We exceeded the inflation target by 0.2 per cent in the year to June 1995, in part because of a very sharp spike in the prices of fruit and vegetables, returned to the target for the next six months, and then exceeded the target by a small margin throughout 1996.
In our judgement, and that of APRA’s, it would be undesirable for a bank to meet its liquidity needs by significantly increasing its exposure to the rest of the banking system. If a stressed situation was to arise at one bank, the increased cross-holdings could rapidly translate this to other banks.