Australia’s Money Supply

(As originally compiled in 2015 and partially updated in 2018)

The available statistical records from the Reserve Bank of Australia commence from July 1959.

At that time Australia money supply is shown from two sources, the Commonwealth’s production of “hard currency”, in the form of notes and coins, and the fictional money created by the private banking sector through bookkeeping entries (later converted to digital money with the introduction of computers)

In 1959 the Government created $0.8 billion in currency and the private banks created approximately $6.7 billion.  The ratio of public money to private money was 11.9% in 1959.

An analysis of the Reserve Bank statistics on a 10 year basis (in billions) since then is as follows:-

Year                                         Broad Money                             Cmlth Currency        %

                                                    Total (M3)                                 .   Total           Difference

Base 1959                                         6.7                                             0.8               11.9%

1960 -1969                                       14.1                                             1.1                7.8%

1970 – 1979                                     73.0                                             4.0                5.5%

1980 – 1989                                   303.5                                            12.3                4.1%

1900 – 1999                                   518.0                                            23.1                4.6%

2000 – 2009                                  1246.2                                           45.7                 3.7%

2 010 – 2014                                 1690.8                                           58.0                 3.4%

Oct 2018 (From the Debt Clock) 2240.3                                          81.9                 3.6%

Reference -

The above table highlights a number of major issues that can, and should, be addressed by the Government, especially a Government that has the constitutional authority and responsibility to control Australia’s money supply as a monetary sovereign nation.

Issue 1 According to the Bureau of Statistics, a dollar in July 1959 is the equivalent of $14.4 in July 2014. If the money supply is to keep pace with inflation then the $6.7 billion in 1959 should be equivalent to $96.50 billion in July 2014.

             In the case of the Government their increase in currency has been 72.5 times the amount in 1959. By comparison, the private banks have increased the money supply by 252.4 times more than the amount they created in 1959.

             As can be seen from the above table, the private banks, and the Government have created far more than the supply needed to account for inflation, but that is understandable in relation to the vast increase in productive capacity over the last 54 years.

Issue 2 The above table shows that the Government in 1959 was creating 11.9% of the total money supply in circulation, but by 2014, the Government had reduced this percentage to 3.4%. The question is why?

             Why is the Government deliberately restricting their ability to provide a large proportion of the funding needed to serve the public purpose for which they have been created?

             If the Government were to increase the creation of public money to the same ratio of 11% as in 1959, this would give them an additional $128 billion at no extra cost other than the production costs for the currency.

             They could even avoid those costs if they were to create digital money.

              It is probably obvious, that the current amount of “hard currency” in circulation is adequate for present day needs; hence, the additional public money could easily be converted to digital currency.

Issue 3 Why has the Government, with constitutional authority and responsibility, to both control the banking system and also the money supply for a monetary sovereign nation, allowed the private banks to create this enormous amount of money and charge the people, and the nation, interest on what they create?

  Why has the Government allowed the private banks to increase the money supply   by 252.4 times when the Government has, apparently, only seen it necessary to increase the “hard currency” supply by 72.5 times the amounts of 1959?

             What is the logical answer to this?

Issue 4 Why has the Government ignored their responsibility to the people, and the nation, by their abject failure in handing over the creation of the nation’s money supply to the private banks?

The 1901 British Act that creates the Constitution of Australia clearly provides for the Commonwealth Government to have full and total control of all the nation’s money supply, as well as full control of all banking in Australia, other than State banking carried out within the borders of the respective States.

(Section 51 Subsections (xii) and (xiii))

The failure of all Governments, except for the period 1911 to 1923 when the Commonwealth Bank of Australia operated as the people’s publicly owned Bank, to comply with the conditions of the Constitution, represents a deplorable dereliction of their responsibility to the people and the nation. The deliberate refusal to comply with their Constitutional responsibility could be considered an act of treason by the elected representatives, in driving Australia into the horrendous and unnecessary debts we have accumulated over the decades.

Issue 5 According to the Australian Debt Clock, as ofOctober 2018, the total Federal     Government debt stands at $660 billion plus another $165.9 billion carried by the State Governments.

             On the other hand, the debt held in the private sector by the banks amounts to $2885.2 billion, some 4.4 times more than the Federal Government. The private sector debt is made up of $1804.9 billion in housing, $930.4 billion in business debt, $99.9 billion in personal debt and $50.9 billion in credit card debt.

               The total debt is perpetually increasing in all major categories and it is quite obvious that the significant root cause of both inflation and deflation must be attributed to the lending practices in the private sector.

               The total public and private debt related to the banking sector in Australia amounts to $3714 billion but the Debt Clock includes an additional $3208 billion outside of the banking sector. Thus, Australia’s total debt is $6982 billion and increasing by approximately $682,000 every minute.

NOTES Graham Paterson is the author of this paper, and confirms that the figures in the above table, while being based on the published statistics from the Reserve Bank of Australia, are all close approximations and have not been calculated “exactly” from the large amount of data provided.

I would be grateful to anyone who wishes to undertake the exact calculations, but for the purpose of this paper, the approximations do realistically illustrate the situation as it stands.