8 December 2021

Address to Australia­-Israel Chamber of Commerce, Melbourne


Transforming Australia’s Payments System



Ladies and gentlemen, nearly two years have passed since the world first learned of COVID‑19.

In those early days of the pandemic, COVID case numbers were increasing by 20 per cent each day.

Treasury were contemplating a collapse in GDP of more than 20 per cent and feared the unemployment rate could rise to 15 per cent.

It was the economists’ version of Armageddon.

The ASX200 experienced its largest daily fall on record.

Consumer and business confidence fell to record lows.

Almost overnight, 1.3 million people lost their job or were stood down on zero hours.

And hundreds of thousands of our fellow Australians were forced onto income support.

The lines outside Centrelink offices were reminiscent of the queues during the Great Depression.

In the face of this unprecedented shock, we acted quickly to protect the lives and livelihoods of Australians.

We closed the international border, introduced health restrictions to slow the spread of the virus and provided unparalleled levels of support to affected individuals and businesses.

It was a Team Australia moment.

There was no rule book.

Governments, Federal and State, the RBA and other regulators, businesses large and small all came together in pursuit of a common goal to save the economy. 

The result, Australia led the world on both the health and economic front.

While tragically many Australians have lost their lives to COVID, our health outcomes stand in stark contrast to the United Kingdom and the United States where the death rate has been around 30 times higher.

The equivalent of 60,000 Australian lives lost had we experienced the same health outcomes.

At the same time, by June 2021, Australia surpassed its pre‑COVID‑19 levels of GDP and employment, ahead of every major advanced economy.

This was no small task.

The economy does not run‑on autopilot, let alone in a crisis.

In upgrading its outlook for the economy this week, the IMF highlighted that Australia’s “strong health and economic policies allowed for a quick economic recovery”.

And while the Delta outbreak was a significant setback that caused the economy to contract 1.9 per cent in the September quarter, our economic outlook remains strong.

Just yesterday, the Governor of the RBA said “household consumption is rebounding strongly and the outlook for business investment has improved”.

He also commented that “leading indicators point to a strong recovery in the labour market”.

The MYEFO next week will show a stronger economic outlook than forecast at Budget – despite the impact of Delta.

Of course, this crisis has taught us that we never know what is around the corner.

The Omicron variant will not be the last. But there are positive early signs with respect to its severity.

Australians should take great confidence in the fact that no country in the world has put themselves in a better position to confront the challenges of the pandemic.

We have amongst the highest vaccination rates in the world.

We have put lockdowns behind us.

Consumers are spending.

Businesses are investing.

And the jobs are coming back.

With 350,000 jobs coming back since the start of September, the RBA, IMF and OECD all see Australia’s unemployment rate being sustained at below 5 per cent – for just the second time in more than half a century.

This is a remarkable achievement as we emerge from the greatest economic shock since the great depression.

Consider that in the 80s and 90s recessions it took 8 and 10 years respectively to return unemployment rates back to pre‑crisis levels.

Coming out of the pandemic we achieved that in just over one year.

That is not to say the pandemic has not created ongoing economic challenges.

Workforce shortages are proving to be a real constraint on labour supply and has the potential to act as a handbrake on our recovery.

Supply chains have strained under surging global demand for goods putting inflationary pressures back on the minds of policy makers after a decade of inflation being below central bank targets.

And as we confront new COVID variants, we must manage the transition from pandemic to endemic and learn to live with the virus.

But despite these challenges there are many opportunities.

We are in the midst of a digital revolution.

COVID has accelerated and changed the way Australians and businesses engage with digital technologies.

And many new and innovative technologies are emerging throughout the economy, impacting every part of our lives.

Nowhere is this digital disruption playing out faster than in the payments and crypto‑asset sectors.

Cheques are on the way out.

In 1980, cheques were used in 85 per cent of non‑cash payments.

By 1995, cheques had fallen to 38 per cent of non‑cash payments.

And today, cheque use has fallen to around 0.2 per cent of non‑cash payments.

The use of cash is also declining.

Cash use has fallen from around two thirds of consumer payments a decade or so ago to less than a third now.

About 55 million non‑cash payments, worth about $650 billion, are made in Australia every day.

Digital Wallets, Buy Now Pay later & Cryptocurrency are fast becoming the new norm.

Almost half of Australians now make payments using their mobile phone

There are more than 5 million active buy‑now pay‑later customer accounts.

The global crypto‑asset market is worth more than USD $2 trillion, with around 220 million participants around the world.

And more than 800,000 Australians have transacted digital assets in the last three years, with a 63% increase this year compared with 2020.

These trends will only accelerate and the uses for these technologies will only expand.

Despite this disruption, the regulatory framework governing the payments system has remained largely unchanged over the last 25 years.

Given the pace of change and those leading it, if we do not reform the current framework it will be Silicon Valley that determines the future of our payments system.

A system that represents a critical piece of our economic infrastructure.

At the same time, with several central banks around the world now developing their own digital currencies, we cannot allow ourselves to be disenfranchised in this new digital payments era.

Australia must retain its sovereignty over the payment system.

Opportunity for Australia

These are significant shifts which we need to be in front of.

What is clear is that if we embrace these developments, Australia has an enormous opportunity to capitalise on the convergence between finance and technology. 

Australia has a strong and sophisticated financial sector and a fast growing and highly respected technology sector.

Australians have also demonstrated they are keen early adopters of new technology.

Our technology sector is already estimated to be generating $167 billion in output and employing more than 850,000 Australians.

Australia has an opportunity to be among the leading countries in the world in leveraging this new technology.

There isn’t a sector in the economy that is not grappling with what it means, how it can be deployed to reduce costs or to transform businesses.

Progress towards Australia becoming a leading digital economy

So too, the Morrison Government has been taking action.

And here I would like to recognise the leading role my colleague, Senator Jane Hume, has played as Minister for Financial Services and the Digital Economy.

Her efforts have seen the Government set a vision for Australia to be a leading digital economy by 2030.

We have backed this vision with unprecedented investments across almost every dimension of this transformation – cyber security, data and digital technology to name a few.

Specifically, under our Digital Economy Strategy we have committed $1.2 billion towards the implementation of e‑invoicing, modernising our business registers and establishing and expanding the Consumer Data Right. 

We have also supported the roll out of 5G to now cover more than 75 per cent of the population.

These are the foundations of our digital economy.

And to build on those foundations, we have also invested heavily to support the development and uptake of new technologies.

A further $2 billion into our R&D tax incentive.

Around $1.7 billion into our national Cyber Security Strategy to identify more cyber threats, disrupt more foreign cybercriminals and protect more Australians.

Around $500 million to enhance the tax treatment of employee share schemes.

Around $200 million to support the implementation of a ‘Patent box’ to spur innovation.

And around $170 million to encourage more investment in intangible assets and digital technologies by allowing businesses to self‑assess the effective life of assets like software.

Taken together, these initiatives will deliver a significant uplift in our nation’s digital capabilities.

Reform plan

The comprehensive payments and crypto reforms I am announcing today will firmly place Australia among a handful of lead countries in the world.

Our reforms will transform our regulatory framework as it applies to payments and crypto assets.

The Farrell Payments System Review, the Senate Select Committee on Australia as a Technology and Financial Centre and the Parliamentary Joint Committee Inquiry into Mobile Payments and Digital Wallets have all informed our approach.

So too have developments in Canada, Singapore and the United Kingdom.

Our regulatory architecture needs to adapt with greater strategic direction from the Government being required.

This is what our reforms will do and we will move quickly to capitalise on our position.

We will work closely with industry and provide dedicated resources to Treasury to fast‑track implementation.

Our reforms will progress in two phases, with the most urgent and immediately implementable changes being consulted upon in the first half of 2022, and the remainder by the end of 2022.

The Government will commence consultation on the feasibility of a retail Central Bank Digital Currency in Australia, with advice to be provided by the end of 2022.

In relation to payments, by mid‑2022 the Government will have:

  • Set out a strategic longer‑term plan for the payments system, developed with industry and reviewed annually.
  • Settled the details of additional powers for the Treasurer to set payment system policy.
  • Determined the changes necessary to modernise payments system legislation to accommodate new and emerging payment systems, including consideration of BNPL and digital wallets.

In relation to crypto, by mid‑2022 the Government will have:

  • Completed consultation on the establishment of a licencing framework for Digital Currency Exchanges to provide greater confidence in the trading of crypto assets.
  • Finalised consultation on a custody or depository regime for businesses that hold crypto assets on behalf of consumers so that investors have greater confidence in the safe keeping of these assets.
  • Received advice from the Council of Financial Regulators, working with other relevant agencies, on the underlying causes and policy responses to the complex issue of de‑banking.

Importantly, by end‑2022 the Government will have:

  • Settled the framework to replace the current one‑size‑fits‑all payment licensing arrangements with a functionally based framework adopting graduated, risk‑based regulatory requirements.
  • Received a report from the Board of Taxation on an appropriate framework for the taxation of digital transactions and assets.
  • Undertaken a mapping exercise of existing crypto currencies and tokens to better inform consumers and others of the risks and benefits that arise.
  • Examined the potential of so‑called Decentralised Autonomous Organisations (DAOs) and how they can be incorporated into Australia’s legal and financial regulatory frameworks.

This is a substantial and complex body of work.

Implementation will be key.

For this reason I have asked Senator Andrew Bragg, who chaired the Senate Select Committee on Australia as a Technology and Financial Centre, to work closely with me in implementing these changes.

It represents the most significant reforms to our payments system in 25 years.

It is how we will capitalise on the opportunity for Australia to be among the leaders in this emerging and fast‑growing area which has almost endless potential applications across the economy.

For businesses, these reforms will address the ambiguity that can exist about the regulatory and tax treatment of crypto assets and new payment methods.  In doing so, it will drive even more consumer interest, facilitate even more new entrants and enable even more innovation to take place.

For consumers, these changes will establish a regulatory framework to underpin their growing use of crypto assets and new payment methods.

As more Australians utilise these technologies and invest in these digital assets, it is important that a robust regulatory regime underpins their interactions.

Our reforms will do just that. 

They will give consumers greater confidence in their dealings with and utilisation of these crypto assets and new payment methods.

Investors must continue to be conscious of the potential risks they face. 

As the RBA has noted, these assets can be especially volatile. 

In the case of Bitcoin, the RBA has observed that over the past year, the standard deviation of its daily change in value has been about 4¼ per cent, and the standard deviation of the five‑day change in its value has been around 9½ per cent.

The Government’s reforms are designed to ensure consumers can have confidence in who they are dealing with and the obligations that are owed to them.

Our reforms are therefore aimed at ensuring only legitimate providers participate in the system and that they are regulated appropriately along with ‘traditional’ providers who offer similar services to consumers.


Ladies and gentlemen, let me conclude my remarks today with where I began them.

In the face of the largest economic shock since the Great Depression, working together, we did what needed to be done.

Australians should be incredibly proud of what they have achieved.

They have come forward in record numbers to be vaccinated, with more than 88% of those aged 16 and above now vaccinated.

The Australian economy is rebounding strongly.

Jobs are coming back.

Unemployment is comfortably below the level when we came to Government.

We have avoided the labour market scarring evident in prior recessions.

Confidence is up and businesses are investing.

The next phase of our economic recovery plan will be set out in next year’s Budget.

It will be guided by our fiscal strategy. A strategy that will see unemployment sustained at levels we have not seen since the Howard and Costello era. 

Just as with the landmark reforms I have announced today, our economic plan will back business to innovate and seize the many opportunities that will unfold after the crisis.

Our plan will lock in the recovery and set Australia up for next year and well beyond.