Topic 6 – Government Debt, Monetary Policy and Payment System Flashcards Preview

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Flashcards in Topic 6 – Government Debt, Monetary Policy and Payment System Deck (48)
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31

Open Market Operations

Actions of the reserve bank in the money markets to maintain a cash rate consistent with its stance on the monetary policy

32

Open market operations conducted primarily by

- repurchase agreements (repos) on nominated debt securities
- outright or direct transactions in short-dated Commonwealth Government Securities
- foreign exchange swap.

33

The RBA holds and manages a portfolio of Commonwealth Government Securities to

maintain system liquidity and effect monetary policy.
- The RBA achieves this by purchasing CGSs in the secondary market and occasionally taking an allotment at tender in a primary issue.

34

Factors impacting on the liquidity of the financial system (or money base) are:

- Commonwealth Government budget deficits or surpluses
- official (RBA) FX transactions
- net sales of Commonwealth Government Securitie and repurchase agreements.

35

Factors impacting on the liquidity of the financial system (or money base) are:
(Commonwealth Government budget deficits or surpluses)

taxation receipts
government securities
budget recurrent expenditures
budget capital expenditures

36

Factors impacting on the liquidity of the financial system (or money base) are:
(official (RBA) FX transactions)

- sales of FX reduce financial system liquidity
- sales of FX by the RBA reduce system liquidity, which can be neutralised through market operations by buying CGSs

37

taxation receipts

Income tax, company tax, cgt, gst, gbt

38

Payments system

Facilitates the transfer of value of a financial instrument, used in transactions for goods and services, from one party to another

39

Payments system clearing systems

- Australian Paper Clearing System
- Bulk Electronic Clearing System
- Consumer Electronic Clearing System
- High Value Clearing System
- Australian Cash Distribution Exchange System

40

Australian Paper Clearing System

for cheques, payment orders and other paper-based payment instructions

41

Bulk Electronic Clearing System

for recurring electronic credit and debit payment instructions

42

Consumer Electronic Clearing System

for card-based ATM and EFTPOS transactions and ‘pay anyone’ via the internet

43

High Value Clearing System

for high-value payment instructions

44

Australian Cash Distribution Exchange System

for the movement of notes and coins.

45

Payments classified by RBA in two ways:

Low-value day-to-day payments for goods and services, particularly by the household sector.

High-value, large-value transactions for assets (e.g. property, wholesale market equity, debt securities and FX transactions) cleared by real-time gross settlements (RTGS).`

46

Exchange settlement accounts:

Same day funds held with the reserve bank; facilitates settlement of payments system value transactions

47

Real-time gross settlement (RTGS)

High value payments system, transactions are settled immediately through exchange settlement accounts

48

Repurchase Agreements (Repos)

sale of CGSs to the RBA on condition the seller will normally buy them back by day’s end

It provides intra-day liquidity for same-day funds for exchange settlement account holders.

RBA also provides end-of-day repurchase facility by offering overnight repos, but subject to interest being charged @ 25 basis points above the official cash rate (only for overnight repos). Incentive to use sparingly.