1301.0 - Year Book Australia, 2006  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 20/01/2006   
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Contents >> Chapter 26 - Financial system >> Money and the payments 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 26.33 shows the value of notes on issue on the last Wednesday of June in the last three financial years. Table 26.34 shows the value of coin on issue at the same time points.

26.33 VALUE OF AUSTRALIAN NOTES ON ISSUE - Last Wednesday in June

2003
2004
2005
$m
$m
$m

$2
45
-
-
$5
515
533
539
$10
762
791
837
$20
2,514
2,533
2,584
$50
14,918
15,941
16,740
$100
13,406
14,224
14,924
Total
32,161
34,022
35,624

Note: $2 notes on issue has been written off by the Reserve Bank of Australia.

Source: Reserve Bank of Australia.

26.34 VALUE OF AUSTRALIAN DECIMAL COIN ON ISSUE - Last Wednesday in June

2003
2004
2005
$m
$m
$m

1c
22
22
22
2c
29
29
29
5c
148
154
163
10c
140
147
158
20c
203
210
226
50c
290
302
319
$1
506
531
557
$2
796
832
893
Total
2,134
2,227
2,368

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 26.35.

26.35 MONEY SUPPLY MEASURES - 30 June

2003
2004
2005
$m
$m
$m

Money base
35,115
37,194
38,678
M3
531,780
584,956
636,200
Broad money
599,850
653,306
721,826

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 26.36 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 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.

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

2003
2004
2005

Branches
Banks
4,858
4,888
n.y.a.
Building societies and credit unions
1,247
1,239
n.y.a.
giroPost
2,990
3,048
3,191
ATMs
20,339
21,550
24,173
EFTPOS terminals
433,640
465,754
n.y.a.

Source: APRA; Australian Payments Clearing Association Limited.



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