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1301.0 - Year Book Australia, 2012  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 24/05/2012   
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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 (Wallis Committee). Under these arrangements, the Reserve Bank has stronger regulatory powers in the payments system in accordance with the Payments Systems (Regulations) Act 1998 (Cwlth), 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. Notes for $1 and $2 denominations were replaced by coins in 1984 and 1988 respectively, and 1c and 2c coins ceased to be issued from 1 February 1992. Table 27.33 shows the value of notes on issue on the last Wednesday of June. Table 27.34 shows the value of coin on issue at 30 June.


27.33 VALUE OF AUSTRALIAN NOTES ON ISSUELast Wednesday in June
2007
2008
2009
2010
2011
$m
$m
$m
$m
$m

$5
591
615
646
673
731
$10
896
919
956
983
1 010
$20
2 834
2 740
2 659
2 653
2 796
$50
19 228
20 141
23 731
23 711
24 287
$100
16 720
17 700
20 067
20 740
21 234
Total
40 269
42 115
48 059
48 759
50 059

Source: Reserve Bank of Australia.

27.34 VALUE OF AUSTRALIAN DECIMAL COIN ON ISSUE30 June
2006
2007
2008
2009
2010
$m
$m
$m
$m
$m

1c
31
31
31
31
31
2c
49
49
49
49
49
5c
174
181
186
192
198
10c
170
180
188
195
203
20c
265
278
292
308
323
50c
368
384
399
414
429
$1
653
682
723
754
781
$2
962
1 028
1 113
1 204
1 277
Total
2 671
2 812
2 980
3 149
3 291

Source: Royal Australian Mint.


MONEY SUPPLY MEASURES

The money supply is the value of financial instruments within a specific economy that are available for purchasing goods or services. The Reserve Bank of Australia (RBA) defines the money supply as the amount of cash held by the public plus deposits with specified financial institutions. The total money supply within an economy can consist of various financial instruments (including currency, demand deposits and various other types of deposits). Monetary aggregates can be created by adding or grouping these various financial instruments. Monetary aggregates range from the narrowest category, money base, through to the widest category, broad money, with other measures in between. The money supply is important to economists trying to understand how policies will affect interest rates and growth. Monetary policy is the process by which the Reserve Bank of Australia (RBA) manages the money supply to achieve specific goals.

The monetary aggregates common to the Australian economy 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. It is also often referred to as 'narrow money' or 'M0'. It is the most liquid measure of the money supply.
  • M1 – is defined as currency plus bank current deposits from the private non-bank sector. This measure is used by economists trying to quantify the amount of money in circulation. The M1 is a very liquid measure of the money supply, as it contains cash and assets that can quickly be converted to currency.
  • M3 – is defined as M1 plus all other Authorised Deposit-taking Institution (ADI) deposits from the private non-bank sector plus certificates of deposit issued by banks less ADI deposits held with each other.
  • Broad money – is the widest definition of money published by the Reserve Bank of Australia (RBA). 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. This measure is generally used to estimate the entire supply of money within an economy.

The money supply under each of these measures at 30 June is shown in table 27.35.


27.35 MONEY SUPPLY MEASURES30 June
2007
2008
2009
2010
2011
$m
$m
$m
$m
$m

Money base
43 735
46 466
53 388
53 623
54 596
M1
225 976
234 194
244 139
242 019
267 218
M3
869 457
1 035 301
1 177 277
1 227 921
1 339 922
Broad money
960 765
1 120 428
1 245 140
1 269 469
1 364 221

Source: Reserve Bank of Australia.


PAYMENTS SYSTEM

Following recommendations by the Financial System Inquiry, the Payments System Board was established within the Reserve Bank in July 1998. The Payments System Board has responsibility for determining the Reserve Bank’s payments system policy, under the powers set out under the Payment Systems (Regulation) Act 1998 (Cwlth) and the Payment Systems and Netting Act 1998 (Cwlth). The Reserve Bank also has responsibility for oversight of the stability of clearing and settlement facilities under the Corporations Act 2001 (Cwlth).

The payments system in Australia has changed significantly in recent years. In part, this has been a response to technological change and consumer behaviour. On average, there are at least 15 million non-cash payments made in Australia each day, the overwhelming majority of which are electronic payments.

Table 27.36 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 storekeepers, and exclude school agencies and Bank@Post agencies. Bank@Post (previously called 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.


27.36 POINTS OF ACCESS TO THE AUSTRALIAN PAYMENTS SYSTEM30 June
2007
2008
2009
2010
2011

Branches
Banks
5 264
5 398
5 504
5 544
5 588
Building societies and credit unions
1 263
1 240
1 172
1 167
1 173
Bank@Post (giroPost)
3 301
3 305
3 302
3 291
3 261
ATMs
25 681
25 658
27 108
28 764
30 154
EFTPOS terminals
597 063
658 033
669 165
712 434
734 380

Source: Australian Prudential Regulation Authority; Australian Payments Clearing Association Limited.

 

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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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