Law of Financial Institutions and Securities

The Reserve Bank of Australia (RBA) was set up under the Reserve Bank Act 1959 and acts as Australia's central bank. There are various legislations in Australia that set out different functions and roles of the Reserve Bank but its major and specific roles are set out in the Reserve Bank Act. The general role of the RBA as stipulated in its charter involve issuing of Australias currency, conducting monetary policies and the maintenance of a robust and strong financial system in Australia. In addition to these roles, the RBA also controls and oversees the nation's foreign exchange and gold reserves as well as providing registry and banking services to government agencies, official institutions and overseas central banks (Reserve Bank of Australia, 2016).

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The reserve banks charter also sets up the Reserve Bank Board under section 10(2) and 11(1) and the Payments Systems Board under section 10B(3). The Reserve Bank Board which is in charge of the nation's monetary and banking policy exercises its functions with an aim to secure the economic prosperity, maintenance of full employment and stability of the nation's currency. According to section 10(2), the board is to perform its functions with the aim of affording the people of Australia the greatest advantage in the nation's monetary and banking policies. The Payments Systems Board ensures that the powers given to the RBA by various legislations such as the Payment Systemes (Regulation) Act 1998, the Payment Systems and Netting Act 1998 and the Corporations Act 2001 are practiced in such a way that contributes to the promotion of efficient payment systems, risk control and overall stability of the Australian financial and banking systems (Reserve Bank of Australia, 2016).

In his article, Baker (2016) opines on how the RBA recently came to a decision to leave the cash rate in Australia at its current level despite the turbulence in global financial markets and the economic matters at play in Australias financial system. In his article, he lists some economic factors that the RBA took into account in meeting its objectives in setting the cash rate:

Turbulence Endured in Global Financial Markets

It is characteristic of global financial markets to be volatile and unstable on occasions. This instability usually results in a rise or fall in the local currency and the cash rates in a country. The financial rates over the period had exhibited some volatility. Usually, a change in the financial rates in the more developed economies leads to a ripple effect which is experienced by other economies as well. The volatility experienced gave rise to a lot of uncertainty on policy settings and economic outlooks globally. The global turbulence diminished global financial market stakeholders appetites for risk and tightened the conditions set for lesser- rated corporates and upcoming market sovereigns to receive funding. However, monetary policies still remained accommodative while high- quality borrowers experienced relatively low funding costs (Reserve Bank of Australia, 2016).

The Recent Rise in the Australian Dollar

The Australian Dollar has experienced significant rise due in part to negative interest rates in global economies especially the United States economy. A rise in the American interest rates would result in a strengthening of the US Dollar and a fall in the Australian dollar. This means that the rise or fall of the Australian dollar is predicated upon other stronger currencies and their country's monetary policies. The RBA's move to maintain the cash rate at its current level was due to the fact that, considering the global monetary policies, if it were to cut the rate, the Australian dollar would experience a significant fall.

The Slowdown in China

In his article, Baker (2016) predicts worse global financial situations if the slowdown in China persists and intensifies. The RBA statement does not delve into China's role in the rise and fall of Australias cash rates, however, this does not mean that it is not significant. The Australian economy is largely affected by the Chinese market equity. The Chinese financial system is prone to ups and downs which have a ripple effect on other economies. The situation in China at the moment was such that there was a slowdown which could be managed in China its vast capacity, resources, and resolve but in other economies like Australia, the negative effects would be felt.

Mining Investment and the Local Labor Market

The RBA statement indicated improved labor market conditions owing in part to the strengthening of the non- mining part of the economy despite the reduction among companies willing to spend in mining investments. A steady decline in the growth of labor costs would lead to low levels of inflation and ultimately, accommodative monetary policies.

Housing Bubble

The Australian property market was characterized by high valuations brought about by a debt binge that disengaged itself from any connections with household incomes that was all motivated by monetary authorities and an indulgent tax regime. Real estate values in Australian mining towns were on the rise during the boom. This coupled with a slump in commodity prices and a slowdown in the Chinese economy are now signaling even worse property rates in Australia. Analysts at the time predicted a catastrophic impact on Australias banking system if there were any sharp corrections in the real estate values in Melbourne and Sydney (Verrender, 2016).

The Australian Prudential Regulatory Authority (APRA), a prudential regulator of the financial services industry in Australia set up supervisory measures to emphasize prudent lending standards. The measures proposed by APRA included a communication to banks to be firm on their lending standards. Banks are to employ the use of a serviceability buffer of at least two percent above set interest rates. This is to be done when the banks are issuing loans and guarantees that the loans would still be repaid even when mortgage rates are at least seven percent. Another measure proposed was an order by the APRA to banks to increase the cash on their balance sheets to curb a shock likely to occur. This move would result in an increase in loan rates which in turn limits the rate of dangerous borrowing but also spells an out-of-cycle rate increase among the business and residential borrowers.

The RBA in its statement expressed confidence in APRA's measures to contain any perceived risks in the housing market. The bias in the new lending conditions as proposed by APRA is more in the direction of restrictions on home occupiers rather than investors. This move has taken the tension from house prices. The measures also steadied the credit growth rate in Australian households while moderating the growth in dwelling places in both Sydney and Melbourne.

In conclusion, the RBA is charged with securing economic prosperity, maintenance of full employment and stabilizing the nation's currency all with the aim of affording the people of Australia the greatest advantage in the nation's monetary and banking policies. This is adequately done within that period and the move to leave the cash rate at its current state would eventually be to the advantage of the Australian people and its economy. The RBA sometimes has to adopt tough measures to streamline the Australian economy.

Global economies are slowly edging towards a cashless society. There are numerous reports on the abolition and proposed abolition of paper currencies and limitations on the cash transactions carried out by citizens in a given period. Global economies are urging their citizens to use credit and debit cards in their transactions, a form of payment that does not require paper currency or hard cash. The main argument for this is that paper currency has outlived its purpose.

Statistics indicate that Australians withdraw more than $11 billion per year on ATM's. However, with the emergence of mobile electronic devices that enable citizens to make payments without the use of paper currency, the need for paper currency is slowly declining. Tablet and tap-and-pay transactions are used more than coins and notes which were the norm (Theodorakis, 2015).

A cashless society has its advantages and disadvantages to the various stakeholders. To the government and financial sector, a cashless society means that banks have the ability to set interest rates as they desire depending on the various inflation or deflation rates. Paper currency has a distinct property that limits central banks from setting the policy interest rates below zero. This is considered favorable since the low-interest rates coupled with a zero bound ultimately means that in the case of huge deflationary shocks, the central banks would not be able to cut interest rates as they like (Rogoff, 2014).

Paper currency facilitates anonymity in transactions. By adopting a cashless society, the government can be able to track the transactions of its citizens, a move which would enable them to curb instances of terrorism, financing of terror cells and activities as well other criminal activities. A cashless society means that there would be a trail which law enforcement authorities can follow when investigating crimes and use as evidence to prosecute criminals who would have otherwise used cash and benefited from the anonymity it provides. Aside from terror activities, over 50 percent of currency in various countries is used to hide transactions. This means that the government is defrauded of billions in taxes which could be used for economic benefit (Rogoff, 2014). A cashless society would also mean that the money used to mint paper currency can re- allocated by the government and used in other endeavors.

To the citizens of Australia, a cashless society would mean faster transactions in an era where time is considered a very scarce commodity. Technological advancements have also made cashless transactions safer and afforded the citizens peace of mind with regard to their money and transactions. It is also more convenient as one can withdraw money or make payments easily without needing to queue in ATM's machines (Theodorakis, 2015).

The main disadvantage to the citizens would be the fact that a cashless society would rob them of the anonymity that paper currency affords them. The need for anonymity in paper currency transactions does not always imply a desire to defraud the government or to carry out criminal activities. Also, a cashless society would challenge common social conventions that have been in place for centuries and which would disrupt the citizens ease in carrying out transactions due to the need for legislations and regulations to cater for this new way of trading. A change to a cashless system would also increase transaction costs which would ultimately be felt by the citizens (Hunter, 2016).

A cashless society has both pros and cons. In my opinion, the status quo should be maintained and paper currency and coins still are in circulation in addition to facilities for cashless transactions in the form of debit and credit cards. Various researches suggest that in as much as global leading economies are pushing for an end to paper currency transactions, there is still widespread demand for notes and coins. It is an efficient, fast, cheap and convenient system that benefits the citizens as well as the government and financial sector.

Also, in my opinion, the people of Australia and other global citizens deserve a right to privacy. A cashless society enables financial institutions and the government to keep track on the flow of finances and transactions of its citizens. This can be productive and curb crime but in other respects, it is just a violation of the people's privacy. Corporations and governments have been accused on numerous occasions of...