK pound and the Euro. In fact, for these currencies, the Australian dollar has climbed to record levels of appreciation.
Source: Australian Tax Office.
Currencies are traded for many reasons: because of exporting or importing requirements, investing or borrowing overseas, arbitraging (i.e. taking advantage of short-term discrepancies in rates) or speculating on possible exchange rate movements with a view to making a profit. Table 27.24 shows the daily average of foreign exchange turnover against all currencies. More recent information may be found in the Reserve Bank of Australia Bulletin Table F.10.