South Pacific Central Banks Governors press conference
Senator Marise Payne:
I am delighted to be here today, and to have the opportunity to open the 34th meeting of the South Pacific Central Bank Governors, hosted by the Reserve Bank of Australia.
The Governor has mentioned my strong interest in the Pacific and in Australia's relations with the Pacific, and this is a really valuable opportunity for me to reinforce that message at such a senior level with all of you. We share with our Pacific family the responsibilities and the challenges of supporting the region's stability and security and prosperity. Through decades of our engagement and our support and our work together, I think that we've forged very close and constructive partnerships across the region. And I keep reminding myself that this is the 34th meeting of this group. That's a powerful message in and of itself — an opportunity to solve those common problems and to work on joint initiatives, which are evidence of those enduring ties.
What our Pacific Step-up does is to build again on these partnerships, to deepen our engagement, to respond to the priorities of the region. The past 12 months, as the Governor alluded to, the period during which I've been Australia's Foreign Minister, have been very busy ones. In fact, we've seen by a quick back of an envelope calculation, which is probably not popular in central banks, but we've seen more than 50 visits by Australian Ministers and officials to the Pacific, including of course across the finance sector. As my Prime Minister has said: if you're going to step up, you have to show up. And that is a pretty powerful message to his ministry, his senior officials in our work. We are strongly committed to economic prosperity across the Pacific and our Pacific Labour Mobility initiatives are one aspect of that commitment that I wanted to mention this morning because they're an important element. Labour mobility boosts income levels; boosts remittance flows to the Pacific; helps to build a bank of skills and experience and, of course, ultimately, those savings to enhance experience and livelihoods.
We know from our calculations and from the level of participation in our Seasonal Workers Programme and the Pacific Labour Scheme that there are thousands of communities across the Pacific who are relying on remittances sent from friends and family who are working in Australia to fund essential aspects of their lives whether it's in health or education or other parts of the community. Some of the feedback that I've received, and I have really made an effort in the last year, to meet personally with workers in Australia and importantly, in your sending countries. And last week, in Vanuatu, I had an opportunity to farewell a group of young men and women who are coming here to Australia as part of the Pacific Labour Scheme. In Cairns, I've met with workers from Bougainville and other parts of Papua New Guinea who are working on one of our great tourist facilities which just happens to be a red papaya farm as well. And many other places around the country. In Solomon Islands, talking to people who've had the opportunity to work in Central Queensland, in the blueberry industry for example. Those stories are incredibly positive and certainly, have related some interesting experiences to me.
One thing that we have to do though, in relation to labour mobility, to maximise its benefits, to maximise the benefits of remittances, which are expected to reach up to US$1.5 billion of income per year for the Pacific by 2040, so in 21 years. We do need to bring down the cost of money transfers, and I know that is something that is on your various desks and agendas. We still have a situation where in the Pacific, countries are some of the most expensive in the world when it comes to sending and receiving remittances. The average costs are still higher than the global average and access to financial services has, in fact, become more difficult due to commercial banks de-risking policies. So, while remittance transfer costs to some Pacific Island countries - Fiji, Samoa, Tonga, Vanuatu - have fallen by around a third since the start of 2017, which is a very, very good piece of news, the average cost still remains above that global average — 9.49 per cent compared with the global average of 6.84. So hopefully, in coming together, one of your focuses is in looking at what scope there is to continue to reduce these costs, especially if we are to meet the sustainable development goal of reducing remittance transaction costs to less than 3 per cent and eliminating remittance corridors which are higher than 5 per cent all by 2030.
The high cost of sending remittances from Australia to the Pacific and also that global trend of de-risking, which I mentioned, it's driven by money laundering. It's driven by terrorism financing risk –remains a concern for the Australian Government. And your colleague from Vanuatu and I were, last week, at the No Money for Terror Conference in Melbourne doing some work in this area, in particular around terrorism financing risks. We've made it our priority to support efforts which aim to reduce the cost of sending money from Australia to the Pacific. We're advocating for an environment that's more conducive to low-cost remittance transfers in a range of both domestic and international fora. And we are committed to keeping remittent services between Australia and the Pacific open, affordable, and safe for criminal abuse.
What we do need though, as you know, are the appropriate enabling environments. Regulatory frameworks, innovative partnerships that with our financial service providers to support a diverse remittance market. So we very much support the South Pacific Central Bank Governors’ commitment to develop the regional know-your-customer facility, regionally linked payment systems which we hope contribute to bringing down those costs, and I want to acknowledge the progress that has been made in doing that. Their initiatives which complement the Pacific Payment, Remittance and Security Settlement Initiative, which the World Bank group of course has undertaken, and funded under Australia’s Pacific partnership with the International Finance Corporation, which seeks to enhance financial infrastructure in a number of countries across the region. That combined with the work that US central banks undertake, these critical components of infrastructure have the capacity to be transformative for the region, and much better connect our economies in the long run.
Of course, in my own portfolio in the Department of Foreign Affairs and Trade, we continue to pursue partnerships with AUSTRAC to strengthen that Australia Pacific remittance corridor, improving the capability of a financial intelligence units in the Pacific to prevent and detect financial crime. We’ll continue to lend our support to the Reserve Bank of Australia to progress the implementation of the initiatives of this group. We also work in our development assistance space to support price comparison initiatives, like the Send Money Pacific website, and to promote access to effective financial services, especially for women under the Pacific Financial Inclusion Program.
We recently commissioned a behavioural insights team to look at remittance behaviours in both Australia and New Zealand to better understand how other factors can contribute to the higher cost of remittances. That research found - not surprisingly, necessarily - that people remitted for personal reasons. For Pacific workers, earning money to send home was the main reason that most of them had left their families. For Pacific diaspora, remitting was often tied to their cultural identity, providing a means for them to maintain a connection with their home country.
Anyone who knows me well knows that I am a sporting tragic, and that my AFL team is the Geelong Cats. And one of the best players in my personal opinion in the, Geelong Cats, is Esava Ratugolea from Fiji. He tells a great story about why he sends remittances to his village and his community and to his family, and it's a really powerful message to the person at the peak, the peak of their sporting achievement, in what I think is the best AFL team in Australia, and he is still telling that story, he is still conveying that message and still encouraging that approach. It's fantastic to listen to him.
People have also indicated a preference to remit physically in person, and they have reported a lack of confidence in interacting with digital tools, even though they might be more convenient in cheaper channels. In some cases, in fact, they reported a willingness to compromise the cheapest option for speed and immediacy of transfers, while in others, remittances did also cause them substantial financial stress. And that's something that we have to bear in mind as well. If people are taking short term loans or neglecting their own wellbeing because of pressures that they feel around remittances, then that is another challenge. So there is some of there is a need to tackle those non-structural barriers that are driven by behavioural factors to address gaps in the financial and digital literacy and capabilities, to better empower those who are earning the money to make their own smart financial choices and decisions.
Before all of the jobs that the Governor referred to, I'd worked for quite some time in the credit union movement in Australia, in the nonbank end of Australia's financial system; financial institutions. And one of the things that I always thought the credit union movement was very good at was working on financial literacy at a very, very, very solid community level. And I think there's a lot to learn from that experience. I certainly have used a lot through schools in Western Sydney communities in Western Sydney, which often experienced challenges because they are so practical, member-driven, very grassroots focused institutions, that just wanted to support their members.
The Governor also reminded me, reminded us that I am Australia's Minister for Women as well as Australia's Foreign Minister, so I can't leave you without a small message about some of the gender issues that I think are important in this conversation. Because there is a gender role in remittances. We know that women remit a higher percentage of their earnings, although on average, they’re probably earn less than their male counterparts in a number of instances. Generally speaking, we understand that women at home in the Pacific who are spending remittances, spend those on immediate family needs, on children’s school fees and other aspects of education, on customary obligations or perhaps in their own small business.
So I would also invite you today to advocate for increased women’s participation in labour mobility and in those initiatives, particularly when you’re talking about the economic and social benefits of migration, of remittances, and of financial inclusion. We also need to ensure that we continue to coordinate in effective ways to manage the increased activity in this space. There is a lot happening to avoid duplication of efforts so that we’re all striving to achieve the same goal, which is low cost money transfers to the Pacific.
So ladies and gentlemen, it’s a great pleasure to see you all here this morning in this beautiful location. I visited many of your countries over my parliamentary career, but particularly in the last couple of years, and I have always felt so very, very welcome. I know that the Governor and his colleagues will be reciprocating that warm welcome today. I certainly hope so. You are key decision makers in this room. You are people who make a difference with what you do. You are people who make a difference to your communities and to your countries. So I really encourage the deepening of those important institutional links that have been built over the 34 meetings of this group to maintain positive momentum through open dialogue and collaboration that best supports economic inclusion in our region, and financial inclusion as well.
So thank you very much for the opportunity to be here this morning. I wish you all the best. I would stay inside most of the day. In the West it will be 39 degrees Celsius and smoky; here it will be very warm and very smoky, but you have an opportunity to spend some very valuable time together. I wish you all the best for your deliberations. Thank you very much, Governor.
Governor Philip Lowe:
Thank you very much Senator. You managed to link the worlds of AFL, money remittances, and central banking.
That’s probably the first time that’s happened at the Reserve Bank.
So it's fantastic. But more importantly, you reminded us that what we're doing really makes a difference in the lives of people, and particularly women. And as you said, women remit a higher share of their income than men, it’s true. But what we do here really makes a difference in the lives of people so we really appreciate the support you're giving our organisation and also the region.
Senator Marise Payne:
Governor Philip Lowe: