The Operation, Effectiveness, and Consequences of the Public Governance, Performance and Accountability (Location of Corporate Commonwealth Entities) Order 2016

10 March 2017

Senate Finance and Public Administration References Committee Parliament House Canberra ACT 2600

Dear Committee Secretary

The operation, effectiveness, and consequences of the Public Governance, Performance and Accountability (Location of Corporate Commonwealth Entities) Order 2016

Thank you for the opportunity to provide a submission into this inquiry.

COBA is the industry association for Australia’s customer-owned banking institutions – mutual banks, credit unions, and building societies. Collectively, the sector we represent has $104 billion in assets and more than 4 million customers.

The customer owned banking sector has a strong presence in regional Australia and many COBA member institutions have a close interest in: • the policy of relocating Commonwealth entities to regional centres • the economic, environmental and capability implications of the policy.

The relocation of government jobs to regional Australia provides economic, social and health benefits to regional communities while offering a more diverse range of lifestyle options for government employees (see Attachment A).

COBA member institutions such as Heritage Bank, Queensland Country Credit Union and Regional Australia Bank would welcome the opportunity to appear before a hearing of this inquiry in their communities.

Regional customer-owned banking institutions encompass our sector’s oldest and newest members. B&E has been serving regional Tasmania for 147 years and is the oldest customer-owned banking institution while the newest customer-owned banking institution, Traditional Credit Union, was established 20 years ago to serve remote Aboriginal communities in the Northern Territory. (See Attachment B for case studies of customer owned banking institutions based in regional Australia).

Half of the banking institutions in our sector have their headquarters outside the major capital cities of Sydney, Melbourne, Brisbane, Perth, Adelaide and Canberra (see Attachment C)1. Three of the five largest customer-owned banking institutions are based outside of these cities with headquarters in Toowoomba and Newcastle. The other two institutions in the sector’s top five are based in Brisbane and Adelaide - outside the traditional Sydney/Melbourne finance hubs of the major four banks. Of the

1 The Regional Australia Institute defines Regional Australia as all of the towns, small cities and areas that lie beyond the major capital cities (Sydney, Melbourne, Brisbane, Perth, Adelaide and Canberra).

ten largest customer owned banking institutions, eight are based outside Sydney and Melbourne.

Alongside COBA’s regional members, several metropolitan-based members have significant regional branch networks acquired through mergers, business expansion and historical bonds to primary industries. Some of these members also operate their call and processing centres in regional Australia.

Regional COBA members strongly support further government jobs in regional Australia. Not only would this increase the economic prospects of their businesses and customers, it would increase regional diversity and resilience, and provide a range of national benefits.

Strengthening regional communities can help to reduce pressure in metropolitan communities on infrastructure and housing affordability.

Australia’s largest customer-owned bank, Toowoomba-based Heritage Bank, notes that the lifestyle benefits of relocating to a regional centre are often overlooked:

“Regional centres generally offer lower housing prices, lower costs of living, shorter travel times, less pollution, lower crime rates and greater social interaction. Our capital cities are already straining to accommodate the pressure of growing populations, which has seen housing prices sky-rocket, increases in higher density living, massive traffic congestion, and multiple other problems associated with urban sprawl.”

COBA members highlight the positive impact of defence bases in regional communities. Defence base employees are “part of the fabric of the community” and deliver far reaching economic benefits from housing construction, improved education and health services and increased consumer spending. In terms of social benefits, defence bases have a positive influence on community and increase the diversity of the population. Members also highlight similar positive impacts from quasi-government entities such as universities.

A stronger regional Australia will these allow significant regional businesses, such as customer owned banking institutions, to grow and prosper in their traditional markets and to bring increased competition and diversity to national markets.

Thank you for the opportunity to contribute to this Senate Inquiry.

Yours sincerely

LUKE LAWLER Head of Public Affairs

COBA Submission – The operation, effectiveness, and consequences of the Public Governance, Performance and Accountability (Location of Corporate Commonwealth Entities) Order 2016

Attachment A: The benefits of relocating government jobs

Diversifying regional economies to increase resilience

Adding stable government jobs to regional communities will provide extra resilience for regional areas to weather economic shocks to their primary industries.

Many regional communities rely heavily upon specific industry sectors for their economic growth. These industries are generally concentrated in tradeable commodity sectors such as agriculture and mining that are subject to economic fluctuations. These downturns can have significant regional repercussions.

Regional communities themselves identify the lack of economic diversity as their greatest economic threat. In the recent ABS review of Regional Development Australia (RDA) plans, 39 of 55 regions identified “the reliance on one or few main industries and the need to diversify the region’s economy” as their main economic threat2.

Government jobs will also increase both private and public spending in regional centres which will have a flow-on effect for other industries in the region.

Increasing population in regional areas to improve economies of scale

More government jobs in a region will directly increase regional populations but a larger and wealthier population will also increase the attractiveness of regions to skilled workers. It will help regional areas reach ‘critical mass’ levels to access services and attract new workers and businesses to their region. It will also improve the economies of scale for areas that require new infrastructure investment. In other cases, it will increase the utilisation of underused infrastructure.

A larger population will help existing businesses maintain their viability and ensure they can stay in regional Australia.

Aside from the economic benefits, a larger population creates social benefits for regional communities. This includes boosting the number of people involved in schools, sporting clubs, service groups, charities and other community organisations. In some cases, this could ensure that these community organisations remain viable.

Diversifying the job market to increase the attractiveness of regions

Relocating government jobs to regions will diversify and increase the job opportunities available in these areas. This will make it easier for regional Australia to attract and retain the skills that it needs.

For regional COBA members, this improves the lifestyle and economic options of their members as well as their ability to attract talent from outside their regional base. A more diverse job market will increase the gender and ethnic diversity of regional Australia and according to one member will “make it easier to improve the diversity of their workforce”.

The ABS RDA plan review identifies lack of job diversity and skill shortages as key issues in regional Australia:

“The need to increase the diversity of employment options was a key issue for many regions” 3.

2 ABS 1381.0 - Research Paper: A Review of Regional Development Australia Committee Regional Plans, 2013, page 10 3 ABS 1381.0 RDA Plan Reviews, 2013, page 19 3

COBA Submission – The operation, effectiveness, and consequences of the Public Governance, Performance and Accountability (Location of Corporate Commonwealth Entities) Order 2016

“A frequently raised economic issue – identified by 44 regions – was a current or potential shortage of skilled workers” 4.

An increase in job options can help attract workers to meet the skill shortages in regional Australia. These job options diversify the local job market, increasing the overall attractiveness of a region.

A diverse job market is important as it is part of the overall package for families looking to relocate to regional Australia. A recent National Centre for Vocational Education Research (NCVER) study5 found married or de facto workers needed a wage premium of $19,2066 to move to Karratha (regional WA) or Emerald (regional QLD). Intuitively, this is compensation for a partner struggling to get work or having to take a pay cut in the new location.

The NCVER study supports this assertion suggesting that:

“Single people are significantly more willing to move for work than married people. Families generally have higher moving costs… The insignificance of the effect of additional dependents, however, suggests that the most important cost may indeed be that of the partner being unable to find suitable work at the destination”7.

The option for their partner to work in a government job could ‘seal the deal’ for skilled workers thinking about moving to regional Australia. Without this option, regional employers looking for these skills will have to pay ‘overs’—which may not make that job viable.

Several members noted that the presence of a government jobs would provide opportunities for young people to stay in their communities. This too is another problem in the regions, as “several RDA committees reported that a lack of entry-level and graduate positions were contributing to high youth unemployment”8.

Providing professional and highly paid jobs for qualified workers in regions

Relocating government jobs to regional Australia will increase the professional and highly paid job opportunities available to regional Australia.

The ABS RDA plan review found:

“…the lack of professional and high-paying jobs was often identified and was considered a barrier to attracting and retaining an educated workforce”9.

According to ABS data, there is significant difference in median incomes ($4,000– $6,000) between capital cities and areas outside capital cities.

Median Employee Income, selected states, 2012-1310 ($ per year)

Greater Capital City Rest of State NSW 50,422 44,560 VIC 48,053 42,417 QLD 49,578 45,600

4 ABS 1381.0 RDA Plan Reviews, 2013, page 11 5 National Centre for Vocational Education Research (NCVER) Research Reporting: Incentives for relocating to regional Australia: estimates using a choice experiment, page 28 6 Relative to a single person 7 NCVER Report, page 23 8 ABS 1381.0 RDA Plan Reviews, 2013, page 19 9 ABS 1381.0 RDA Plan Reviews, 2013, page 19 10 ABS 6524.0.55.002 - Estimates of Personal Income for Small Areas, Employee Income 2012-13: Table 2 4

COBA Submission – The operation, effectiveness, and consequences of the Public Governance, Performance and Accountability (Location of Corporate Commonwealth Entities) Order 2016

In comparison, the median base salary for an APS3 (entry level) public servant was $59,67711, well above the figures in our table. This is not surprising, given a large number of APS roles are generally qualified professionals. Relocating some of these jobs to regional Australia will provide well-paid jobs for qualified workers in regional Australia while also stimulating regional economies.

The jobs will ensure that regional Australia is able to attract and retain an educated workforce. For regional COBA members, this will increase the potential employment base within their region as well as the potential pool of skilled workers willing to work in regional Australian cities and towns.

Opening up a viewport into regional Australia to Government agencies

Adding government employees to regional Australia will give these agencies a greater understanding of regional Australia. This will help to ensure that staff are exposed to a different way of life outside of metropolitan Australia. As one COBA member notes, location “inescapably colours the way staff experience life”.

Understanding regional Australia is important for policymaking and service delivery as more than 8.8 million Australians live in regional Australia and it accounts for one third of our national output12.

Increasing lifestyle choices for government careers

The option of government jobs in regional Australia will allow employees who want a regional lifestyle to have both the career and lifestyle that they want. While regional Australian life is not for everyone, the same applies for metropolitan life.

COBA members identify many advantages living in regional Australia. They note that regional Australia generally offers lower housing prices, lower costs of living, shorter travel times, lower pollution, less crime and greater social interaction. Anecdotally, several regional COBA member senior executives noted improvements in their quality of life after moving to regional Australia.

In terms of housing affordability, the median house price in capital cities is up to twice the house price outside these cities according the ABS data. More jobs in regional Australia could help alleviate house affordability issues and increase the prospects of home ownership for some Australians.

Median House Price, selected states, September 201613 ($’000)

Capital City Rest of State NSW 882.0 425.0 VIC 610.0 310.0 QLD 499.0 430.0

11 Australian Public Service Commission, APS Remuneration Report 2013, page 9 12 Regional Australia Institute, http://www.regionalaustralia.org.au/home/what-is-regional-australia/ 13 ABS 6416.0 - Residential Property Price Indexes: Eight Capital Cities, Sep 2016, Tables 4 and 5

COBA Submission – The operation, effectiveness, and consequences of the Public Governance, Performance and Accountability (Location of Corporate Commonwealth Entities) Order 2016

Attachment B: Case studies on regional customer-owned institutions

Heritage Bank – Toowoomba, Queensland

Heritage Bank is Australia’s largest customer-owned bank, with a history stretching back to its origins in Toowoomba in 1875. Heritage is proud to still have its headquarters in Toowoomba and to illustrate the ability of regionally-based businesses to compete on the national stage. Heritage Bank’s headquarters was Toowoomba’s first high-rise office building when it opened in 1983 and has ever since been a city landmark.

Heritage has grown to have total consolidated assets of more than $8.8 billion, 61 branches across southern Queensland, 800 staff, and home loan borrowers across Australia, sourced via a network of mortgage broker partners. Heritage has administrative offices in Toowoomba, Brisbane, Sydney and Melbourne, and branches throughout metropolitan Brisbane, the Gold Coast, the Sunshine Coast, north to Bundaberg, west to Dalby and south to Stanthorpe. More than half of its 800 staff members are located in regional areas.

Heritage Bank today is a well-known and respected brand across the Australian financial services landscape. In its home location of Toowoomba, Heritage is one of the largest employers and is an important contributor to local community events and activities. As a regionally-based employer, Heritage successfully attracts some of the top talent available in the sector, with a number of senior executives recruited from capital cities to base themselves in Toowoomba.

Queensland Country Credit Union - Townsville, Queensland

Queensland Country Credit Union has a long and proud history of servicing regional Queensland since first opening its doors in Mount Isa in 1971. Today, Queensland Country provides banking and insurance services for over 70,000 Members from Stanthorpe to Weipa and out to Mount Isa, employs over 400 people and has $1.36 billion in assets. Over the past twelve years, Queensland Country has given back $2 million to its local communities.

The Queensland Country head office is in Townsville, which is currently experiencing one of the highest unemployment rates in Queensland. The high unemployment rate in Townsville has been an issue for the region for some time and the Commonwealth Government can play a role in assisting by relocating government employment in metropolitan areas to regional Queensland.

Queensland Country has been operating its head office out of Townsville since 1985. With the rise in technology and the early roll out of National Broadband Network in Townsville, distance is not a barrier for operating a modern corporate entity out of the city.

COBA Submission – The operation, effectiveness, and consequences of the Public Governance, Performance and Accountability (Location of Corporate Commonwealth Entities) Order 2016

Regional Australia Bank - Armidale, New South Wales

Regional Australia Bank is a member owned bank that has been helping regional Australians achieve their lifestyle goals for almost 50 years. Regional Australia Bank is proudly headquartered in Armidale — the first region in mainland Australia to be switched to the National Broadband Network.

With over $1.25 billion in assets and 60,000 members, Regional Australia Bank’s 30 branches cover half the footprint of New South Wales. It has 230 employees with 100 located in the Armidale head office. The values and lifestyle offered at Regional Australia Bank have successfully attracted senior executives from both overseas and metropolitan Australia. The wider benefits of regional Australia allow Regional Australia Bank to run a world-class call centre in Armidale staffed with stable and quality employees.

In 2016, Regional Australia Bank changed its name from Community Mutual Group to better reflect who they are, what they do and their commitment to the prosperity of the individuals and communities in Regional Australia. As part of this commitment, Regional Australia Bank pledges more than 5 per cent of its profits back into grassroots community initiatives.

Warwick Credit Union - Warwick, Queensland

Warwick Credit Union is successful customer owned financial institution with an excellent reputation through Darling Downs in Queensland. Since its formation in 1970, Warwick Credit Union has grown to 10,000 members, over 40 employees and over $250 million in assets.

Warwick Credit Union was founded and directed by men and women who were part of the close-knit community of the Warwick district, and who believed in the philosophy of helping others and putting the best interests of the member first.

Encompassing the southern Darling Downs, Warwick Credit Union’s branch network developed from commencement in Warwick itself in 1973 expanding to Killarney in 1983, Allora in 1992, Inglewood in 2002 and to Dalby in 2006.

Supporting local towns and communities is an integral part of Warwick Credit Union's philosophy. Warwick Credit Union has supported over 100 activities through a mix of direct cash and indirect in kind assistance. This support ranges from one off grants to regular support for events such as the Killarney Bonfire, Allora, Killarney and Warwick Cup races, Jumpers and Jazz, and Dalby rugby league.

COBA Submission – The operation, effectiveness, and consequences of the Public Governance, Performance and Accountability (Location of Corporate Commonwealth Entities) Order 2016

Attachment C: Customer-owned institutions with HQs outside of Sydney, Melbourne, Brisbane, Perth, Adelaide and Canberra14

Institution Headquarters State B&E Personal Banking Launceston TAS BCU Coffs Harbour NSW Broken Hill Community Credit Union Broken Hill NSW Cairns Penny Savings & Loans Cairns QLD Central Coast Credit Union Central Coast NSW Central Murray Credit Union Yarrawonga VIC Central West Credit Union Parkes NSW Coastline Credit Union West Kempsey NSW Community Alliance Credit Union Wollongong NSW ECU Australia Cairns QLD Family First Credit Union Lithgow NSW FCCS Geelong VIC First Choice Credit Union Orange NSW Goulburn Murray Credit Union Shepparton VIC Greater Bank Newcastle NSW Heritage Bank Toowoomba QLD Heritage Isle Credit Union Launceston TAS Holiday Coast Credit Union Wauchope NSW Horizon Credit Union Wollongong NSW Hume Bank Albury NSW Hunter United Credit Union Newcastle NSW IMB Bank Wollongong NSW Lysaght Credit Union Wollongong NSW Macquarie Credit Union Dubbo NSW Maleny Credit Union Maleny QLD Newcastle Permanent Newcastle NSW Northern Inland Credit Union Tamworth NSW Nova Credit Union Newcastle NSW Orange Credit Union Orange NSW Queensland Country Credit Union Townsville QLD Regional Australia Bank Armidale NSW South West Slopes Credit Union Young NSW Southern Cross Credit Union Murwillumbah NSW South-West Credit Union Co-Operative Warrnambool VIC Summerland Credit Union Lismore NSW The Capricornian Rockhampton QLD The Gympie Credit Union Gympie QLD The Mac Camden NSW The Mutual Maitland NSW Traditional Credit Union Darwin NT Warwick Credit Union Warwick QLD WAW Credit Union Wodonga VIC

14 The Regional Australia Institute defines Regional Australia as all of the towns, small cities and areas that lie beyond the major capital cities (Sydney, Melbourne, Brisbane, Perth, Adelaide and Canberra). 8