Australian dollar banknote information request

Scott, of the family Chapman made this Freedom of Information request to Reserve Bank of Australia

This request has been closed to new correspondence from the public body. Contact us if you think it ought be re-opened.

The request was partially successful.

Scott, of the family Chapman

Dear Reserve Bank of Australia representative

I am currently researching the history of money and would like to request some information from you.

It is my innerstanding that the Reserve Bank of Australia (RBA) duties include facilitating an economically efficient payment system and issuing the Commonwealth of Australia (Australia) banknotes in circulation.

1. Can you please provide the information that you have or have access to that provides that the Australian dollar banknote is 'Lawful' money of 'substance'?

2. Where does the Australian dollar banknote specifically derive its intrinsic value from?

Kind Regards
Scott, of the family Chapman

FOI, Reserve Bank of Australia

Dear Mr Chapman,

I refer to your recent query seeking information about Australia’s
currency.

The Reserve Bank of Australia is responsible for the issue of Australian
banknotes (which are legal tender throughout Australia for sales,
transactions or dealings).  The broader concepts you are interested in
(relative value and ‘substance’ of the Australian dollar) are not
specifically addressed by the Reserve Bank, however, there is a range of
information available online which may assist you in understanding how
‘money’ works and why currency is readily accepted as a means to
facilitate the transfer of goods and services in the Australian economy. 
Please see the following links for this information:

What is Money -
 [1]https://www.rba.gov.au/education/resourc...

Legal Tender - [2]https://banknotes.rba.gov.au/legal/legal...
Exchange rates -
[3]https://www.rba.gov.au/education/resourc...

I hope this information is useful to you and wish you well with your
research.

Best regards

Phil Lomas | FOI Officer | Secretary's Department  
RESERVE BANK OF AUSTRALIA | 65 Martin Place, Sydney NSW 2000
e: [4][RBA request email] | w: [5]www.rba.gov.au

 

 

-----Original Message-----
From: Scott, of the family Chapman
[[6]mailto:[FOI #7345 email]]
Sent: Monday, 24 May 2021 11:31 PM
To: FOI <[7][RBA request email]>
Subject: Freedom of Information request - Australian dollar banknote
information request

 

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Dear Reserve Bank of Australia representative

 

I am currently researching the history of money and would like to request
some information from you.

 

It is my innerstanding that the Reserve Bank of Australia (RBA) duties
include facilitating an economically efficient payment system and issuing
the Commonwealth of Australia (Australia) banknotes in circulation.

 

1. Can you please provide the information that you have or have access to
that provides that the Australian dollar banknote is 'Lawful' money of
'substance'?

 

2. Where does the Australian dollar banknote specifically derive its
intrinsic value from?

 

Kind Regards

Scott, of the family Chapman

 

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Scott, of the family Chapman

Hi Phil

That information is very very helpful. However, could I request that you direct me to the official glossary where the RBA derives its definition of terms? That information would be most helpful in deciphering some of the information.

In addition, I have a couple of simple questions related to the information provided.

What do commercial banks use to purchase the Australian dollar banknotes created by the RBA? and if the RBA prints its own 'money of account' out of thin air, why would there be a need to purchase the banknotes? As per under the title "How is money created?" it states, "commercial banks purchase banknotes from the Reserve Bank [of Australia]"

Does the RBA accept the Generally Accepted Accounting Principles (GAAP) as a method for money creation? Do you have a document that explains the details of the principles used/recognized by the RBA?

Since legal tender is a note issued by the RBA and the Mint issues the coins, who controls/has responsibility for the creation of digital dollars in circulation?

Kind Regards
Scott

FOI, Reserve Bank of Australia

Dear Mr Chapman,

Please see below answers to your new questions.

For further queries of this nature, please direct them to our general enquiries email address ([email address]). These contact details can also be found on the contacts tab on our home page at www.rba.gov.au .

Yours sincerely

Phil Lomas | FOI Officer | Secretary's Department
RESERVE BANK OF AUSTRALIA | 65 Martin Place, Sydney NSW 2000
e: [RBA request email] | w: www.rba.gov.au

-----Original Message-----
From: Scott, of the family Chapman [mailto:[FOI #7345 email]]
Sent: Saturday, 5 June 2021 12:02 AM
To: FOI <[RBA request email]>
Subject: Re: Query regarding Australian Banknotes - legal tender and related concepts - answer to question [SEC=OFFICIAL]

Hi Phil

That information is very very helpful. However, could I request that you direct me to the official glossary where the RBA derives its definition of terms? That information would be most helpful in deciphering some of the information.

Answer: Please see https://www.rba.gov.au/glossary/ for a glossary of terms used by the Reserve Bank

In addition, I have a couple of simple questions related to the information provided.

What do commercial banks use to purchase the Australian dollar banknotes created by the RBA? and if the RBA prints its own 'money of account' out of thin air, why would there be a need to purchase the banknotes? As per under the title "How is money created?" it states, "commercial banks purchase banknotes from the Reserve Bank [of Australia]"

Answer: Commercial banks order banknotes from the RBA as they require them to meet the needs of their customers. They pay the RBA the full face value for the banknotes they order, using their Exchange Settlement Account balances held at the RBA. The funds received by the RBA are matched by a corresponding liability for the banknotes on issue. When the commercial banks return banknotes to the RBA, such as at their end of life, the RBA pays them the full face value for the returned banknotes (into their Exchange Settlement Accounts) and thereby extinguish the RBA’s liability. The stock of broad money, however, is unchanged. A recent speech by Chris Kent, Assistant Governor (Financial Markets) may be of interest: https://www.rba.gov.au/speeches/2018/sp-...

Does the RBA accept the Generally Accepted Accounting Principles (GAAP) as a method for money creation? Do you have a document that explains the details of the principles used/recognized by the RBA?

Answer: The RBA accounts for its activities in accordance with Australian Accounting Standards (AAS) and accounting interpretations issued by the Australian Accounting Standards Board, in accordance with the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015, which is issued pursuant to the PGPA Act. Information on the RBA’s accounting policies is contained within its annual financial statements. Note 1 on page 176 of our 2020 Annual Report (https://www.rba.gov.au/publications/annu...) refers.

Since legal tender is a note issued by the RBA and the Mint issues the coins, who controls/has responsibility for the creation of digital dollars in circulation?

Answer: Australian dollars held in accounts offered to customers by Authorised Deposit-Taking Institutions (ADIs, eg banks, credit unions etc) are regarded as ‘digital money’, and are a liability of the ADI to the account holder. Transactions from these accounts take place without the physical transfer of banknotes, but they still represent a transfer of wealth (determined in Australian dollars) and the value is available to be withdrawn as physical banknotes by the party receiving the payment. Banknotes account for around 95 per cent of the value of Australian currency on issue with the rest accounted for by coins produced by the Australian Mint. Considerations and rationales for a possible Australian central bank issued digital currency were discussed in a recent speech given by our Head of Payments Policy – please see https://www.rba.gov.au/speeches/2020/sp-...

Kind Regards

Scott

-----Original Message-----

Dear Mr Chapman,

I refer to your recent query seeking information about Australia’s currency.

The Reserve Bank of Australia is responsible for the issue of Australian

banknotes (which are legal tender throughout Australia for sales,

transactions or dealings). The broader concepts you are interested in

(relative value and ‘substance’ of the Australian dollar) are not

specifically addressed by the Reserve Bank, however, there is a range of

information available online which may assist you in understanding how

‘money’ works and why currency is readily accepted as a means to

facilitate the transfer of goods and services in the Australian economy.

Please see the following links for this information:

What is Money -

[1]https://aus01.safelinks.protection.outlo...

Legal Tender - [2]https://aus01.safelinks.protection.outlo...

Exchange rates -

[3]https://aus01.safelinks.protection.outlo...

I hope this information is useful to you and wish you well with your

research.

Best regards

Phil Lomas | FOI Officer | Secretary's Department

RESERVE BANK OF AUSTRALIA | 65 Martin Place, Sydney NSW 2000

e: [4][RBA request email] | w: [5]https://aus01.safelinks.protection.outlo...

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Please use this email address for all replies to this request:

[FOI #7345 email]

This request has been made by an individual using Right to Know. This message and any reply that you make will be published on the internet. More information on how Right to Know works can be found at:

https://aus01.safelinks.protection.outlo...

Please note that in some cases publication of requests and responses will be delayed.

If you find this service useful as an FOI officer, please ask your web manager to link to us from your organisation's FOI page.

-------------------------------------------------------------------

Disclaimer

This e-mail message (along with any attachments) is intended only for the named addressee and could contain information that is confidential or privileged. If you are not the intended recipient you are notified that any dissemination, copying or use of any of the information is prohibited. Please notify us immediately by return e-mail if you are not the intended recipient and delete all copies of the original message and attachments. This footnote also confirms that this message has been checked for computer viruses.

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