with the same term to maturity. Macfarlane (1988) concludes that a pre-currency-float link between domestic and foreign bond rates weakened in the post-float era. This study is based on data truncating in June 1988. However, the study by Felmingham, Zhang and Healy (2000) suggests that Australian rates are cointegrated with rates in six of its major trading-partner countries in the 1990s, but not in the 1980s.
Further revisions of Australia's money and banking arrangements can be anticipated. Hogan's (1999) menu of potential banking changes include the effects of asymmetric information and technical change. The presence of scale and scope economies in Australian banking suggests that further amalgamations, particularly those involving the combination of international partners, will eventuate. E-banking will create the need for banks to revise credit-supervision procedures to counter the influences of asymmetric information and the related problems of adverse selection and moral hazard. Hogan views future banks as 'design and construct' centres retaining more profitable activities and outsourcing plain vanilla banking products to service providers. The outcome for payment and clearance activities given the banks' desire to capitalise on scale and scope cost-savings is uncertain. Central banks will have a heightened interest in payments systems security for precautionary reasons.
The future of the banking system is just one of several intriguing puzzles about the future of money and banking in Australia.
Alles, L. 1995. The Australian term structure as a predictor of real economic activity. Australian Economic Review 4:71–78.
Asano, H. 1999. Financial deregulation and the stability of money demand:The Australian case. Australian Economic Papers 38(4):407–21.
Blundell-Wignall, A., and S. Thorp. 1987. Money, Own Interest Rates and Deregulation. RBA Discussion Paper 8703. Canberra: Reserve Bank of Australia.
Brooks, R.B., and R.W. Faff. 1995. Financial market deregulation and bank risk: Testing for beta instability. Australian Economic Papers 34(65):180–99.
Brown, R., and K. Davis. 1997. The Wallis Report: Functionality and the nature of banking. Australian Economic Review 30(3):310–15.
Butlin, M.W., and C.J. Ryan. 1982. The Causal Relationship between Money Base and Money in Australia: 1960–79. RBA Discussion Paper 8203. Canberra: Reserve Bank of Australia.