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Address at a dinner of the Australian Federation Credit Union Leagues Limited



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MINISTER FOR FINANCE

EMBARGO 9 P.M. 23 MAY 1979

PRESS RELEASE

NO: 42

ADDRESS BY THE MINISTER FOR FINANCE, THE HON ERIC L ROBINSON MP, AT A DINNER OF THE AUSTRALIAN FEDERATION OF CREDIT UNION LEAGUES LIMITED - 23 MAY 1979.......

Mr President, Ladies and Gentlemen

It gives me great pleasure to address this dinner of the

Federation, which is being held as part of arrangements for

the Triennial Meeting of the World Council of Credit Unions.

I understand this is the first time that the World Council $

of Credit Unions has held a Triennial Meeting outside North

America. On behalf of the Government I welcome all overseas

visitors to Australia. '

Credit Unions in Australia have been growing rapidly - to the

point where, as a group, they now form an important financial

institution within the overall Australian financial system.

They differ from other financial institutions, however, in that

their investors and borrowers are also shareholders and many

are administered on a voluntary basis..

CREDIT UNIONS

The credit union concept is one of self-help. Credit Unions

originated from the simple idea that people working together

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and pooling their savings can create credit resources not

otherwise available to them, thereby improving each other's

financial well-being.

They are legally constituted savings co-operatives serving

a common interest group - organised on the basis of employment

and geographic proximity.

The primary objectives of credit unions are to provide members

with a safe place for their savings and access to credit -

both at reasonable rates of interest- and to provide financial

counselling and advice.

The success of credit unions shows what can be achieved when

people are determined to help themselves. It is a success

which the Government applauds. As the Prime Minister in his

forward to your Federation's 1978 Annual Report, noted:

"The credit union movement in Australia certainly

has a fine record of service to its members, and

has played an important role over recent years in ;

helping create a sense of community involvement

in the towns and suburbs throughout Australia".

To illustrate the achievement of credit unions in Australia,

it may be useful to briefly recount their history and growth

in Australia.

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HISTORY OF CREDIT UNIONS IN AUSTRALIA .

The first credit union in Australia was registered in New

South Wales in 1946. Subsequently, credit unions were

established in South Australia and Queensland in 19,49, and

in other states by 1960.

In most States, initial development was along parish/community

lines, although the development of industrial/employment

type co-operatives began in the early 1950's with the

establishment of a number of credit unions in the public

service.

The movement grew gradually until 1960, but since it has

grown rapidly to the position where there are now 680 credit

unions with a membership of about 1.2 million and total assets

of over $1,300 million.

/ The main lending activities of credit unions are in the areas

'tv '

of personal loans, debt consolidation loans and first and

second mortgage housing loans; I am informed that credit

unions now provide about 13 per cent of consumer finance in

Australia.

There are also indications that credit unions are becoming

a growing source of housing finance even though in most

States they are at present prevented from lending substantial

amounts for housing because of maximum loan limitations.

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The rapid rate of growth of credit unions in Australia

clearly indicates that they are satisfying an important

social need.

In summary, much of the movement's success has been due to

the common practice of having money deducted from members'

salaries and deposited in their credit union accounts and

to the wide range of services provided effectively to their

members.

AUSTRALIAN FEDERATION OF CREDIT UNION LEAGUES

I understand that the Australian Federation of Credit Union

Leagues currently represents some 65 per cent of the credit

movement in Australia and that a close working relationship

has been established with credit unions not affiliated with

the Federation.

I also understand that A.FiC.U.L. has continually canvassed

credit unions to join together to present a unified and

effective voice for the movement as a whole.

It is commendable that the Australian movement has worked

through the World Council of Credit Unions to assist -

through the provision of funds - credit union movements in

other countries, particularly those in the South Pacific.

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I note, however, that in turn the Australian credit union

movement has received technical assistance e.g. planning

advice from overseas experts. This really typifies the

co-operative spirit of the credit union idea on an

international scale. .

CREDIT UNION LEGISLATION IN AUSTRALIA

In Australia, credit unions operate under a variety of

statutes.

In recent years there has been discussion about the need for

complementary State and Federal legislation on credit unions

to apply throughout Australia.

The Commonwealth's attitude is that the co-operative approach

between the States and the industry in developing more uniform

legislation covering credit unions is desirable and should be

supported. Any development towards more.efficient administration

of credit unions and greater stability in the industry are

encouraged. .

CONSUMER CREDIT LEGISLATION AND CREDIT UNIONS

In April 1978, agreement was reached on legislation designed

to revise the laws governing the provision and collection of

consumer credit and provide a basis for uniform legislation

throughout Australia.

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The legislation was designed to replace hire purchase and

money lending acts with new laws relating to the sale of goods

on credit and the provision of loan finance.

Following representations from the A.F.C.U.L. to the Commonwealth

the legislation was withdrawn and is to be redrafted.

FINANCIAL CORPORATIONS ACT

The Government's general attitude to the regulation of the

finance industry is that it should be kept to a minimum.

The Government, at present, regards the Financial Corporations

Act primarily as a vehicle for consultation and the provision

of information rather than as an instrument of control.

The Advisory Committee established under the Act has been, and

continues to be, an important channel of communication between

the Government and the credit union movement.

As a former Minister Assisting the Treasurer I can assure you

that we value the advice we have received from Committee members.

From humble beginnings, the credit union movement in Australia

has now grown to a position of some significance in financial

circles. '

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We cannot overlook its basic strength.

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PRESSURES FOR CHANGE WHICH COULD AFFECT THE CREDIT UNION : MOVEMENT ■

There have been various pressures for change in the Australian

financial system in recent years which may have implications

for the credit union movement in Australia.

The Government's initiatives include:

. announcing in the last Budget a review of the regulations

governing the savings banks subject to the Banking Act;

. .committing itself to an insurance scheme to protect

• deposits with Australian building societies; and

Tv . establishing a committee to inquire into the Australian

financial system.

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REVIEW OF SAVINGS BANK REGULATIONS

Many have argued that the high growth rate of assets of

non-bank financial institutions over the last two decades,

e.g. building societies and credit unions, has occurred

largely because of Commonwealth Government regulation of

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the banking system.

They believe (and there are persuasive arguments to support

this view) that the impact of monetary policy controls has I led to the erosion of the banks' share of total assets of

the financial sector over that period. As a consequence

banks, particularly savings banks, have been unable to compete

effectively with non-bank financial institutions.

Consistent with our general view that regulations and

restrictions should be kept to a minimum, the review is

expected to result in savings banks having more flexibility

in the disposition of their funds. To the extent that this

puts savings banks on a more equal footing with their major .

competitors that must be regarded as being to the good.

DEPOSITS INSURANCE FOR BUILDING SOCIETIES

The A.F.C.U.L. has made representations to the Government

about the need to avoid providing special status to any one

sector of the finance industry.

The issues involved in the question of deposits insurance are

complex and the Government recognises the potential implications

for other sectors of the financial industry.

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As a Government, we are committed to the early resolution

of a deposits insurance scheme for the building society

movement; I would hope that legislation could be introduced

later this year or early next year.

Assurances have been given to A.F.C.U.L. and to other

representatives of the industry that the views and interests

of credit unions, and indeed, all affected financial institutions, I ■ .

will be kept very much in mind as the Government moves towards

the introduction of a deposits insurance scheme for building

societies. .

The credit union industry will be given the opportunity to

comment on proposals for this scheme.

There is no question of the Government not undertaking

appropriate consultations with credit unions or the introduction

of the deposits insurance scheme for building societies - they

are firm commitments.

INQUIRY INTO THE AUSTRALIAN FINANCIAL SYSTEM

An Inquiry into the Australian financial system was announced

earlier this year. It is the first into the financial system

in over 40 years.

During that period there have been many far-reaching changes

in the structure of the system; e.g. credit unions now exist

in large numbers and they have become a significant competitive

force.

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The Inquiry has been given the widest possible rein; its

terms of reference, while mentioning specific areas for

inquiry are sufficiently broad to allow it to look at all

other matters it considers to be important.

One of the important issues expected to be canvassed by

the Inquiry is whether present levels of regulation and

Government involvement are appropriate.

The success of the Inquiry will depend to a large extent on

all interested organisations making their views known to the

Committee, I urge you all to participate.

Many persons, financial institutions and interest groups

have in recent years made their views known about existing

imperfections and deficiencies in the system.

Over the life of the Inquiry, the Committee will be grappling

with many problems and issues of interest to the credit union

movement in Australia.

Each of you with an interest in the operation of the financial

system is urged to make submissions to the Inquiry. They

would certainly be welcomed by the Committee.

ECONOMIC CONDITIONS J Mr President,

Your movement has enjoyed outstanding success and prosperity.

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What of the future?

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Like any other business it can best operate in a stable

economic environment to which the greatest threat is

inflation.

As your are all awdre inflation increases uncertainty and

makes business decision making more difficult: for example,

iri estimating future returns from planned projects. At best,

inflacion complicates long term contracts; at worst, it

discourages them altogether. | ■

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Since 1975 the Government's economic policies have been

designed to bring inflation under control.

Our objective has been to lay the foundations for a resumption I

of non-inflationary growth in activity and employment which

can be sustained.

We have rejected the panaceas that promise increased activity

in the short term but would fail to sustain it in the longer I

term. We have reined in. the growth of public

expenditure.

Our firm restraint on Government expenditure has helped to

restore a healthier balance between the claims of the public

and private sector on the nation's resources. Apart from .

these direct benefits our expenditure restraint has greatly

aided the pursuit of our monetary objectives.

We are determined to continue to pursue policies that create

the conditions for further sustainable reductions in inflation

and for expanded production and employment.

Overseas financiers and bankers are sure that Australia is

pursuing the correct economic policies.

They see us developing a firmly based economy from which to .

launch into the 1980's in a very strong position.

In our view continued adherence to an effective anti-inflation

strategy is the only way to ensure a restoration of consumer

and business confidence and sustainable economic recovery. To

entertain any relaxation of this approach would merely squander

the hard won gains to date.

There is a growing and justifiable mood for optimism about

Australia's economic prospects.

My President, may I say again that I am very pleased to have

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been able to be present tonight.

Your history has been one of outstanding success. I am ;

confident that coupled with our economic policies you can | look forward to continuing success in the future.

SYDNEY 23 May 1979