Transcript of Question & Answer Session Issues in Payments Systems

Governor, thank you very much for that presentation, it was very good to hear consistent, clear messages about the framework that you see benefit in our country, which I totally understand and we're excited to be part of. What I'd like to encourage, and also as part of this question, is the continued interaction of the industry with the Reserve Bank, which I think is in a very healthy state, a very accessible team that you have, a very interested team and the frameworks that you've put together, and have now with the Australian Payments Council which is about to be established, is welcome. And from a very strategic point of view, access to decision makers and policymakers in the form of the PSB, this is a very important thing. So what I'd like to ask you is, with the interaction with the PSB and the Payments Council, what will be the most productive use of the time we have when directly interacting with you and your colleagues on the PSB?

Well I don't want to rule things in or out or be too prescriptive, but at a level of principle, I think what we're looking for is a recognition on the part of the Council members of what the overall goals are, which, after all, we've all signed up to, you and us. We're interested in seeing the Council work constructively to tackle the thorny issues that occasionally arise in the governance space and, you know, in a sense to help cut this thorny question, this knot, of how hard it can be for private financial institutions who are competitors in most respects, to act cooperatively in this space. So that's, in my mind, the key thing we're looking for that Council or one of the key things we're looking for it to do. We'll provide appropriate devices and structures for interaction with the PSB, once the Council is up and running. I don't have a predetermined view about exactly how we do that, but we'll be constructive and as you've said, our senior people, Tony, who's here and his colleagues, are very amenable to background discussions to help get that going on a good footing. But let's get it going, get it established, have it work well, have it working in a sense with appropriate independence and a consciousness of what the public interest is. I mean, we really want to see that. Not to say that institutions pursuing their own private interest is inappropriate, of course that's your job, but there's a public interest here. Our job is to preserve, protect and advance that, and what we're looking for the Council to do is be an appropriate point of interfacing with the industry to help advance those goals.

You spoke about the decline in the use of cheques but they're still in use, are a high cost instrument as you state, what appetite are you detecting in government to proactively encourage the decline in the use of cheques, particularly through legislative change, where cheques currently need to be used for certain things, and also just for a government departments cutting cheques.

Do you think that the Payments Cost Study will be able to be used to encourage government to assist the industry in removing cheques?

Well facts always matter in these things. I haven't had conversations with members of the government about what their appetite is on this particular matter. I would observe that from my vantage point there is very strong interest, and certainly the government customers that the Reserve Bank itself services, to get efficiency gains and to take full advantage of electronic payments. Whether it should be the public sector or the private sector that takes the lead is an interesting question. I think there are some people in the private sector who would like to get rid of cheques but want someone else to take the heat from those who currently like them. It's not obvious that a government minister or the central bank ought necessarily to be the heat shield for you here. Don't be afraid to take a leadership role yourselves if you feel strongly about this, but we will play an appropriate part.

Governor it's Sue Lemming here from ABC News. The Reserve Bank has been talking a lot recently about lending standards. In terms of the implementation of macroprudential tools, has there been any progress and is there a timeframe to curb bank lending here?

There's been a lot of excitement over one phrase, one sentence in the Financial Stability Review, but the key points here are: we're keeping a close eye on the build up of credit to investors in the housing market, not to owner occupiers per se and certainly not to first home buyers. They're not the issue. As we've said, we are in discussions with APRA about whether there is more that ought to be done to reinforce sound lending standards, and those discussions are continuing and when there's something to be said it will be said all in good time.

Governor if I could have a follow up, lending standards have been mentioned in a number of the public comments by the Bank, in minutes from the other day and also Philip Lowe's speech, so are lending standards a big concern at the moment?

Lending standards are things that need to be carefully watched in a time when house prices are rising quickly and competition to lenders increasing, and they are the circumstances that we face. I think a prudent person would have a close eye. And I could only refer you to things that the Chairman of APRA said yesterday.

I think, alluding to, you know, some resistance to the NPP from various players, many of them over the last year or so have questioned — I'm talking about banks — have questioned really, whether people really want or need real time payments. And they've also questioned the cost of it, that it would be actually higher for them to link to the new system than the existing old system and they may have to charge extra for that and various things like that. What's your view on some of those comments?

Well I think the question is since everything in our lives runs 24 hours a day, why wouldn't you expect the payment system ultimately to be able to do that. This seems to be the trend in other countries and I repeat the question that I asked in the speech, is there any plausible reason why you would expect Australia to fall behind that trend? I can't really think of one. It does involve costs, of course it does, for the banks and for us. But serving your customers does involve investment and it involves building the right sort of architecture for the future and one way or another we're going to have to have some architecture like that. And the way we've sought to go about this is a collaborative, constructive, co-operative approach with the industry. There are other approaches but this is the one we've chosen and it's important that it be made to work.