Review of the Reserve Bank of Australia annual report 1997-98
Media Releases

Media release: 22 March 1999

MONEY TOO FAR AWAY – NO LONGER?

'The decline in access to banking services in regional and remote areas must be turned around', said Mr David Hawker MP, Chairman of the House of Representatives Economics, Finance and Public Administration Committee. 'Although our inquiry into regional banking services has been very effective in prompting a number of developments aimed at improving the access communities have to banking services, there is still a long way to go.'

After a long and comprehensive inquiry into regional banking services, the Committee tabled its report in Parliament today. The Committee has called for the Australia Post's giroPost services to be expanded to offer business banking and for the network to be extended to more sites. It has also pushed for Australia Post to play a greater role in the transport of cash in regional and remote areas. The Committee has also come out in support of the Rural Transaction Centres Policy.

'We want to build on what is already in place. Australia Post has an expansive network across Australia and is already involved in delivering banking services. The addition of business banking and the extension of the giroPost network are important and straightforward means of giving communities continued access to financial services. The RTC program should be a means of facilitating this.'

The Committee has identified access to withdrawal and deposit facilities for cash and access to business banking services as being the major problems that result from the closure of bank branches.

It has advocated an aggregated service delivery approach as being the most sustainable way of ensuring that communities have continued access to over-the-counter financial services.

'It is inevitable that changes in the regulatory environment and technological developments will alter the delivery of financial services. However, these developments should improve access and not be used as an excuse for diminishing services', said Mr Hawker.

'We understand that the banks are under pressure to reduce costs. They must understand that they play a key role in the economic and social fabric of regional and remote communities.'

The Committee has welcomed signals of a change of heart by the banks but has put the banks on notice. 'We are determined to make sure existing commitments are upheld and there is still room for improvement on these. We will be watching closely both in terms of the level of services provided to regional and remote communities and in terms of the treatment of communities.'

Ends
22 March 1999
Email: EFPA.Reps@aph.gov.au

Further information:
David Hawker MP (Chairman) 02 6277 4100
Jan Connaughton (Inquiry Secretary) 02 6277 4587

A copy of Mr Hawker's tabling speech follows.

For a copy of the Committee's report see:
internet:(http://www.aph.gov.au/house/committee/efpa/rbs/rbsrep.htm)
or contact the Committee secretariat).

Committee Membership 39th Parliament

Chairman: Mr David Hawker MP
Deputy Chairman: Mr Gregory Wilton MP
Members:
Mr Anthony Albanese MP
Ms Anna Burke MP
Ms Teresa Gambaro MP
Mrs Kay Hull MP
Mr Mark Latham MP
Mr Christopher Pyne MP
Hon Alex Somlyay MP
Dr Andrew Southcott MP

TABLING SPEECH: DAVID HAWKER MP, CHAIRMAN

REGIONAL BANKING SERVICES: MONEY TOO FAR AWAY

Monday 22 March 1999

The delivery of financial services is being transformed by two concurrent developments. Changes in the regulatory environment together with moves towards globalisation have increased competition. Financial institutions are under pressure to reduce costs and this is leading them to seek cheaper ways of delivery.

At the same time, technological developments are offering banks cheaper methods such as ATMs, EFTPOS, telephone and internet banking.

Although the increased competition and the introduction of self-service banking are improving the access many have to some financial services, they are also leading to the rationalisation of the bank branch networks. For others, particularly those in regional and remote areas, this process is resulting in reduced access or loss of access to banking and like services.

This inquiry into alternative means of providing banking in regional and remote Australia was referred to the Committee by the Treasurer in October 1997. The inquiry was borne out of a concern about the impact of these developments, and a determination to find ways of ensuring communities maintain reasonable access to these services.

The Committee accepts that changes are inevitable. Financial institutions, along with other service providers, will always seek cheaper and more efficient ways of delivery. However, in the Committee's view, technological developments and other changes should be leading to improved services and access rather than the reverse.

It has been a most effective inquiry. At the start, the Committee was flooded with submissions from rural and regional communities describing forcefully the impact of branch closures. Communities have clearly been quite seriously hurt by the action of the banks – with the closures affecting both the economic and social fabric of the towns. They feel, quite justifiably, let down by the banks whom they have supported for many years, and in some cases, for generations.

Their disillusionment and feeling that the head offices are out of touch with their needs is understandable particularly in the light of some of their experiences.

Mr Speaker, we have sought, and to some extent gained, the interest and cooperation of all parties in trying to resolve the problems being experienced by these communities as a result of changes in the delivery of financial services.

The Committee has also been pragmatic in its approach to this inquiry. Services will continue to evolve as telecommunications infrastructure improves. Electronic methods of banking may, indeed, be the way of the future but at the moment, they are simply not an adequate substitute for a branch. Many regional and remote communities simply do not have access to ATMs, EFTPOS, telephone banking or internet banking.

Communities need cash and access to facilities to withdraw and deposit it. They also need access to business banking. They have a strong preference and, in many cases, a need for the continuation of over-the-counter services.

I am pleased that as the inquiry progressed, and largely because of it, the industry, governments and communities have turned their efforts, and in may instances cooperatively, to developing solutions to these problems.

In July last year, at its second appearance before the Committee, the Australian Bankers' Association made a number of commitments concerning regional banking services. Some individual banks have gone further such as the ANZ and Westpac.

The Federal Government has also announced its Rural Transaction Centres Program. This program draws on many of the alternatives that have been raised in the course of this inquiry. The Committee considers that this is a significant development and it has urged the government to give high priority to its implementation.

Local government has figured prominently in submissions and public hearings and has been active in searching for solutions to the problems that have been our focus.

CreditCare has continued its efforts in assisting communities establish credit unions or other alternative financial institutions. Bendigo Bank has established its community bank concept. This has attracted strong interest around Australia.

Non- financial institutions have also seen opportunities for expanding their interests in the delivery of banking services. The Pharmacy Guild announced just yesterday its new joint venture with BankWest.

These developments will go some way towards ensuring regional and remote communities retain or regain access to financial services.

However, in addition to these initiatives, the Committee considers that the extension of the banking services provided by Australia Post will significantly improve financial services access for regional and remote communities. Australia Post is already involved with delivering banking services through its long-time arrangements with the Commonwealth Bank. The introduction of giroPost in 1995 has meant that many communities now have personal banking services from a wide range of financial institutions.

The Committee has recommended that Australia Post's giroPost services be extended to include business banking. The addition of business banking will also solve problems associated with the transport of cash for businesses and other organisations in country towns.

Although the Committee understands Australia Post's requirement that its operations be commercially viable, it considers that the extension of the giroPost network or the installation of a cheaper electronic banking service such as EFTPOB, is a very important and straightforward means of providing such access. The Rural Transaction Centres program should provide a means of developing this.

Mr Speaker, changes in the delivery of financial services are part of a process of structural adjustment in rural Australia. The Committee has stressed the importance of a cooperative approach to finding solutions. The developments that appear to promise most in terms of being sustainable are those that are based on strategic alliances between a range of parties. The Committee is convinced that an aggregated approach is the key to ensuring continued delivery particularly in small towns.

It is an approach that underpins the RTC policy and that recognises the imperatives to reduce costs of service delivery while at the same time ensuring that communities retain access.

An excellent example of this approach is the arrangement between the Cairns based Electricity Credit Union and the Queensland Government Agents Program at Herberton , a small community in northern QLD.

Herberton's achievement demonstrates that community involvement is a powerful and critical ingredient in creating solutions to problems experienced after the closure of a bank branch.

I think it is fair to say that the communities that have refused to accept the loss of banking services and that have supported an alternative have not only secured financial services but have strengthened the economic viability and the vitality of their towns.

While the Committee has focused on finding solutions for immediate problems, it has also kept an eye to the future. Technological developments will continue to offer new ways of delivering services. In the long term, they should significantly enhance access. Governments have a role to play in progressing these developments and the Committee has recommended accordingly.

The introduction of electronic banking must be accompanied by well constructed and properly targeted education programs. The Committee is pleased with the progress.

Although, as suggested earlier, the treatment of communities by some banks has left much to be desired, the Committee welcomes signals of a change of heart. However, it will be looking closely to see that the commitments are upheld. The Committee has recommended that the relevant Ministers collect comprehensive data on the access communities have to financial services and that the Government monitors bank closures.

Mr Speaker, I believe that in addition to giving people across Australia an opportunity to express their concerns about what is happening and to have real and valuable input into the inquiry, the Committee has demonstrated one of the most positive aspects of the Federal Parliament, namely, the effectiveness of the inquiry process and the House of Representatives committee system.

Finally, I would like to thank all the members of the Economics, Finance and Public Administration Committee and all members of this Committee in the 38th Parliament for their hard work on the inquiry and report. I would also like to thank all participants for their contribution to this inquiry.

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