1360.0 - Measuring Australia's Economy, 2003
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 03/02/2003
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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.
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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