Year 2000 Preparations in the Australian Banking and Financial System Appendix 1 – Extracts from Reserve Bank Governor's Speech 17 June 1999

The following is an extract from the Opening Statement to House of Representatives Standing Committee on Economics, Finance and Public Administration by Governor of the Reserve Bank of Australia, Mr Ian Macfarlane, on 17 June 1999.

[I] now want to turn to a totally different subject, but one that will be very important over the next seven months. I refer, of course, to the issue of the end of century date change – or Y2K as it is colloquially known.

The main point I want to make is that the Australian financial system is very well prepared for Y2K. The formal processes of fixing and testing their systems began in the mid 1990s and it has been under the scrutiny of APRA and the Reserve Bank since early 1997. Financial intermediaries have devoted over a billion dollars and thousands of staff to checking and updating computer systems. Where problems have been found, they have been fixed. Outmoded ATMs and EFTPOS machines have been replaced, computer programs have been rewritten or new software has been installed. With all this effort, the Australian financial system rightly enjoys a world-class reputation for its high level of Y2K preparedness.

The Reserve Bank's own computer systems are, of course, Year 2000 ready. In particular, the systems that the Reserve Bank uses to distribute pensions and other government payments to banks, building societies and credit unions on behalf of Centrelink have been thoroughly tested. Pension payments will be made on time.

So much work has now been completed to ensure that the system works, that the big issue facing us is no longer a technical one ­ it is instead an issue of public reaction. While I am very confident that the overwhelming majority of the Australian public will act sensibly, there are no doubt a few who are inclined to believe doomsday scenarios. With this in mind, there are a few preparations that we at the Reserve Bank have been putting into place to help reassure the community.

An important step was to talk to the banks, building societies and credit unions to make sure that they were communicating with their customers in clear language to reassure them that their deposits were safe. Because the simple fact is that their deposits are safe and their records are not at risk from Y2K-related problems.

All financial institutions have extensive back-up systems to ensure that each night they keep multiple physical records of all account information. While some members of the public have expressed concerns for the safety of their deposits because they think records might disappear, there is no basis for this type of concern. The safest place for people to keep their savings is in the financial institution that they are already with. Withdrawal and conversion to cash would expose them to a lot of unnecessary risks.

The vast majority of people, I believe, do not have those concerns, but they probably still have a few uncertainties. Many will wish to take more cash out to tide them over the New Year period than they normally do. To this group, I just want to make a few points:

  • Do not, for a minute, fear that you need to take out more cash because there may not be enough to go round. There will be. The Reserve Bank has printed, and is carrying in stock, a lot more notes than usual so that it can meet any increased demand.
  • If you are worried about high-tech systems such as ATMs or EFTPOS letting you down, remember you are only dependent on them for the first three days of the new year. After that, the banks, building societies and credit unions open their doors again and you can go back to the old-fashioned ways of obtaining cash. You are really only dealing with a long weekend.
  • Even in those three days, you are not completely dependent on cash – credit cards can, if necessary, still operate in their traditional paper-based mode and cheques can be used as normal.

Overall, our view is that the system will be able to operate on a ‘business as usual’ basis and the public should view the new year as just another long weekend. That is what I will be doing. For those who want a little extra reassurance in the form of extra cash, they can be confident that it will be readily available.

That is all I wish to say in general terms about Y2K at this stage, but I will be happy to answer any detailed questions you wish to put to me.