The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Chris Pearce

Parliamentary Secretary to the Treasurer

26 October 2004 - 3 December 2007

Speech of 25/11/2005



25 NOVEMBER 2005

Good morning.

I’m delighted to be here today and to participate in the launch of the second survey of adult financial literacy commissioned by the ANZ Bank.

Firstly, let me congratulate the ANZ Bank — and particularly CEO John McFarlane — for the bank’s ongoing commitment to financial literacy and the broader community.

I’d also like to thank Jeff Lucy, the Chair of ASIC, for being here this morning to lend his support to this important initiative.

Secondly, I would like to say that it is very timely that the second ANZ survey on financial literacy is being launched as we head into the Christmas season.

Shopping centres around the country are buzzing with activity during the month of December as Australians stock up for the festive season.

This boost in spending reinforces the importance of financial literacy…

Importance of financial literacy

I was at a function earlier this week with Paul Clitheroe, the Chair of the Australian Government’s Financial Literacy Foundation. Paul remarked that it is important that we talk about money and finances even around our dinner tables.

One of my favourite sayings about money is:

“Money talks — but all mine ever says is goodbye.”

I suspect many of us can relate to that!

It’s true that we all need money to live. But whatever our income level, we all need the skills to manage our money. So that we can save, and where possible, invest. So that we can provide for our children. So that we can help our economy grow. And so that we can enjoy a comfortable lifestyle when we retire.

As the pace of life accelerates, these skills will only become more important.

This is why the Howard Government established the Financial Literacy Foundation, launched in July, to help Australians to better manage their money.

Survey results

When I read this research report, I was pleased to see that there were some very positive findings.

I was heartened, for example, to learn that 98 per cent of Australians understand that they must prioritise their needs to balance their income and expenditure.

Another positive result from the survey is that Australian society is financially literate – that more people feel well informed when making financial decisions than was the case in 2002 (the last survey). And there were good levels of understanding of the basics of superannuation.

But, on the other hand, it was worrying to learn that 47 per cent of those surveyed said that they would invest for “well above market rates and no risk”.

This finding indicates that many would-be investors don’t understand the relationship of risk versus reward. This makes them potentially vulnerable.

It also illustrates why education is such an important thing. The better informed the population, the better equipped they are to manage their money responsibly… to choose their investments wisely… and to protect themselves against scams and fraud.

A financially literate community is also important for building consumer confidence in the marketplace.

Consumers who feel they are protected and equipped to look after themselves in the marketplace have greater confidence participating in that marketplace.

And more confident consumer participation is not only good for consumers themselves, but also good for business and the Australian economy as a whole.

Qualitative survey of people in financial difficulties

A second worrying finding of the survey was that a small number of people — three per cent — feel that that their finances are “out of control” most or all of the time.

This three per cent ranged across a wide spectrum. It included those with household incomes both under $15,000 and over $90,000. In other words, financial vulnerability may sometimes present itself regardless of a person’s income level.

Also, two-thirds of that three per cent had borrowed money. To put it simply, two per cent of survey respondents — respondents who are representative of the Australian population — had borrowed money and felt their financial situation was now outside their control.

The ANZ conducted follow-up qualitative research on that two per cent of survey respondents.

I would like to commend the ANZ for commissioning this in-depth, follow-up research.

Before we in Government or in the private sector can give consumers the tools to make better informed financial decisions, we need first to understand what motivates them in making those decisions.

The further research revealed that many of the two per cent surveyed found themselves in financial ‘hot water’ due to unexpected life events, or a lack of skills and knowledge.

But the most prevalent characteristic of the group was that they had unhealthy spending habits. For example, they spent to “keep up with the Joneses”. They spent to feel better. Or they spent for today, with little regard for tomorrow.

Clearly, lenders do play a role.

As the ANZ survey report points out:

    “The challenge here is for lenders to market their products responsibly, and to be responsive and appropriately flexible in dealing with customers in financial hardship.”

Code on responsible lending

Backing up this sentiment, on Monday this week, the ANZ Bank released a responsible lending code.

The code provides that lenders not offer credit card limit increases to vulnerable customers, or those on fixed incomes.

It’s commendable that the ANZ is the first bank in Australia to adopt a formal responsible lending code – showing it cares, like the Australian Government, about increasing financial literacy across the country.

The ANZ Bank’s commitment to corporate social responsibility in this context should help to prevent many more people from sinking further into the downward spiral of debt — and the hardship, stress and unhappiness this can cause.

Financial Literacy Foundation

I mentioned earlier that the Government is strongly committed to raising the financial literacy levels of all Australians.

2006 will be a landmark year for financial literacy in Australia. It will see the Financial Literacy Foundation launch an information campaign to heighten consumer interest in the issue of financial literacy.

The information campaign will raise community awareness about the importance of financial literacy, and how thinking about money in a “healthy” way can improve people’s wellbeing.

The information campaign will include an Australia-wide advertising campaign, as well as an “Understanding Money” website. The website will provide information on financial literacy issues and resources for both consumers and providers of financial literacy programmes.

It is important that all Australians are better informed about their financial future and the Financial Literacy Foundation is providing the practical tools to reach this goal.


Financial literacy is one of the keys to fostering better outcomes for our country.

Outcomes that will see more Australians, particularly younger Australians planning for their future with greater confidence.

It is our vision, that going forward, all Australians are equipped with the skills required to manage their money responsibly.

With this confidence comes the confidence to participate in the marketplace.

This is vital for the future economic prosperity of our nation.

We all want a financially literate Australia.

And we all have a role to play in making this vision a reality.

The Australian Government is doing its bit through the work of the Financial Literacy Foundation and the ANZ Bank is playing its part too through important initiatives such as this survey.

I look forward to us working together to further improve our financial literacy levels, and I have much pleasure in officially launching the ANZ Financial Literacy survey.

Thank you.