Appendix C — Glossary of terms
Australian Competition and Consumer
Commission (ACCC). A
Commonwealth statutory authority responsible for ensuring compliance with the Trade Practices Act 1974
and the provisions of the Conduct Code and for administering the Prices Surveillance Act 1983.
The Commission's consumer protection work complements that of State and
Territory consumer affairs agencies.
Australian Payments Clearing Association Limited (APCA). A public company owned by banks, building societies and
credit unions which has specific accountability for key parts of the Australian
payments system, particularly payments clearing operations.
Australian Prudential Regulation Authority (APRA). APRA is the prudential regulator of the Australian
financial services industry. It oversees banks, credit unions, building
societies, general insurance and reinsurance companies, life insurance,
friendly societies, and most members of the superannuation industry.
Australian Securities and Investments Commission (ASIC). One of three Australian Government bodies (the others
being the Australian Prudential Regulation Authority and the Reserve Bank of Australia) that regulates financial services. ASIC is the national regulator of Australia's companies. ASIC has responsibility for market protection and consumer integrity
issues across the financial system.
accrual accounting. Revenues and expenses are recorded as they are earned
or incurred, regardless of whether cash has been received or disbursed. For
example, sales on credit would be recognised as revenue, even though the debt
may not be settled for some time.
institution that provides a merchant with facilities to accept card payments,
accounts to the merchant for the proceeds and clears and settles the resulting
obligations with card issuers.
average weekly earnings.
gross (before tax) earnings of employees.
average weekly ordinary time earnings (AWOTE). Weekly earnings attributed to award, standard or agreed
hours of work.
average weekly total earnings. Weekly ordinary time earnings plus weekly
balance on current account. The difference between receipts and
payments as the result of transactions in goods, services, income and current
transfers between Australia and the rest of the world. A current account
deficit means that total payments exceed total receipts, while a current
account surplus means the reverse.
bankruptcies. Bankruptcies and Administration Orders
under Parts IV and XI of the Bankruptcy Act.
basis point. A basis point is 1/100th of 1 percent or 0.01 per cent. The term is used
in money and securities markets to define differences in interest or yield.
is a payments clearing organisation owned by a group of retail banks.
Individuals who hold accounts with a BPAY participating financial institution
can pay billing organisations which participate in BPAY, using account
transfers initiated by phone or internet. The transfers may be from savings,
cheque or credit card accounts.
business investment. Private gross fixed capital formation for machinery and
equipment; non-dwelling construction; livestock; and intangible fixed assets.
card issuer. An institution that provides its customers with debit or credit cards.
cash rate (interbank overnight). Broadly defined,
the term cash rate is used to denote the interest rate which financial
institutions pay to borrow or charge to lend funds in the money market on an
overnight basis. The Reserve Bank of Australia uses a narrower definition of
the cash rate as an operational target for the implementation of monetary
policy. The Reserve Bank of Australia's measure of the cash rate is the
interest rate which banks pay or charge to borrow funds from or lend funds to
other banks on an overnight unsecured basis. This measure is also known as the
interbank overnight rate. The Reserve Bank of Australia calculates and
publishes this cash rate each day on the basis of data collected directly from
banks. This measure of the cash rate has been published by the Reserve Bank of Australia since June 1998.
cash rate target. As in most developed countries, the stance of monetary
policy in Australia is expressed in terms of a target for an overnight interest
rate. The rate used by the Reserve Bank of Australia is the cash
rate (also known as the
interbank overnight rate). When the Reserve Bank Board decides that a change in
monetary policy should occur, it specifies a new target for the cash rate. A
decision to ease policy is reflected in a new lower target for the cash rate,
while a decision to tighten policy is reflected in a higher target.
charge card. A charge card is a card whose holder has been granted a non-revolving
credit line enabling the holder to make purchases and possibly make cash
advances. A charge card does not offer extended credit; the full amount of any
debt incurred must be settled at the end of a specified period.
consumer price index.
measure of change in the price of a basket of goods and services from a base
period. Changes in the
Consumer Price Index are the most commonly used measure of inflation.
collateralised debt obligations. Collateralised debt obligations
(CDOs) are securities that are exposed to the credit risk of a number of
corporate borrowers. In the simplest form of a CDO, this credit risk exposure
is generated in the same way as for any asset-backed security (ABS): the CDO is
backed by outright holdings of corporate debt, such as corporate bonds and
corporate loans. Increasingly, however, the exposure to corporate credit risk
is synthesised through the use of credit derivatives. Unlike other forms of
ABS, where the collateral pools usually consist of loans with broadly similar
characteristics, CDO reference pools are typically quite heterogeneous, with exposures
to a variety of borrower types and credit ratings and across a number of
countries. A CDO will usually have exposures to between 50 and 200 bonds or
large corporate loans, or up to 2,000 loans to small and medium-sized
The simplest forms
of CDOs are known as ‘cash' or ‘vanilla' CDOs, and are similar to other forms
of ABS. A special purpose vehicle buys loans and securities from financial
institutions and other market participants, and funds these acquisitions by
selling securities to investors. The manager of the CDO vehicle will usually
deduct fees and expenses from the interest income received from the assets in
the collateral pool, with the remainder used to make regular coupon payments to
investors. The term to maturity of the loans and bonds in the collateral pool
will determine the maturity of the CDO securities sold to investors.
credit card. A credit card is a card whose holder has been granted a revolving credit
line. The card enables the holder to make purchases and/or cash advances up to
a pre-arranged limit. The credit granted can be settled in full by the end of a
specified period or in part, with the balance taken as extended credit.
Interest may be charged on the transaction amounts from the date of each
transaction or only on the extended credit where the credit granted has not
been settled in full.
debit card. A debit card is a card that enables the holder to access funds in a
deposit account at an authorised deposit-taking institution.
derivative. A financial contract whose value is based on, or derived from, another
financial instrument (such as a bond or share) or a market index (such as the
Share Price Index). Examples of derivatives include futures, forwards, swaps
employed persons. Persons aged 15 and over who, during a
period of one week, worked for one hour or more for pay or worked for one hour
or more without pay in a family business or on a family farm.
of Ten countries: Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Sweden, Switzerland, United Kingdom, and USA; plus Bank for
International Settlements (BIS), European Commission, International Monetary
Fund (IMF), and the Organisation for Economic Co-operation and Development
(OECD). It was formed in conjunction with the establishment of the General
Arrangements to Borrow, under which members agreed to make resources available
to the IMF.
of Twenty Forum: Members are finance ministers or central bankers from -
Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia,
Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey,
UK and US; plus representatives of the IMF, European Union and World Bank. The
G-20 aims to broaden the dialogue on key economic and financial policy issues
among systemically significant economies, and promote co-operation to achieve
stable and sustainable world economic growth.
of Twenty-two. The G-22's aim was to advance issues related to the global
financial architecture. It operated through three Working Parties - on
Transparency and Accountability, International Financial Crises, and
Strengthening Financial Systems. The group made its recommendations in 1998,
and its work has since been taken up in other forums.
of Seven countries: Canada, France, Germany, Italy, Japan, UK and USA. The G-7 Summit deals with issues covering macroeconomic management,
international trade, international financial architecture, relations with
developing countries, and other global issues.
of Eight countries: G-7 countries and Russia.
gross domestic product. The
total market value of goods and services produced after deducting the cost of
goods and services used up in the process of production but before deducting
gross domestic product—chain volume measure. Also
known as real GDP, this is a measure used to indicate change in the
actual quantity of goods and services produced. Economic growth is defined as a
situation in which real GDP is rising.
gross domestic product at factor cost. Gross domestic product less the excess of indirect taxes
gross foreign debt.
non-equity financial claims by non-residents on residents of Australia. The major component of gross foreign debt
is the amount of borrowings from non-residents
by residents of Australia.
household debt ratio. The amount of
household debt at the end of a quarter expressed as a proportion of annual household
gross disposable income.
household gross disposable income. The amount of income that households have available for
spending after deducting any taxes paid, interest payments and transfers
household net disposable income. Household gross disposable income less depreciation of household
household saving ratio.
The ratio of household
income saved to household net disposable income.
housing loan interest rate. The variable rate quoted by banks for loans to
implicit price deflator for non-farm gross domestic product. A measure of price change that is derived
(hence the term implicit) by dividing gross non-farm product at current prices
by gross non-farm product at constant prices.
index of commodity prices. A Reserve Bank of Australia-compiled index (based
2001/02=100) which provides a measure of price movements in rural and non-rural
(including base metals) commodities in Australian Dollars (AUD), Special Drawing Rights (SDR) and United States Dollars (USD).
inflation. A measure of the change (increase) in the general level of prices.
inflation target. A tool to guide monetary policy expressed as a
preferred range or figure for the rate of increase in prices over a period. In Australia, the inflation target is between 2 and 3 per cent per annum on average over the
course of the business cycle.
interchange fee. A fee paid between card issuers and acquirers when
cardholders make transactions.
interest rate. The term used to describe the cost of borrowing money or the return to
the owner of the funds which are invested or lent out. It is usually expressed
as a percent per annum of the amount of money borrowed, lent or invested.
labour force. The employed plus the
labour force participation rate. The number of persons in the labour force expressed as a
percentage of the civilian population aged 15 years and over.
labour productivity. Gross
domestic product (chain volume measure) per hour worked in the market sector.
long-term unemployed. Persons unemployed for a
period of 52 weeks or more.
macroeconomy. The economy looked at as a whole or in terms of major components
measured by aggregates such as gross domestic product, the balance of payments
and related links, in the context of the national economy. This contrasts with
microeconomics which focuses upon specific firms or industries.
market sector. Five industries are excluded from the market sector because their
outputs are not marketed. These industries are: property and business services;
government administration and defence; education; health and community
services; and personal and other services.
monetary policy. The setting of an appropriate level of the cash rate
target by the Reserve Bank of Australia to maintain the rate of inflation in Australia
between 2 and 3 per cent per annum on average over the business cycle.
natural increase. Excess of live births over deaths.
net foreign debt. Gross foreign debt less non-equity assets
such as foreign reserves held by the Reserve Bank and lending by residents of Australia to non-residents.
net overseas migration. Net permanent and long-term overseas migration plus an adjustment
for the net effect of ‘category jumping’.
non-farm gross domestic product. Gross domestic product less that part which derives from
agricultural production and services to agriculture.
overseas visitors. Visitors from overseas who intend to stay in
Australia for less than 12 months.
prime interest rate.
The average rate charged by the banks to large businesses for term and
profits share. Gross operating
surplus (the excess of gross output over costs incurred in producing that
output) of all financial and non-financial corporate trading enterprises as a
percentage of gross domestic product at factor cost.
real average weekly earnings. Average
weekly earnings adjusted for inflation as measured by the Consumer Price Index.
real prime interest rate.
The prime interest rate discounted for inflation as measured by the Consumer
seasonally adjusted estimates. Estimates in which the element of
variability due to seasonal influences has been removed. Seasonal influences are those which recur
regularly once or more a year.
terms of trade. The relationship between
the prices of exports and the prices of imports. The usual method of calculating the terms
of trade is to divide the implicit price deflator for exports by the implicit
price deflator for imports.
trade weighted index.
of the value of the Australian dollar against a basket of foreign currencies of
major trading partners.
turnover. Includes retail sales; wholesale sales; takings from repairs, meals
and hiring of goods; commissions from agency activity; and net takings from
gaming machines. From July 2000, turnover includes the Goods and
unemployed persons. Persons aged 15 and over who, during a period of one week,
were not employed but had actively looked for work in the previous four weeks
and were available to start work.
unemployment rate. The number of unemployed persons expressed as a percentage
of the labour force.
wage price index. A measure of
change in the price of labour (i.e. wages, salaries and overtime) unaffected by
changes in the quality or quantity of work performed.
wages share. Wages,
salaries and supplements (the total value of income from labour) as a
percentage of gross domestic product at factor cost.
west texas intermediate. A type of crude oil used as a benchmark in oil
pricing and the underlying commodity of New York Mercantile Exchange's oil futures contracts.
Number of 15–19 year olds looking for full-time work.
youth unemployment rate. Number of 15–19 year olds looking for full-time work
expressed as a percentage of the full-time labour force in the same age group.
Library and Reserve Bank of Australia
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