Final answer:
The action that would increase the credit provision ability of Australian banks is the purchase of government securities by the Reserve Bank, which boosts bank reserves and the supply of money in the economy, allowing for more loans.
Step-by-step explanation:
The option that would tend to increase the ability of Australian banks to provide credit is c) purchases of government securities by the Reserve Bank. When the Reserve Bank purchases government securities, it injects money into the banking system, increasing the reserves of banks, and consequently their ability to lend more. This is known as an open market operation, which is a tool used by central banks to manage the supply of money in the economy.
An increase in the supply of money typically allows banks to offer more loans. Therefore, the correct answer to both the question about Australian banks and the general financial market question is that an increase in supply of funds leads to an increase in the quantity of loans made and received.