The Reserve and Commonwealth Banks are One and the Same!

The following may shock some home loan customers and members of the general public alike. This is in review of the recent interest rate price hikes by the Commonwealth Bank. The Headline of this Blog is exactly what the Media does not want you to know, and the Gov Puppets are laughing right in your face!

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The first Federal Parliament met in Melbourne in May 1901, pending the selection of a site for the Federal Capital.

The Constitution empowered the Parliament to make laws in relation to 'Currency, coinage and legal tender' and 'Banking… and the issue of paper money'. But it was not until 1910 that legislation – The Australian Notes Act – passed through Parliament. Under this Act, control over the issue of Australian currency notes was given to the Commonwealth Treasury. The Bank Notes Tax Act, also in 1910, imposed a 10 per cent tax on all private bank notes, effectively discouraging, though not prohibiting, their issue.

Up to 1910, notes issued by the private banks and the Queensland Government continued to circulate as Australia's paper currency.The total amount of notes that banks could issue was limited by their gold reserves. Like many other countries around the turn of the century, Australia adhered to the gold standard.

This meant that the value of currency notes was measured in terms of gold and the banks had to carry enough gold at all their branches to redeem notes on request for gold coins. Private bank notes were not legal tender as that term is now understood, and the public did not have to accept them from a bank.

Though the 1910 legislation for a national currency was in place, the new nation was ill-prepared to move quickly to issue its own currency notes. As an interim measure the Australian Government issued superscribed bank notes.

The Government overprinted notes purchased from the private banks with the words:

    AUSTRALIAN NOTE

    Payable in Gold Coin at the Commonwealth

    Treasury at the seat of Government

With Federation, the Commonwealth Government acquired the power to make laws in respect of banking and currency. Establishment of a 'Commonwealth Bank of Issue, Deposit, Exchange and Reserve', became part of Labor Party policy. Later, in 1908, the Labor Party Conference discussed detailed proposals by King O'Malley for a government-owned bank which would issue currency notes and also conduct the Government's accounts, manage its debt and hold the reserves of the banking system.

Mr O'Malley, elected to the first Federal Parliament as a representative from Tasmania, had been a long-term proponent of a central bank. He wanted 'a Bank of Australia to be in Australia what the Bank of England is in England'. Sydney was selected as the centre for the Bank's head office and by January 1913 branches in all state capital cities, Canberra, Townsville and London had been established. A new Head Office in Martin Place was opened in 1916, and the building served as a model for the Bank's home savings money box.

Despite earlier proposals, when established in 1912 the Commonwealth Bank was not given a central banking role, not even responsibility for issuing currency notes. With the passing of the Commonwealth Bank Act in 1911, the search for a suitable Governor of the Bank concluded with the appointment of Denison SK Miller in May 1912. Governor Miller was appointed for a seven year term at an annual salary of £4,000, over $1 million in terms of today's earnings.

 Before long, preparations were made for a new series due in part to concern about counterfeiting. By late 1932 a new series, for denominations from 10/- to £10, was ready for issue. The 1933 series came to be known as the 'Ash Series' after John Ash who succeeded Thomas Harrison as Australian Note Printer in 1927. The notes carried a watermark portrait in a clear medallion as part of efforts to increase the security of the note issue. A profile of Edward, the Prince of Wales (later King Edward VIII) was used for this purpose.

A major difference was that the new notes no longer carried a Government promise to redeem the notes in gold coin. Instead they were specified to be legal tender in the Commonwealth and its Territories. Australia formally departed from the gold standard at the height of the Great Depression in the early 1930s. Following devaluation in 1931, the Australian pound was no longer worth a pound sterling. Until then British coin had circulated freely in Australia. 
The Commonwealth Bank Act of 1932 made Australian currency notes no longer convertible into gold. Indeed, the Bank was not required to keep any gold reserves. 

World War I provided significant opportunities for the development of the Commonwealth Bank. It boosted the Bank's role in the distribution of currency notes and in organising finance for Australia's war effort.
Legislation in 1945, based on wartime regulations, defined for the first time a broad central banking role for the Commonwealth Bank, encompassing macroeconomic objectives.
This step did not end the long-running debate about the need to separate commercial from central banking.

 By the late 1950s, the Government had decided to establish a separate Central Bank.

The Reserve Bank of Australia (RBA) became a reality on 14 January 1960. The original corporate body was preserved under the Reserve Bank of Australia name, and the commercial and savings bank business put into a new Commonwealth Bank of Australia.

 Dr HC (Nugget) Coombs, Governor of the Commonwealth Bank since 1949, was appointed the RBA's first Governor.

By the time Coombs retired at the end of his third term as Governor in 1968, the RBA had established branch offices in all other State capitals, Canberra, Darwin and London and had a staff of 3200; this compares with about 800 nowadays.

Note: That while they claim the commercial and savings part of a the bank became a new bank in 1960, this video released recently by the Commonwealth Bank itself, tells another story Listen to what is said around 0:25 -0:30sec


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The creator of this Blog takes no responsibility for the accuracy of the information contained herein. All the above information on the RBA & CBA has been taken directly from the Reserve Bank of Australia's own Website,  it has been arranged slightly to produce a more chronological effect  for the benefit the reader.