Cory Bernardi (SA, Liberal Party) Share this | Hansard source

A financial crisis has been developing in our nation for the past 40 years. I am referring to the decline in the personal savings rate in this country and the decline in personal financial know-how. To those who think I am being alarmist in calling this a crisis, I will highlight the fact that our personal savings rate in this country was over 12 per cent in 1965-66. Twenty years later in 1985-86 it was 10.5 per cent, and in 2005-06 it is actually a negative 2.3 per cent.

Australians are now spending $1.03 for every $1 they earn. It is simplistic in the extreme to state that an individual, a business, a family or a nation cannot prosper if it continues to spend more than it earns. Although it is simplistic, it is absolutely true. It is the road to disaster. History is littered with the economic corpses of those who thought this immutable law did not apply to them.

This is an issue of great personal interest to me. I have spent the bulk of my working life helping people to solve their financial problems through savings and investment. A key part of helping people in this regard is to help them understand the nature of money and the benefit of savings. Financial literacy is one of the most important skills that any adult can develop. And it is a skill that can help ensure our nation will remain competitive and strong. Australia is a growing economy; however, as I mentioned earlier, we are no longer good savers. Our international competitors, particularly those in our region, also have growing economies—although one of the key differences is that they are very good at saving. Consider the Chinese economy. It is growing at around 10 per cent per year and China has a personal savings rate in excess of 30 per cent per year. In India economic growth is around 7½ per cent and personal savings run at more than 20 per cent. The situation is similar in South Korea and in Vietnam.

Changing our national savings habit is a generational issue. You cannot stop a 40-year decline in savings rates with the wave of a magic wand. I feel so strongly about this subject that I wrote a book to help parents teach their kids good money habits—and I am proud to be a part of a government that is stepping up to the plate on financial literacy and education. Developing good money habits from an early age is essential to our future prosperity. It is never too early to start creating these good habits. Just as we teach our children good manners and how to read and count, we must also teach them basic financial skills: how to budget, how to save and how to invest.

I commend the government for its initiative in fulfilling its 2004 election promise to put in place a national strategy to help Australians develop their financial literacy. This promise saw the establishment of the Financial Literacy Foundation. Launched last year, the foundation is actively working to help all Australians to improve their financial skills and to better manage their money. Importantly, the foundation is also working with school children to develop positive money habits. Encouraging these good habits from an early age is essential—and, as I said earlier, it is never too early to start.

The foundation has worked to produce the National Consumer and Financial Literacy Framework in schools for years 3, 5, 7 and 9. Under this framework, children will be taught, through their school curriculum, about basic concepts relating to money, including the difference between a need and a want—which is very relevant in today’s consumer driven world. They will also develop an understanding of the importance of setting financial goals and of how to spend and save their money more wisely.

This framework will complement some initiatives that many primary schools around the country are already implementing. One such school is the Upper Sturt Primary School in my home state of South Australia. Students at this school are learning about financial literacy through their mathematics curriculum. Specifically, these students are learning about the basics of money.

These lessons aim to provide school children with the essential skills to successfully tackle the financial decisions they will face in adulthood. The next generation of adults are facing an enormous array of marketing pressures. At a very young age they are able to get credit on mobile phone accounts, and as soon as they turn 18 they will be inundated by credit card offers.

It is no secret that teenagers and young adults are targeted by marketers. They are being sold everything from iPods to mobile phones, credit cards and in-store finance. There is massive competition for their consumer dollar. The problem is that the debt they incur today in keeping up with their friends must eventually be repaid. If they are financially naive and do not make the repayments on this debt, it can have long-term implications for their personal credit rating.

We need to make sure the next generation of adults are not crippled by poor savings habits and do not become slaves to poor spending habits during their lifetime. It is imperative that young Australians learn how to avoid getting into unmanageable debt. Carolyn Bond, the chairwoman of the Consumer Federation of Australia, has stated:

Once you have one debt, you have less disposable income to save, so it means you will be more likely to use credit again. A cycle forms. If that happens when you are 19 or 20 it can have an impact on you for the next 10 or 15 years.

Parents and the wider public need to be engaged. They need to be re-educated and to pass on good financial habits to their children. More information needs to be made public. The Financial Literacy Foundation is going a long way towards meeting this need. The foundation’s research indicates that most people think managing money is too hard or too boring, or that they are too old to begin learning or too young to be bothered learning. However, just as it is never too early to begin to build good financial habits, it is never too late to learn to implement wise money management strategies. Through the Financial Literacy Foundation, the government has made myriad resources available to everyone. The Understanding Money website contains numerous tools to assist with budgeting, saving, understanding credit, investing and much more.

The government recognises the importance of having a vision for the future financial health of our country. We have done a lot to encourage superannuation savings. The superannuation co-contribution scheme has been overwhelmingly successful, with over 571,000 individual accounts benefiting from the scheme in 2004-05. Our plan to simplify and streamline superannuation will sweep away the current tax complexities faced by many retirees.

However, we also recognise that we need to change the cultural awareness of our children. The education of our next generation in the fundamentals of the prudent use of money is essential to our nation’s future prosperity. The task ahead is a generational one. We cannot neglect it—and this government will not neglect it—because it is a task of national importance.