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.
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.
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.
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.
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.
acquirer. An 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. Average 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.
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.
BPAY. BPAY 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
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.
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.
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. A 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
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 businesses.
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.
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.
A debit card is a card that
enables the holder to access funds in a deposit account at an authorised
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 and options.
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
G-10. Group 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.
G-20. Group 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.
G-22. Group 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.
G-7. Group 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.
G-8. Group 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. All 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.
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
A measure of the change
(increase) in the general level of prices.
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.
fee. A fee paid between
card issuers and acquirers when cardholders make transactions.
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 unemployed.
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.
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.
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 overdraft facilities.
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
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 Price Index.
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. A measure 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 Services Tax.
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
wages share. Wages, salaries and supplements (the total value of income
from labour) as a percentage of gross domestic product
at factor cost.
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.
youth unemployment. 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