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Tuesday, 7 June 1994
Page: 1433

(Question No. 1236)

Senator Jones asked the Minister representing the Treasurer, upon notice, on 16 March 1994:

  With reference to the answers to question on notice No. 299 (Senate Hansard, 2 September 1993, page 905) and question on notice No. 890 (Senate Hansard, 15 March 1994, page 1637) relating to the proceeds of deposits of cheques awaiting final clearance:

  (1) What amount of money from cheques awaiting clearance did Australian banks invest in the past 3 financial years.

  (2) What was the profit to Australian banks from invested cheques awaiting clearance in the past 3 financial years.

  (3) What was the return to bank customers from invested cheques awaiting clearance in the past 3 financial years.

  (4) Where does this interest payment appear on financial statements made to bank customers.

  (5) Is the interest earned in the period the cheques await clearance shown as a separate item on the interest-earned section of the bank statement to their customer.

  (6) Is the sum of cheques awaiting clearance invested on the international overnight money market.

  (7) When cheques are from accounts in the same branch of a bank, can they receive same day clearance.

Senator Cook —The Treasurer has provided the following answer to the honourable senator's question:

  The series of issues raised in Parts (1) to (6) of Senator Jones' questions are most appropriately addressed together.

  As I noted in my response to a previous question on this subject, depending on the nature of the account to which the cheque is credited, banks in Australia pay interest or reduce overdrafts from the day a cheque is deposited. Banks do not maintain separate records of the amounts involved or interest accruing to customers during the clearing cycle. Interest credits shown on customer accounts include, but do not separately identify, interest paid on cheque deposits awaiting clearance.

  Similarly, banks' accounting systems do not identify separately interest earnings on funds invested during the clearing cycle.

  The clearing cycle generates substantial fluctuations in the value of funds banks have available to invest from day to day; they will typically be lenders on one day and borrowers on the next. As a result, investment opportunities for these funds are for the most part very short-term. This points banks to the domestic overnight market, where the major borrowers and lenders are other banks, and dealers in the short-term money market. Rates offered and paid in this market closely reflect the stance on monetary policy, although day-to-day variations in liquidity will also have an impact. Rates are currently around 4.75 per cent per annum.

  In answer to Part (7) of the question, cheque proceeds deposited to an account at the same branch of the bank on which they are drawn will not in the normal course, be immediately available to be withdrawn. However, I understand that most banks have arrangements that allow such cheques to be cleared immediately upon request by the depositor.