Mid 19th century.E2.80.931924 Reserve Bank of Australia

prime minister andrew fisher, government created commercial bank owned government, not central bank.

the proposition of national bank in australia began raised in middle of 19th century. interest accelerated in 1890s due austere collapse of financial , banking sectors @ beginning of decade. australian labor party consequently formed during same decade , proposed bank should formed, protected , cheap way of having financial services. party designed platform in 1908 commonwealth bank , combination of both commercial , central bank.

regardless, fisher s labor government introduced legislation in 1911 government-owned commercial bank, without complete central banking component. stated time , experience show how functions usefulness may extended [towards central banking]. function @ time made bank characteristic of central 1 was banker australian government, in addition being same states. time being, treasury of australia maintained role of issuing bank notes through notes act of 1910.

the commonwealth bank of australia gradually developed central bank of australia. in response disruption of trade during world war (1914–1918) commonwealth bank began manage debt of australian government. nevertheless, @ end of war, bank continued have primary role savings , trading bank. world war had caused currency of australia move away gold standard, in order fund great increase of government spending, did united kingdom , other parts of british empire.

anb board member john garvan led movement toward reestablishing gold standard.

the value of australian pound remained tied pound sterling. inflation in australia increased, less in britain, more in united states. case central bank increased need government cut spending after war reduce debt. commonwealth bank governor denison miller had been arguing issue of australian currency switched treasury bank, had more staff , more monetary knowledge.

the australian notes board (anb) created in 1920 , partially acceded request of miller, in having 4 directors, governor of bank being ex officio member. anb began follow policy of board member john garvan, in contracting money supply, goal of reducing prices free convertibility of australian pound gold re-established @ pre-war rates, return former gold standard.

this accomplished refusing exchange of notes gold , hoped lower domestic prices , raise exchange rate australian pound. when gold arrived new york, u.s. government sold securities in order diminish effect of monetary expansion, therefore executing first open market operations in history of australia , first attempt of central banking.