TERM

DEFINITION

Australian Prudential Regulation Authority

This government authority has responsibility for the prudential supervision of banks and for life and general insurance and superannuation. It has also assumed the regulatory responsibilities for State-regulated building societies, credit unions and friendly societies.

Australian Securities and Investments Commission

The Australian Securities and Investments Commission (ASIC) is an independent government body that enforces and administers Corporations Law and consumer protection law for investments, life and general insurance, superannuation and banking (except lending) throughout Australia.

Bank bills

A bank bill generally arises from a short-term credit arrangement designed to enable businesses to obtain funds to finance commercial transactions. The bills are accepted by the bank, that endorses them.

Broad money

Broad money is M3 plus borrowings from NBFI's, less the latter's holdings of currency and bank deposits.

Cash rate

The equilibrium interest rate in the market for exchange settlement funds, also referred to as the money market. The cash rate is targeted by the Reserve Bank through market operations.

Central Bank

A bank whose functions are:

• To have sole control over the issue of currency and usually also to control the nation's reserves of gold and foreign exchange;

• To act as banker to the central government and to the banking system;

• To advise and assist the central government on financial and monetary matters;

• To implement officially determined monetary policy by regulating the monetary and banking system.

Commonwealth government security

A Commonwealth government security is originally issued as a means to finance a budget deficit. It is a form of borrowing where by the Australian Government agrees to pay the holder a fixed some of money over a period of time and pays the face value of the security on maturity. They include treasury notes and government bonds.

Credit

The lending of money to another party. It involves an agreement to repay the temporary loan.

Currency

The notes and coins in circulation in the economy.

Debt

Whatever is owed, be it money, goods, or services, by one person or organisation to another.

Equities market

The share market. The rights (shares) to partial ownership of companies are bought and sold.

Financial innovation

The development of new financial products and methods of borrowing and lending.

Foreign exchange market

The market in which the currencies of different countries are exchanged for one another.

Futures market

The market where agreements are made, that commodities and other products will be bought or sold at a later date, at a fixed price, determined at the time that the contract is agreed to.

Liquidity

The degree to which an asset can be instantly converted into cash at a known price.

Market operations

Reserve Bank activity in the money market, in implementing monetary policy, through targeting the cash rate.

Real interest rate

The nominal interest rate adjusted to compensate for inflation.

Repurchase agreements

A repurchase agreement is an agreement between the Reserve Bank and a bank, that the Reserve Bank buys or sells a security on the understanding that the dealers agree to repurchase or sell the security at a specified date and at an agreed price. It is used to cover temporary fluctuations in the supply of cash. This is the most common form of transaction in the cash market.

Reserve Bank

Australia's Central Bank. The Reserve Bank is responsible for maintaining the stability of the financial system. Financial stability is an essential ingredient in maintaining macro-economic stability and the confidence of the community in undertaking their financial transactions. Within this broad mandate, the Bank also has specific responsibility for the safety and efficiency of the payments system, a responsibility overseen by the Payments System Board

Share market

The market for equities. Shares are bought and sold, which gives claim to the partial ownership of a company.

Short term money market

A market trading in financial assets and consisting of participants located in many physically separate offices and communicating by modern telecommunication networks.