The trend and structure of interest rates in Australia

This thesis aims at analysing the main as ects of interest rate behaviour in Australia. We are concerned mainly with the post-war years although, in several instances, it has been considered worthwhile to extend the discussion to cover earlier periods. No statistics have been extracted nor any developments discussed beyond late 1963. Throughout this thesis, unless otherwise indicated, any reference to the current situation may be regarded as referring to the situation prevailing in late 1963. The first chapter, which is mainly factual, is the basis for the subsequent analysis. In it the main statistical series of interest rates in Australia are brought together along with some comments on their bases of compilation and main limitations. Also included in this chapter is some discussion of institutional arrangements in various parts of the capital market in so far as these arrangements have some bearing on interest rate behaviour. In Chapter 2 we set out what is basically the Keynesian theory of interest rate determination. This theory is then used (Chapter 3 in an attempt to explain the major movements in the general level of interest rates in Australia since 1920. Our attention is then focussed on the two main aspects of official control over interest rates. In the first instance we discuss the bases of particular interest rate policies pursued at various times and then we turn to consider the means used to put these policies into effect. An important characteristic of the post- war Australian capital market has been the dichotomy between those rates of interest that are either officially administered or at least subject to a high degree of official control and those over which the influence of the monetary authorities is at most an indirect one. In Chapter 5 our attention is turned to an analysis of the behaviour of these so- called "free" rates. In Chapter 6 we discuss the main factors which might be expected to influence the relationship between short and long term interest rates. This theory is then used as a basis for discussing the relationship between short and long term bond yields Australia