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), 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 27.30 shows the value of notes on issue on the last Wednesday of June. More recent information may be found on the Reserve Bank of Australia website (<http://www.rba.gov.au/banknotes/resources/statistics.html/>). Table 27.31 shows the value of coin on issue, for more information see the Royal Australian Mint website (<http://www.ramint.gov.au/about/compliance/annualreports/2008-09/06_appendices.cfm#a>).

27.30 VALUE OF AUSTRALIAN NOTES ON ISSUE - Last Wednesday in June
	2005	2006	2007	2008	2009
	$m	$m	$m	$m	$m
$5	539	572	591	614	644
$10	837	857	894	917	954
$20	2 584	2 690	2 846	2 732	2 651
$50	16 740	18 044	19 228	20 111	23 721
$100	14 924	15 903	16 730	17 690	20 117
Total	35 624	38 066	40 289	42 064	48 087
Source: Reserve Bank of Australia.

27.31 VALUE OF AUSTRALIAN DECIMAL COIN ON ISSUE - 30 June
	2005	2006	2007	2008	2009
	$m	$m	$m	$m	$m
1c	31	31	31	31	31
2c	48	48	48	48	48
5c	163	174	181	186	192
10c	158	170	180	188	195
20c	247	265	278	292	308
50c	344	368	384	399	414
$1	622	653	682	723	754
$2	889	962	1 028	1 113	1 204
Total	2 502	2 671	2 812	2 980	3 146
Source: Royal Australian Mint.

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 is shown in table 27.32.

27.32 MONEY SUPPLY MEASURES - 30 June
	2005	2006	2007	2008	2009
	$m	$m	$m	$m	$m
Money base	38 678	41 278	43 735	46 466	53 388
M3	678 465	747 315	869 457	1 035 569	1 178 302
Broad money	764 572	841 217	963 995	1 121 140	1 246 438
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 27.33 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 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. More recent information may be found on the Australian Prudential Regulation Authority website (<http://www.apra.gov.au/Statistics/Points-of-Presence.cfm>).

27.33 POINTS OF ACCESS TO THE AUSTRALIAN PAYMENTS SYSTEM - 30 June
		2005	2006	2007	2008	2009
Branches
	Banks	4 960	4 853	5 264	5 398	5 504
	Building societies and credit unions	1 235	1 170	1 263	1 240	1 172
Bank@Post (giroPost)		3 190	3 188	3 301	3 305	3 302
ATMs		23 472	24 616	25 681	25 658	27 108
EFTPOS terminals		518 532	540 189	597 063	658 033	669 165
Source: Australian Prudential Regulation Authority; Australian Payments Clearing Association Limited.

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