Good morning ladies and gentleman, and thank you for inviting me to speak at the finalists' breakfast for this year's Australian Banking and Finance Awards.
It is excellent to see so many banking and finance practitioners here so early on a Wednesday morning - a sign I hope is indicative of the energy and the future fortune of Australia's ever-changing financial services industry.
And it is the theme of financial sector change that I want to discuss this morning, particularly what this change means for the average Australian - the consumers of financial services.
Because at the end of the day it is consumers who count.
It is consumers who choose your products, it is consumer who make and break your industry and, and as such, it is consumers who, if not embracing financial change, then must at least understand what is happening and, what is in it for them.
For my Government, a commitment to consumers is absolutely crucial. It is a commitment to giving consumers more choice, better products and services and lower prices.
In other words it is a commitment to consumer empowerment and a commitment to consumer sovereignty.
And for the consumers of banking and finance products there has been plenty of recent change with which to grapple.
But that was not always been the case. I am not telling this audience anything new that until the 1980's, banking had not changed very much since the Second World War.
Even as recently as 15 years ago, a person could only access their savings account between the hours of 9am and 3pm, Monday to Friday.
Now, you can get hold of your cash, 24-hours a day, 7 days a week, right across the country - in fact right around the globe.
And the pace of this change can be expected to increase further still.
We are already seeing technology creating better products in greater varieties for consumers than ever before. And those products are cheaper for the banking industry and cheaper for customers.
However, technology is by no means the only factor driving change in the financial sector.
The Wallis Report identified changing consumer preferences and changes to regulation as other forces fuelling changes in the financial system.
But it has been the consumer's willingness to embrace new technology that has made the biggest contribution here.
The Government's response to Wallis built on regulatory changes that emerged from the Campbell Inquiry of the early 1980s.
A key point of Wallis was the recognition of the need for a regulatory structure that was flexible enough to keep up with the financial sector's changing face.
The idea was that without flexibility, regulation would impede rather than improve growth.
This year's financial reforms focused on this. For example, with the transfer of credit unions and building societies to Commonwealth jurisdiction - which I recently introduced into the House - all prudential regulation will come under one body, the Australian Prudential Regulation Authority (APRA).
Reforms like this are designed to ensure financial stability while encouraging efficiency, while encouraging innovation and while encouraging competition.
But often, this is not the way the public sees it.
Community perceptions of banking are generally focused on two considerations - the cost of financial services, and access to financial services.
This helps explain the community's concerns about the fees and charges for things that were previously seen as free, and the perceived cut back in services, especially due to branch closures.
Many people think they should be able to access their money without incurring any cost at all, regardless of the size of their balance or the number of transactions they make.
They might also feel that banks are trying to get rid of their unprofitable customers, regardless of these peoples' loyalty over the years.
Some sections of the community even feel they are being deliberately excluded from the financial system. Some of these concerns were covered in the Hawker Committee's report "Regional Banking Services - Money Too Far Away".
And booming bank profits don't help these negative perceptions.
Indeed, much is made of the perception that the ever-increasing profit margins appear to correlate with increased fees and charges, and increased cost cutting.
This adverse reaction to change, and the apparent inability of the community to see any benefit for themselves, can lead to an unhealthy attitude: toward future developments.
And that is in no-one's interest.
So the big question is can anything be done to correct this view?
Certainly, the Government will be responding to the recommendations of the Hawker Committee and will continue to ensure our regulatory framework does not impede competition.
However, with the sale of the Government's interest in the Commonwealth Bank, we are no longer a player in the market - the ball is, therefore, very much in you, the practitioners', court.
From my point of view, much of the problem stems from a lack of understanding about the changes taking place.
And for that, the financial sector must take the blame.
Financial institutions have failed to explain the changes taking place and failed to spell out the benefits these changes might have for consumers.
For example, we know that fees and charges are here to stay because competition has removed the interest margin 'fat' that in the past provided the scope for cross-subsidies.
However, while removing cross-subsidies are great from an efficiency point of view, there are also losers as well as winners from this process.
Banks need to explain why the changes are taking place. For instance, they need to tell customers why fees and charges are necessary, and let them know how little these fees and charges actually contribute to bank profits.
While I'm wrapping the industry on the knuckles, I should say that some financial institutions are taking steps in the right direction.
Recently a major bank issued a booklet for consumers explaining how to use their credit cards more efficiently, what their rights and responsibilities are, and what to do if they get into trouble.
This is extremely important as there are many people with the wrong kind of credit card who, as such, are paying much more interest each month than they need to.
With the huge number of new financial products available, people need to know what accounts and what products best suit their needs.
In other words, banks need to help consumers help themselves.
But all this needs to be handled sensitively.
I regularly see complaints about programs designed to help older Australians deal with new technology. The response of these people is "we already know how to use new technology, but we choose not to use it".
For banking practitioners, this leaves you between a rock and a hard place.
While wishing to satisfy customer's needs, you have to adapt to changing circumstances and new technology to ensure your costs do not blow out and you don't lose your competitive edge.
The broader community perception of your institution has to be managed.
Having the right product at the right price may not be enough if your institution is "on-the-nose".
I think David Morgan, the new CEO of Westpac, put it best when he said last month "the range, choice and real price of financial services has never been better".
But the industry has, as David said, "just done a really ordinary job in getting its message across".
And there is a good message that needs to be communicated.
In 1988 you could access your bank account at nearly 30,721 outlets. Today, with the development of EFTPOS, Australian consumers can access their accounts at over 241,000 points of service right across the country - and that doesn't count phone and Internet banking.
In fact, about 5 million people now use phone banking.
There are now more than 218,000 EFTPOS terminals in Australia - not a bad figure given there were practically none until the late 1980s.
In spite of the perception that face-to-face access is being reduced, we compare well with other countries. There are around 311 branches per million people in Australia, compared with 270 in Canada, 226 in the USA and 205 in the UK.
What is more, there are over 300 banks, credit unions or building societies across the country.
And, if you hadn't noticed, there is an increased range of services and products from which to choose.
Banks, for example, not only have a huge range of deposits and credit facilities, but also offer products and services that were previously unheard of - managed funds, superannuation, insurance, financial planning advice and stockbroking.
In short banks are becoming a one-stop shop for financial services.
The banks are not alone here. Other financial institutions are following suit by offering traditional banking products as well as other financial services.
And it won't just be the traditional banks or other financial institutions becoming one-stop shops.
We are already seeing in other parts of the world as well as in Australia supermarkets, pharmacies and the like selling financial services alongside their own traditional goods.
It may well soon be mortgages with your margarine.
As mentioned earlier, globalisation will be one of the main driving forces of change in the future for many sectors of our economy, especially the financial sector.
The Government would ideally like to see the financial sector placed such that it will be able to take advantage of, and benefit, from globalisation.
This factor is pivotal to the Government's commitment to make Australia the regional financial centre of Asia.
Financial centre promotion will enhance Australia's capacity to participate fully in the strong global growth in the financial services industry to the benefit of all Australians.
Capitalising on our comparative advantages, particularly with our robust economy, should enhance Australia's position as an investment destination, help deepening the liquidity of our financial markets, and ensure Australian consumers and businesses continue to have access to the best, cost-effective finance and advice.
In conclusion, I cannot overstate the Government's desire to see the benefit of financial sector change not only spread throughout the community, but to make sure the community hears and understands the good news.
Now, more than ever, Australian consumers are willing to vote with their feet. The loyalty people once had to their bank or to their political party has largely evaporated.
Now it is performance that counts.
This performance is possibly the biggest challenge facing the banking and finance industry.
And it is a challenge I am sure will be taken up by the industry, as it presses on towards the new millennium.
Thank you