Transcript of Question & Answer Session Building Bridges in the Digital Economy: Modernising Australia’s Payments System

Governor. Thank you for delivering the 2025 Bradfield Oration. I was taking notes furiously up the back actually. I thought I was going to need two pens at one stage. A quantum computer falls into the wrong hands and is used to beat existing encryption, steal our money and data and cause chaos. It sounds like the plot of a Mission Impossible movie. But it’s not fiction, is it? I mean, is it the biggest threat, the biggest new threat to the payment system?

Certainly it’s something I worry about. I mean, if you believe what they say on the tin of quantum computing, what takes 200 years to decrypt now, to break will take a matter of minutes. So it is a big threat but I have to say I think, as I said, the advanced encryption standards have been developed to actually meet that challenge of quantum computing but it’s scary. You know, you don’t - at the moment we trust our financial institutions to keep our data safe and they do that through encryption. So it is a worry that we need to make sure we keep up with that quantum computing situation because otherwise it’s not safe.

Yes. I was listening very closely and I felt that you threw in an extra line there, an extra message to industry that perhaps they’re not moving quickly enough on this. We don’t want to be caught in a situation where we need to send a self-destructing message to Tom Cruise to get us out of this, do we?

Actually I watched Mission Impossible on a plane recently. No, we don’t. I think the banks and the financial institutions get it but it’s not just the financial institutions. Most corporations these days, whether it be telecoms or banks or grocery stores or whatever, they all hold information and they all have encryption and cyber security associated with that. So everyone has got to be engaged in this process of upgrading our encryption and our security.

Would you like to see swifter action, better collaboration, at an industry level to make sure that we’ve got this in place before something goes wrong?

I think the banks are well on to it myself. That’s my focus, the financial sector. And I’m very comfortable that they are all taking this on and they’re taking it very seriously.

Of course. Fraudsters are already fleecing billions of dollars a year from us. Have you or anyone close to you ever been done in by a scam?

I personally haven’t been but I’m not so silly as to think I couldn’t be. They are getting better and better. My husband got a message the other day that looked like it was from NAB but I scrolled back and it looked like it was from NAB but it wasn’t. It was a spoof. And so we went to the website and we checked it out and we figured it was a spoof. So you’ve got to be very, very careful but it also demonstrates it’s not just up to the financial institutions. There’s an ecosystem here. The telecommunications companies. I’d have to say the social media companies. They have to be ready and willing to take down spoofs and scams. Everyone has to buy into this.

You mentioned the review of card payment costs and surcharging. I know the RBA has run a genuine consultation process and really listened. But in your personal view is banning surcharges and driving down back-end costs for businesses still the way to go?

So no decision has been made so I can’t give you a definitive answer. What I can tell you is that when we introduced surcharging in the early days it was to allow merchants to give a signal to consumers that certain payments were more costly for them to take than others. And in the early days it was sort of used like that but increasingly it hasn’t been. And what we’re observing now, is that typically small business who face high payment costs, are passing them on and they pass them on in one flat fee. The question we’re asking is, is there a better way to do this? I’d have to say we’ve got quite a lot of feedback. We’ve received 170 submissions on this and other issues. There’s a few camps. One camp is no, leave it as it is. It’s perfectly fine. Mostly from small merchants probably. Another camp is that, well, no. Make debit cards surcharge fee and allow people to surcharge on credit cards because they’re much more expensive than debit cards to take. And then there’s another camp that’s sort of, agree with us - just get rid of surcharging altogether. So I think what we’re - the focus we’ve got here is that a lot of the problem with surcharging seems to be focused with small merchants who face high charges so we’ve got to figure out a way of making sure that small merchants don’t feel like they have been beaten on one hand and there’s been no sort of gains for them on the other. That’s the challenge, I think.

Because otherwise this would just further reduce their margins, would it not, because they’d have to absorb it in and they’re already under so much pressure.

They’d absorb but they would add it on to their cost base like they do with other sorts of costs, like electricity, for example. I mean, part of the challenge with surcharging now is that when we first introduced the right to surcharge, cash was about 70 per cent of transactions. Cash is now, we think about 10 per cent of transactions. Most people don’t carry cash. They can’t avoid the surcharge. And so that’s why the challenge is, well, if you can’t avoid the surcharge, wouldn’t it be better folded into the total price.

Understood. Now, this event is called Future Sydney. Housing supply is one of, if not the biggest challenges to Sydney’s future. I know you’re not responsible for housing. You’ve got plenty on your plate already. I recognise that. And I’m not really asking you this as the RBA Governor but as an economist and a citizen of this city, what else could be done to drive housing supply?

So you’ve already heard the Premier obviously talk quite a lot about housing supply. Let me make a couple of points upfront. The first is that obviously housing and housing prices are not part of the Reserve Bank’s mandate. Having said that, we do recognise that part of the way interest rates work their way through the economy, one way is through the housing sector. So I think the best thing we can do speaking as the Reserve Bank is to keep inflation low and stable, because that keeps building costs and so on not increasing too much. So that’s positive. And then the issue really then becomes, as you’ve said, supply. And it’s a very knotty problem. The Premier’s already set out increasing supply involves changes to planning laws and those sorts of things and that’s all very positive. But it also involves making sure that we have the skills and the resources to build those extra homes. So we need the inputs. We need the cement, the bricks, the wood. We need tradies who have got the skills in order to build these things. So we need to make sure that we’ve got all those resources available and if the economy is running too hot, then sometimes that may mean those resources aren’t available. So that’s another thing. As interest rates come down hopefully what you’ll see is people be able to afford build more houses and hopefully we’ve got the skills to build them. So that’s the second point.

The third point I would make is that – and this goes to sort of supply and demand. We’ve seen a long-term decline in the average household size. Now, this isn’t uncommon. It happens in many countries and it’s happening here too. And in COVID it accelerated because people decided, well, I don’t want to share a house with five other people anymore. I’m going to share with my partner. Or actually I want a home office now, so I’m not going to have a spare room in my unit anymore. I’m going to use that for my home office. So as the average household size declines then the given housing stock, there’s less of it. So the same housing stock provides housing for less people because there’s less people in each house. The other long-term demographic challenge here, of course, is that there’s many older people whose families have left home, who are still in their large homes and they’re not downsizing. So in terms of this issue of average household size, I think there is a question about, are there policies, taxes, things we do that are discouraging people, perhaps from downsizing from large homes, are there reasons why people aren’t sharing more. So these are the sorts of things I think that you also have to factor into this.

Stamp duty is a considerable barrier, isn’t it, to downsizing?

Stamp duty, I think my predecessor called it a tax on mobility. It’s not only a barrier to downsizing. It’s a bar to people moving to find jobs. So it’s also a barrier for dynamism in the economy because it basically keeps people pretty much where they are instead of allowing them to up and move.

To cover off on an earlier point you made there, do we need more skilled migrants in Australia to build the houses that we need?

I’m probably not going to get engaged in a migrant discussion but I do agree that we are seeing - and we hear this in our liaison program, that there is a shortage of skills in the housing industry and some of that is contention for resources with all the other infrastructure projects that are going on. We do need to find a way to encourage, either people to come in with these skills, or people who might be thinking - they’re coming out of year 12, why don’t you go and do a trade? These are the sorts of things we need to encourage.

Governor, thank you so much for delivering the oration for this Q&A. Would you please thank Michele Bullock.