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Below is a detailed plan to adopt Quantitative Balancing (QB) in Australia, with a focus on the legal and regulatory changes required to make bank-created money legal tender, transform irregular deposit contracts into regular deposit contracts, and segregate deposit accounts to ensure ownership remains with customers. This plan builds on the QB framework from prior work (e.g., Solving the Conundrum of Banks' Cash Flow Statements: A Quantitative Balancing Approach), tailoring it to Australia’s financial system as of March 10, 2025. The approach is structured in three phases—pilot, expansion, and full adoption—over a five-year timeline (2025-2030), aligning with prior accelerated scenarios.
Plan to Adopt Quantitative Balancing (QB) in Australia
Overview of QB in the Australian Context
Quantitative Balancing (QB) redefines bank money creation: when banks issue loans, the resulting deposits are recorded as liabilities to the Reserve Bank of Australia (RBA) or Treasury, with seigniorage tranches paid back as loans are repaid. Deposits can be segregated, owned by customers, and backed by the state as legal tender, enhancing transparency and stability. Australia’s banking system—dominated by the "Big Four" (Commonwealth Bank, NAB, Westpac, ANZ), with A$5.5 trillion in assets (2024 estimate)—relies on irregular deposit contracts, where banks own deposits and lend them out under fractional reserves. QB would shift this to a regular deposit model, aligning with Australia’s robust regulatory framework under the Australian Prudential Regulation Authority (APRA) and the RBA.
Objectives
- Legal Tender Status: Make bank-created money (deposits) legal tender, backed by the state.
- Deposit Segregation: Transform irregular deposit contracts (banks own funds) into regular deposit contracts (customers retain ownership), segregating accounts.
- Debt and Stability: Offset public debt (A$900 billion, ~30% GDP in 2024) and reduce systemic risk.
Phase 1: QB Pilot Project—"AussieCoin" (2025-2026)
Duration: 18 months (March 2025 - August 2026)
Objective: Test QB with a state-backed stablecoin, laying the groundwork for legal changes.
Objective: Test QB with a state-backed stablecoin, laying the groundwork for legal changes.
Details:
- Execution: A private entity, AussieCo, issues 50 billion "AussieCoin" (1 AussieCoin = 1 AUD), accepted by the Australian Taxation Office (ATO) for tax payments, tracked on a public blockchain (e.g., Hedera).
- Accounting:
- AussieCo: Assets = "Creation of 50B AussieCoin"; Liabilities = "Debt of 50B from seigniorage to Treasury."
- Treasury: Offsets A$900B debt by 50B, records AussieCo’s debt as an asset.
- Reflux: AussieCo pays 5B AUD tranches annually over 10 years as AussieCoin is redeemed.
- Scale: 50B AUD (~1% of M2, estimated at A$5T in 2024).
Legal Modifications:
- Currency Act 1965 (Cth)
- Current: Section 9 defines legal tender as RBA-issued coins and notes.
- Change: Amend Section 9 to include "digital currencies issued under QB framework and accepted by the Commonwealth for tax payments" as legal tender, effective June 2025.
- Rationale: Extends legal tender status to AussieCoin, aligning with QB’s state-backed model.
- Taxation Administration Act 1953 (Cth)
- Current: ATO accepts AUD payments via cash or electronic means.
- Change: Add Section 8AAZLE: "The Commissioner must accept AussieCoin for tax liabilities at 1:1 parity with AUD."
- Rationale: Ensures demand for AussieCoin, anchoring its value.
- Sandbox Approval: Leverage the ASIC Regulatory Sandbox (Corporations Act 2001, Part 7.10A) to fast-track AussieCo’s issuance, bypassing immediate banking law conflicts.
Outcomes:
- Debt reduction: A$50B (~5.5% of A$900B).
- Liquidity boost: A$50B (~2% GDP, A$2.5T).
- Proof-of-concept for QB’s legal tender and transparency mechanisms.
Phase 2: QB Expansion and Banking Reform (2026-2028)
Duration: 2 years (September 2026 - August 2028)
Objective: Scale QB to banks, segregate deposits, and formalize bank money as legal tender.
Objective: Scale QB to banks, segregate deposits, and formalize bank money as legal tender.
Details:
- Expansion: Banks adopt QB, creating AUD deposits as legal tender with Treasury seigniorage credits. AussieCoin scales to A$500B (10% of M2).
- Deposit Segregation: Customers opt into "QB Safe Accounts" (regular deposits, owned by them) or "QB Lending Accounts" (irregular deposits, bank-owned for lending).
- Accounting: Banks record loan-created deposits as Treasury liabilities; tranches of A$50B/year repay over 10 years.
Legal Modifications:
- Banking Act 1959 (Cth)
- Current: Section 5 defines "banking business" as taking deposits and lending; no distinction between deposit types.
- Change: Add Section 5A:
- "Deposits under QB may be segregated as regular deposits, owned by customers and unavailable for lending, or non-segregated as irregular deposits, owned by banks for lending. Segregated deposits are legal tender, backed by the Commonwealth."
- "Banks creating money via loans must register seigniorage credits with the Treasury, offset by tranches upon loan repayment, effective January 1, 2027."
- Rationale: Transforms irregular deposit contracts into regular ones, ensuring customer ownership and legal tender status.
- Reserve Bank Act 1959 (Cth)
- Current: Section 36 mandates RBA notes and coins as legal tender.
- Change: Amend Section 36(1): "Bank deposits created under QB, registered with the Treasury, are legal tender alongside RBA currency."
- Rationale: Formalizes bank money as state-backed legal tender.
- National Consumer Credit Protection Act 2009 (Cth)
- Current: Governs credit contracts without deposit ownership specifics.
- Change: Add Schedule 1, Clause 7A: "Banks must offer QB Safe Accounts, segregating funds with ownership retained by depositors."
- Rationale: Enforces segregation in consumer contracts.
- APRA Prudential Standards
- Current: APS 111 (Capital Adequacy) and APS 210 (Liquidity) assume fractional reserves.
- Change: Amend to reduce Capital Adequacy Ratio (e.g., from 8% to 5%) and Cash Reserve Ratio (e.g., from 4% to 2%) for QB-compliant banks, incentivizing adoption by 2027.
Outcomes:
- Debt reduction: A$500B (~55% of A$900B).
- Banking shift: 10% of deposits segregated, owned by customers, reducing systemic risk.
- Legal tender: Bank money gains state backing, enhancing trust.
Phase 3: Full QB Adoption (2028-2030)
Duration: 2 years (September 2028 - August 2030)
Objective: Convert all AUD M2 to QB framework, clearing debt and embedding customer ownership.
Objective: Convert all AUD M2 to QB framework, clearing debt and embedding customer ownership.
Details:
- Transition: Convert A$5T M2 (100%) to QB AUD, all deposits optionally segregated and legal tender.
- Mechanics: Banks redenominate all deposits under QB; Treasury offsets remaining A$400B debt with A$5T credits, with A$500B/year tranches beyond 2030.
- Ownership: Default to QB Safe Accounts unless customers opt into lending accounts.
Legal Modifications:
- Banking Act 1959 (Cth)
- Change: Amend Section 9: "By January 1, 2029, all ADIs must operate under QB, with all deposits defaulting to segregated regular contracts unless opted otherwise."
- Rationale: Mandates full segregation and ownership shift.
- Currency Act 1965 (Cth)
- Change: Replace Section 16: "All QB AUD, physical or digital, is sole legal tender from July 1, 2029."
- Rationale: Completes legal tender transition.
- Financial Sector (Collection of Data) Act 2001 (Cth)
- Change: Add Section 13A: "APRA must report QB adoption metrics annually, ensuring 100% M2 compliance by 2030."
- Rationale: Enforces oversight and accountability.
Outcomes:
- Debt cleared: A$900B offset, surplus credits fund infrastructure.
- Ownership: Customers own ~80% of A$5T M2 (assuming 20% opt for lending accounts).
- Stability: No fractional reserve risk; full state backing.
Key Legal Changes Summary
Legislation | Change | Purpose |
|---|---|---|
Currency Act 1965 | Include QB digital money as legal tender | Make bank money state-backed |
Banking Act 1959 | Segregate deposits; register seigniorage credits | Shift to regular deposits, ownership |
Reserve Bank Act 1959 | Extend legal tender to QB bank deposits | Formalize state backing |
NCCPA 2009 | Mandate QB Safe Accounts | Enforce customer ownership |
APRA Standards (APS 111/210) | Lower capital/liquidity requirements for QB banks | Incentivize adoption |
Feasibility and Challenges
- Economic Impact: A$500B in Phase 2 (20% GDP) risks inflation unless channeled productively (e.g., housing, renewables). Phase 3’s A$5T shift could devalue AUD (10-15%) short-term but boost exports (A$400B annually).
- Bank Resistance: Big Four may resist losing deposit control; APRA incentives and public pressure (post-2019 Banking Royal Commission) can counter this.
- Political Will: Requires bipartisan support in Parliament; tying QB to debt relief (A$900B) and depositor security (A$250K FCS limit preserved) boosts appeal.
- Timeline: Five years is tight but feasible with emergency decrees (Constitution Section 51) and RBA/APRA coordination.
Conclusion
Adopting QB in Australia over 2025-2030 transforms bank money into legal tender, segregates deposits as regular contracts owned by customers, and clears public debt. Starting with a 50B AussieCoin pilot, scaling to A$500B via banking reform, and converting A$5T M2 ensures a phased, manageable rollout. Legal changes to the Currency Act, Banking Act, and APRA standards are pivotal, balancing innovation with stability in Australia’s A$2.5T economy. This could position Australia as a QB pioneer, echoing its 1980s deregulation success.
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