Govt banking move

Press, 5 April 1989, Page 36

Govt banking move

PA Wellington Government department banking at Westpac which started yesterday will have no effect on the open market operations conducted by the Reserve Bank, the Bank says. < Under Public Service financial reform moves the Government’s account at Westpac would be funded from the Public Account and the departments would then write cheques on this Westpac account, the bank said yesterday.

The liquidity impact of the departmental transactions would be the same as under the old banking arrangements because any net balance in the Government’s Westpac account would be transferred to the Reserve Bank leaving

the Westpac account with a zero balance. This would mean that from a liquidity perspective the transfers from the Public Account to Westpac will be irrelevant as the liquidity would only be affected when cheques written by or received by departments were presented for clearance. The transfers to and from the Reserve Bank to ensure that the Westpac account had a zero balance would take place daily, shortly before the float tender, for value the previous day. The Reserve Bank would continue to forecast the net liquidity impact expenditure of Government and base the daily open market operation on this forecast.