1 MAY 1994: WA5: RICHARD RAXWORTHY TALKING TO BRIAN PATERSON
I want to get a bit of a profile of you first for the Who’s Who of Credit Unions if you don’t mind. What is your full name?
BP Brian Thomas Paterson.
What year were you born?
BP I was born in 1946.
Whereabouts?
BP Perth.
You grew up in Perth?
BP Grew up in Perth.
Right. Went to school at?
BP Christian Brothers College, Highgate. Highgate is an inner Perth suburb.
When you left where did you go then?
BP I joined the Perth Building Society.
Was that the one that was to become the Challenge Bank?
BP That’s the one. I was there for seventeen years.
What year did you start with them?
BP I started on 1 January 1965.
That’s a long while ago.
BP Certainly is.
What did you do at the Perth Building Society?
BP Oh well I started off as an accounts clerk and moved through the accounting systems to become the Accountant and then the Financial Controller. Then I became the Member Services Controller. Then I became the Assistant General Manager Operations. Then I went on to Assistant General Manager Development to look at diversification and new services and those sorts of things. Then I left in December 1981.
Where did you go then?
BP I decided to go out into the corporate world and I went to a chap by the name of N G Kaliph who is a fish exporter, he exports crayfish, prawns and that sort of thing. I lasted with him for about nine months and then I went to work for a guy by the name of Bill Miland who made agricultural equipment. He designed, manufactured and sold agricultural equipment like seeders, cultivators and those sorts of things. He also had heavy engineering, he used to do plate engineering, vessel engineering, specialised vessel engineering for mining truck bodies and those sorts of things. I did consulting work for him for about twelve months. Then I joined Brian Coppen at Voxadeon.
What is the name again?
BP Voxadeon, they are retailers like Retrovision-type. Voxadeon, Western Underwriters, Western Underwriters Insurance. I actually joined his holding company which was his own personal company, Western Group Holdings. They owned Western Underwriters, which is one of the major insurers here of household and car insurance. While I was there he bought Voxadeon out and I was transferred across to Voxadeon as his corporate adviser to look at management of assets and take-overs and acquisitions and mergers and those sorts of things.
So how did you get to credit unions?
BP The job was actually advertised.
Did you know anything about credit unions?
BP No, not a lot, although I had touched briefly on them when I was at Perth Building Society. We actually looked at starting up a credit union many years ago while I was there. But that was really the only exposure I had to credit unions. I briefly knew what they were about. This job at the Association came up while I was at Voxadeon and I applied for it and I subsequently got it.
What year was that?
BP That was in August 1985.
As late as that? Who in the Association hired you for that job?
BP Well there was actually three of them. The Association was actually formed and that was being run by Dennis Hagan, who I think you have interviewed already. They also had a company called CUATM Proprietary Limited, the ATM company, that had already been formed. What they wanted me to do was start up their Treasury side of things which was CUTM Proprietary Limited, which was the central banking wing which they hadn’t started and they wanted to start up. Then what they wanted to do was bring the three together, bring the Association, CUATM and CUTM together as a group. So I was appointed Chief Executive Officer of the Association and Managing Director of the two companies. Initially they had three Boards which I consolidated into two Boards later on, so there was a Commercial Board and an Association Trade Board. I started with them in August 1985.
You were Chief Executive or General Manager of the Association?
BP I was Chief Executive of the Association and Managing Director of the other two.
Any problems starting out?
BP Well apart from lack of resources, not a lot of money and no staff.
No staff?
BP No. CUATM did have some staff but the other two the Association had a part-time secretary and CUTM had no staff at all. So I really started with a blank piece of paper with those two organisations. So there was very little in the way of resources and very little money so we had to start from virtually nothing.
So it was virtually you and one part-time staff member for the whole lot?
BP Yes. That is how it started.
You were working with AFCUL on the ATM business?
BP Well yes. As I said we had the ATM company which was called CUATM and at that stage it owned, I think, about nine ATMs. So when I joined the Association I was also put onto the AFCUL and AFCUL Services Board. I went to Board meetings along with Dennis Hagan in the first instance. Dennis and I used to go across every month for AFCUL and AFCUL Services Board meetings.
AFCUL Services, that it CUFSAL isn’t it? Was it then?
BP Well the two companies CUSCAL and CUFSAL were originally known and AFCUL and AFCUL Services.
What about the AFS and EFTS and all those ones?
BP AFS was the New South Wales ATM service.
EFTS was the one that developed Ausnet.
BP That’s it.
So you weren’t anything to do with those?
BP No the New South Wales Association actually ran AFS. EFTS was a company which was owned by the New South Wales Association. AFCUL had some shares in it and then it was privately owned by two guys, I can’t think of their names now. But EFTS was a separately owned company. Also Challenge Bank owned a fair chunk of it as well. We ended up buying Challenge Bank shares off them, that is the credit union movement. So EFTS was an independent company and it was developed to organise our switching operations.
In Western Australia as well?
BP Yes. Western Australia was on it. All the States were attached to it.
What about the operation Cuecard and Teledata?
BP Don’t know anything about them?
They didn’t last very long. It got the Victorians into trouble.
BP No, I don’t know anything about those.
Were you on the Board of AFCUL and AFCUL Services?
BP Yes I was.
When Reg Elliott came from New South Wales to AFCUL?
BP Reg Elliott was already there. When I got there Reg Elliott was the Chief Executive Officer of AFCUL and AFCUL Services. He actually moved from the New South Wales Association.
I was wondering whether you were party to the decision of his move?
BP No I wasn’t.
It was planned by the New South Wales people to take the services nationally.
BP That had already happened by the time I got there.
Was there any resentment in those days of New South Wales running things?
BP There was the normal parochial attitude. I guess there was some attitude to the wise men from the east, I suppose.
Yes, that is the story I have heard.
BP I think there has always been an attitude in WA that the credit union movement is dominated by the New South Wales movement. I mean that is reasonably so too because they have got most of the money and most of the size and the numbers. So obviously they are going to dominate in a fairly big way. I think there are times where they think the whole credit union movement, the system itself, is actually developed in the best interests of New South Wales rather than perhaps in the interests of other States.
Of course they don’t see it that way. They are carrying the message from New South Wales and they are doing the right thing by the movement nationally. That is their attitude.
BP Yes and I think in most cases that has been pretty much the case too. I think what happens is that Western Australian credit unions don’t have the philosophic fervour that New South Wales and Victoria have. They are much more entrepreneurial, much more autonomous, they want to be more autonomous. They don’t co-operate as much as the New South Wales and the Victorian movement has in the past. They were much later getting into sharing services and doing consortium-type operations. You know they really didn’t get into it until I was there. By the time I got there the other States had been into that sort of thing ten or twelve years so they were used to it. Even now WA credit unions do not carry the credit union philosophy as strongly as the other States do, particularly Victoria and New South Wales.
Yes of course there is a religious influence plus all the other attitudes as well as the old building societies, the old friendly societies, etc. They have all sort of carried through. What about other aspects. Were there any problems in setting up the CUTM?
BP No, no problems. No more problems than you would normally get when you were setting up an organisation. What we had to do because we had no participants in CUTM and we didn’t have 100 per cent affiliation with the Association at that stage, it was really a matter of convincing people that it was a good idea to become a shareholder in CUTM and a member of the Association. That took many, many years. We have only got the last credit union into central banking last year, that was Police and Nurses’. They hung out all that time. So we struggled very much in the early days to try and make this thing work. The credit unions wanted to do it on a commercial basis, that is we had to do it on a profitable basis, and we had to provide competitive pricing for our services. There was no subsidisation and no-one was prepared to give hand-outs, so we had to fight tooth and nail for what we developed. What we did was we developed an organisation from the three of them, virtually from a blank piece of paper, to having all credit unions involved in the three companies. Making them very, very profitable and we had an enormous turnover in cash. Before I handed it over to the national, the new national structure, we had something like $75 million under management and we were making substantial profits each year. We were giving credit unions quite a new face in town, a high profile. It had virtually no profile when I started. Within four or five years they had a very high profile and very good entre to government and politicians and that sort of thing.
What about the opposition, the WA Teachers’ that was in with the R & I?
BP Well that was our first major glitch. That came in 1987 when WA Teachers’ were put under administration by the government. That caused us a lot of problems and it still causes us problems today, there is no doubt about that. The failure of Teachers’ has been one of the lesser lights of the credit union development over the last ten years.
Whose administration was it put under?
BP The R & I were actually appointed as administrators.
Why them? Well I suppose they had been involved with them all the time?
BP Well not really.
It was their ATMs they were using and all that sort of thing?
BP No they weren’t actually. They were using their own ATMs, Teachers’ had their own ATMs which we bought off them at the end of the day. The rest of the credit unions had their ATMs and Teachers’ had their ATMs separately. They weren’t using R & I ATMs at that stage, they were using their own which we bought off them. We actually bought those machines in the sale.
So you got the sticky end and R & I got whatever was going?
BP Well we didn’t get any end at all. One of the things, and the question remains unanswered today, was why the credit union movement as a whole, not only WA but as a whole, weren’t given the opportunity to help Teachers’ out of the predicament. The R & I, I mean they have got substantial government support. Now with the sort of support that the government were giving at that time I think there was no reason why the credit union movement couldn’t have done it themselves. What it has ended up of course is it had a very good base credit union, the basics of the credit union were still very good. Fundamentally it was still a good credit union and the assets were handed over to the R & I Bank and they got it at a very cheap price.
My point is this, do you think it was a political thing why the credit union movement didn’t end up as administrators? I mean they could have sent for Pat Taylor or somebody.
BP I don’t think it was political at that stage, I just don’t think we had the credibility. That was back in 1987 when the credit union movement didn’t have a very good image. You would have to say that their credibility and their professionalism was not that good in WA. It was not that good and it was an industry that wasn’t well accepted by the government or anybody else for that matter in 1987. I think the government just didn’t have enough belief in us that we could fix things. Not only in this State but I think nationally. They didn’t understand the credit union system, you know how we come to help one another. So I think in a matter of panic what they did was they turned to the R & I Bank because the R & I Bank had the financial resources and probably the manpower to administer, or manage the administration. I don’t think it was a political thing, I think it was more a matter of convenience. It was an organisation that had the resources and perhaps the wherewithal at the time, and the credibility, to carry out the administration. I think the government didn’t think we did. That changed quite substantially because we did a lot of work after that. When Fremantle was put under administration we were actually given the administration. I was actually appointed Administrator. Now that was two years later. That was in 1989. So we had built up a lot of credibility and improved our profile and image over those two years to the tune that the government gave us that administration. They allowed us to conduct our own affairs. But in 1987 I don’t think they felt we were ready for it. I think also because of the size, because what we are talking about was an organisation which was nearly $600 million. They didn’t know the depth of the problem that the Teachers’ had at that stage either. So I guess they thought that the credit union movement both here and nationally may not have had the resources necessary to do what was required in a financial sense. Even though the government provided most of the money anyway.
All right, but as far as the legislation was concerned, there wasn’t a Credit Union Act until 1980 was there. At that stage there had already been reserves in three States, that is compulsory reserves, but they didn’t build a reserve into the Act. Why not?
BP Well they did. This is one of the problems with the industry at that time. The industry was very much motivated, or led, by the management of Teachers’, United Credit Union and Fremantle Credit Union, they were virtually the advisers to the government through an Advisory Committee. We actually had an Act in 1979 and that Act in fact did have a capital requirement. The capital requirement was 2.5 per cent of assets, year end assets I think. Now what happened was that these larger organisations got the game wrong. What they wanted to do was go for growth and not capital.
Just a minute, if you have a Reserve Fund?
BP We didn’t have a Reserve Fund.
Well that is what I said.
BP No, didn’t have a Reserve Fund until 1990. In fact I did that myself.
Did you have a Legislative Committee to push that through?
BP No I did it myself, just myself, by myself. I copped all the flack, all the blood. In conjunction with Graham Loughlin we developed the basic legislation required. But I actually did everything myself. I convinced the credit unions, I convinced the government and I actually sat in Parliament while they actually got the Act through. So I did that wholly and solely.
Where is Graham Loughlin now?
BP Graham Loughlin is still with CUSCAL in Sydney.
Well he is in hiding or something, I can’t find him.
BP Well I know what is happening. I think he is getting married this weekend.
Yes, I heard about that.
BP He maybe incognito. That might be part of the problem, I am not sure.
He is on my hit list. I still haven’t done Reg Fowler or the other ones.
BP Well Loughie will tell you some stories about WA. We actually tried to get the Reserve Fund up in 1989 and the Labor Government at that stage didn’t allow it. We actually got defeated in Parliament. We went to the Opposition in 1989, Graham Loughlin and I. David Daniels came over with Graham Loughlin and we actually wrote the legislation required to put a Reserve Board into place in 1989. We actually got it into the Parliament. We took it to the Opposition, the Liberal Party, and we got them to run it up in the Upper House. Unfortunately the Government of the time, the Labor Party, wouldn’t pass it. So we actually fell on to stony ground at that stage. It then took us another two years to get it up and running. One of the main reasons we got it up and running was the work we had to do with United Credit Union when it sort of ran into a few problems as well. I can talk to you about that a bit later.
Now Fremantle was pushed into United wasn’t it?
BP Yes. What I decided to do was that Fremantle had just run out of capital. No-one was prepared to put any capital into Fremantle, so what I had to do was put it into somebody so I chose United. At the time it seemed the easiest thing to do. A lot of people will disagree with this. Reg Elliott and the people on the eastern seaboard will all say that I made a bad decision and they are entitled to say that. But at the time it was the best decision that we had. We had done quite a bit of financial modelling on it, Arthur Anderson had done independent financial modelling on putting Fremantle credit union into United. We had put a strategy together that we believed would work. What we didn’t know was that United was in far deeper trouble than we thought. We didn’t appreciate that, number one. Number two, the management of United at the time just simply didn’t adopt strategies that were required to integrate Fremantle into United and make it successful. Consequently United got itself into trouble about a year later, after we put Fremantle, or after I put Fremantle into United.
So was an Administrator appointed to United then?
BP No it wasn’t. That just shows the increasing strength of the industry. What we did, we went to the government and said, ‘Look we know what the problem is. We are prepared to put money into it,’ which we did, ‘we are prepared to support it with cash flow,’ which we did. We said to the government, ‘Let us have a go at rehabilitation.’ The government said, ‘Yes, OK you can have a go.’ So we didn’t have to appoint an Administrator because we actually put a lot of money, over $8 million dollars into capital.
How did Pat Taylor get over there?
BP Pat Taylor was actually appointed. When the industry money went into United, it was industry money from around Australia. Western Australian money plus money from South Australia, New South Wales. I am not sure about Victoria and Queensland, but certainly New South Wales, South Australia and WA put money, individual credit unions, put money into United. One of the conditions was that a Supervisory Committee be set up, an independent Supervisory Committee be set up in conjunction with the Board. That Supervisory Committee consisted of Reg Fowler, John McIntyre and Fred Hewitt. That Supervisory Committee then appointed Pat Taylor as the CEO, once we moved the existing management of United out. What we did initially was that CUTM actually supported United in the early stages. Because we were too small we had to go back to the industry and get industry support and CUSCAL support which we got. In the meantime what I did was I put my finance guy, a chap by the name of John Beattie who is still at United, I put him down at United and let him run it in the short term. Then when the Supervisory Committee was put up, when we put the industry money into the organisation, Pat Taylor was actually appointed as CEO to come over and really get down to the rehabilitation process. She is still there today.
It looks as though she is going to be permanent as well. Was there any resentment at her coming over?
BP No I don’t think so. No.
She had a lot of experience of course.
BP She actually worked for the Reserve Board in New South Wales.
There is a lot more to it than that. She was also Second-in-Charge to Geoff Cambridge, Credit Union Consultants, the stabilisation team which did all the New South Wales credit unions.
BP That’s right, yes. So she certainly had a lot of experience in rehabilitating credit unions there is no doubt about that. It has been a success story, there is no doubt about it.
I think she had been Administrator of forty or more. Various sized credit unions and got them all out of the hole.
BP This one is going quite well at the moment. It still has got a fair way to go but it is a long way improved on what it was when we took it over. The government allowed us to take it over so we didn’t actually have to appoint an Administrator to United. They allowed the industry to try. What we did was we went to the government and said, ‘Look this is our plan. If you see our plan isn’t working then you can put it under administration.’ We even went to the media and said, ‘Look keep off our back. Don’t print anything because it is going to do more damage than good. This is what we are going to do. If you think that we are not doing the right thing or pulling the wool over the members’ eyes and the communities eyes, then you go right ahead and print the story as you see it.’ The media was prepared to give us the benefit of the doubt and they didn’t print anything. We kept them fully informed about what was going on, as we did the government, and it has been a great success story. No question about. It really shows how good the credit union system is. It is a real good story but unfortunately you can’t tell it because it works out of a failure. But it just shows you how strong the credit union system can be when they put their mind to it.
Yes. Now what about Project Renewal, your involvement with that?
BP: I was actually appointed to the Steering Committee.
When?
BP: That would have been back in 1989 as well I think. I was on the initial committee, the founding committee. I can’t remember the date now to tell you the truth, I think it was 1989.
I think you are right, I have a report from that year.
BP: I worked on the Committee right through until we brought out the final Report.
What about the people from Western Australia? I notice Doug Caldow was on the Committee as well.
BP: No he wasn’t on the Committee.
Well he was at planning meetings, I saw that.
BP: Yes he went to planning meetings but he wasn’t actually on the Committee. I was the only Western Australian on the Committee. There were about another eight or nine people on the Committee.
Now at what stage did the consultant’s report get considered?
BP: Oh, gee.
When did Vern Harvey come in?
BP: Vern Harvey, PA was in virtually right from the start. There was an initial report done by PA and then PA were appointed the long-term consultants to the project. The Report came out in about 1990 I think, or thereabouts.
Were you in full agreement with the way things turned out?
BP: I was in full agreement. Yes I thought the concepts of Project Renewal were certainly right for the time. There was certainly a need to rationalise the industry, make its decision-making process much more streamlined. What we had was that to make a decision you had to go through from individual credit unions through the State Associations then through to the National Association. So it was just too long winded and not responsive enough. So the rationalisation was certainly the right way to go in terms of making decision-making more efficient. Also to make our commercial operations more efficient and more effective. There is no doubt that most of the matters impacting our decisions.
End Tape 1A: 4400 Words: 1 hour 55 minutes.
1 MAY 1994: WA5: RICHARD RAXWORTHY TALKING TO BRIAN PATERSON
BP: … the commercial activities more and more were being driven down a national line, a federal line. We were dealing with the payment systems, for argument’s sake, which is a national operation. So there was very little that State Associations could do. All the products and services, like Treasury and plastic cards, EFT, direct entry, were all heading down the line of requiring national activity. So it was the right way to go.
Well I have heard no arguments against that from the point of view of the services. However, the majority of credit union people object strongly to the changes which ended up the way the governance of the movement is now, the new structure of representation.
BP: Yes there certainly is a lot of criticism in terms of the way that the Board structure is set up. Perhaps that could have been done in a different way although I think people on the east coast are pretty comfortable with it.
No.
BP: Not either are they?
I don’t know anybody, apart from the people who are immediately involved now. The rest of the average credit union blokes are sort of scratching their head, ‘Why did our blokes let this through?
BP: Well I think, you know, evolution of time probably has shown that there may well be some weaknesses. I mean I think the Membership Council is probably a weakness. Not a weakness so much but it probably needs to be re-thought. I think the company structure now needs to be re-thought. They are starting to do that pretty well now.
They are not worried about that. They are only worried about the present representation, they reckon that it is insufficient and far too remote.
BP: You mean in terms of the Board?
Well the Board and the Council, they are not happy with either of them. They don’t reckon they actually represent the movement or anything. It doesn’t give the different credit unions enough say. Too many Managers is another one of course.
BP: I would have to say that that hasn’t come out in any forums that I have attended.
I know it is amazing. Yet you talk to people around.
BP: Yes, well you get a lot of private views on these sorts of things.
You get them from long-time supporters who are not going to stop supporting actually. But they are just so baffled.
BP: I have to say I don’t believe that what has happened has harmed credit unions in any way. I think it has allowed credit unions to get on and develop their own business and use the system as much as they want to use it. Personally I think credit unions spend far too much time trying to fathom out what the system is doing and trying to do rather than getting on with their own business.
Oh yes, I don’t think many people object to the way they are getting on with their own business, as far as that is concerned, except that they think their banking investment systems are all right for the few people who have got it. It is for the haves not for the have nots. They don’t seem to have any answers for anybody who is in trouble any more. As long as you have got a full-time job, or have had one recently and got a golden handshake, that is the mark. If you are anybody else well they don’t have any sort of solutions. The traditional possibility of credit unions helping ordinary people is just gone. They are still helping the people they have helped and who are now all right, thank you very much. It is just a big business and that is that.
BP: Certainly in WA and I think in most places there hasn’t been a lot of development in other areas with credit unions. I mean there have been very few new credit unions, they haven’t expanded into new socio-economic groupings.
They don’t seem to have tried to bring in other groups at all.
BP: I think that has been a real weakness in the credit union movement.
The only people that I know of are Mileni and the other one in Victoria with much the same name. There are only two in the whole of Australia. Of course the new rules have pushed the smaller credit unions which traditionally do try and help people back into their boxes. They have to sort of amalgamate or they can’t compete at all. Even the Christian Credit Union had to go into one of the bigger organisations, it has gone to the other one you know. The Christians were always a credit union just among church people, but they can’t be that anymore they are not allowed to be that. Anyway what about uniform legislation, were you involved with that?
BP: I wasn’t involved a lot. That was mainly done in Sydney with Graham Loughlin.
The uniform credit union legislation?
BP: Yes the uniform credit union legislation. This is the AFIC legislation you are talking about?
Yes I suppose it is.
BP: Or the uniform Credit Act?
The uniform Credit Union Act and the AFIC legislation. Then we have the third variety which is the uniform Credit Act which is not through.
BP: That’s right. AFIC legislation was essentially done out of Sydney. But the policy that drove our submissions to government on this were actually approved by credit unions through debate and consultation. Fairly long and extensive consultation in fact. My personal view is that I think the AFIC legislation has been a breath of fresh air. I mean I don’t say it is perfect by any stretch of the imagination, but in my view I think it has given credit unions another ten years to get themselves together, get their act together to take the opportunity that is available to them at the moment. There is a window of opportunity available that has been available now for two or three years. I think it is still there for credit unions and I think the AFIC legislation has given them that opportunity. It has given them a very good creditable base from which to go forward. I think it has been very good for credit unions.
What about the uniform Credit Act?
BP: The uniform Credit Act, well we have had Credit Act legislation in WA since 1986. It has been the bane of our life. I mean we have spent just hundreds of thousands of dollars on trying to understand what the Act is all about. We are still finding out more and more about the Act everyday. So the uniform Credit Act will certainly improve credit union life there is no question about that. We have now had nearly eight years of trying to come to grips with Credit Act legislation. The current legislation does nothing for anybody, it is too expensive it is too onerous. No-one understands it, it is difficult to interpret. Certainly the people who it is supposed to protect, that is the consumer, they certainly don’t understand it. It is really a piece of legislation that is a sledge hammer to crack a nut. Most people, or most financiers, try and do the right thing. There are the odd one or two that obviously will try and rort the system and they should be caught and they should be penalised in whatever ways the Act says. But the Act does penalise everybody, I mean it is a very, very torturous Act. It virtually deregulates the market through the back door. So what we are trying to do we have got deregulated markets and this Credit Act comes along and it really re-regulates because it controls prices, it controls product development, it tries to put everybody into the same box. You know it boxes finance companies, credit unions, banks and building societies all in to the one box and tries to make them all the same in the name of informing the consumer I suppose, or letting him be properly informed so that he can make an informed choice. It simply hasn’t worked, it really hasn’t worked at all.
Well it has been going on for an awful long time. They started back in the United States back in the 1960s I think. It used to be called ‘Truth in Lending’.
BP: No-one can argue against that. There should be some form of legislation in place. It should be more proscriptive and less prescriptive. That is it shouldn’t tell you how to run your business. There should be rules and there should be rules that everyone can understand. The consumers can understand so they know exactly where they stand and rules the financiers can understand so that they can inform the consumers about what they are doing. What their rights and obligations are, what their charges are, how they charge interest rates, all those sorts of things. So I certainly can’t argue against that. The uniform Credit Act will certainly improve everybody’s lot, there is no question about that.
It is still not through anywhere.
BP: No, it is not through anywhere. I mean they are predicting now that it will be in place probably by July 1995, or sometime in 1995. But I won’t hold my breath.
What about your involvement with the Advisory Committee and with the Registrars?
BP: I didn’t have a role with the Advisory Committee at all in the early stages. I kept pretty close association with the Registrars, particularly John Mataxis. But the Advisory Committee was actually a committee that was appointed under the legislation. The Minister actually appointed the Advisory Committee. Of course that was a pretty closely guarded affair. I mean it was virtually a private club, if you like.
Is that right? Well that is most peculiar because when they were bringing the reserve in, which is when they were leading up to the point of getting everybody’s acceptance of a compulsory reserve in New South Wales, it was decided by both the Minister and the Registrar that everybody would go in, you know. They had five associations and they would have five representatives from them at least, plus the Registrar, plus etc. etc. That is the way they got it in. Not only got it in but got it accepted too. Some people were excluded in Western Australia and some people weren’t?
BP: Sorry, I am a bit lost, what are you talking about?
Well the method used in New South Wales was to invite everybody in, but you say this was not so in Western Australia?
BP: Well in the Advisory Committee? No it wasn’t. It was actually very much a closed shop. They were actually appointed by the Minister, I think it was. There were four or five on it. I mean you just have to have a look at what has happened. One of them was the Teachers’ representative, one of them was United’s representative, one of them was Fremantle’s representative, Dennis Hagan. I think they had a solicitor on there and a solicitor wouldn’t have known shit from sugar, excuse my French, on credit unions or anything else. They had the Registrar on there. Now these guys, I mean they were so uninformed that what they did was they reduced the requirement for capital in credit unions in 1984. They reduced the requirements of capitalisation of credit unions just at a time when it should have been going the other way. But these organisations couldn’t meet the few standards that had already been set down in the legislation in 1979, so they had a change in 1984 to make it even easier. They changed it from 2.5 per cent of year end assets to 2.5 per cent of average assets for the year. This meant they could go ahead and have their growth, they could just go growth crazy.
2.5 per cent?
BP: 2.5 per cent, that is all they had to achieve. They couldn’t achieve that. So the Advisory Committee was dominated by these people.
I have been reading some papers from the ??????? Reserve Bank and they were horrified.
BP: That really was the underlying reason as to why WA credit unions started to have trouble in 1987. When the pressures came on from the market place in terms of the crash and the fall-out from the crash, the share market crash, the lack of confidence the uncertainty, that all came home to roost. These credit unions just simply didn’t have the capital to support it.
In most States, almost in all States although there are other loopholes in other States, it is not possible for credit unions to have a member who is not a natural person. Now I understand, and I don’t know from when, that in Western Australia it has been possible for a corporation or company to be a member of a credit union and borrow?
BP: That is correct.
Is that still the same? Well it can’t be now of course.
BP: Well it has got to be a natural person, yes.
Of course that was got round in a number of other ways in a number of other places, not always legally. But the problem in Victoria has been, not so much with credit unions admittedly, but building societies could be quoted on the Stock Exchange and weren’t true societies.
BP: Well I mean credit unions are going to face the same problem now that the tax laws have changed. Now they have no longer got 33(g) they can no longer accumulate surpluses from members’ income. So they are going to have to find some other way because they are now going to have to pay the corporate rate of tax on their earnings, which is 39 cents in the dollar. That comes in next year 1995. There is some relief for the smaller ones, but the bigger ones there is no relief.
I suppose prudentially they have got to make a profit. They are really caught now, aren’t they? In the early days you know what they used to do, don’t you, they used to rebate.
BP: That’s right and now they can’t.
Well that’s not right, because they are co-operatives and other co-operatives can rebate.
BP: Oh they can rebate whatever they like if they want to.
But the credit unions can’t now by the new legislation because they have got to make a profit.
BP: Well they have got to make a profit.
Because they have got to contribute to reserves.
BP: They have got to contribute to reserves, that’s right. They have got to maintain their capital. If they are going to be taxed on their profitability that means that they can’t keep adding to the reserves at the same rate that they have been able to over the last decade, or ever since they started. So they are going to have to find the capital from somewhere else.
How are the Christian credit unions going to get on?
BP: We don’t have one of those over here.
I know you don’t, but there are several around the place. Generally speaking they don’t make a profit and they don’t pay any dividends to their members. All they are is a savings scheme as far as their members are concerned. But what they do with the money that they get from insurance rebates and from bank interest or other interest that they get from money invested, is that they use it in good works around the areas. The members get an advantage in saving.
BP: Well they won’t be able to do that any more. Well they will if they have got their capital in place, which is their 8 per cent.
Well they must have that.
BP: Then I suppose they can do what they like with their profitability. But it will be a lot harder for them to do that sort of thing. I think the days of the really traditional credit union are numbered.
No wonder Rose was having a go at me at the time I was over there. Rose Gallagher, Lidcombe Credit Union, she has got troubles too. I notice she has joined our organisation too.
BP: Yes they really will have problems, no doubt about it.
She could probably get out of it, because I doubt if she is a $1 million. I doubt if she has got a $1 million in assets. I doubt if she has got more than 1,000 members either. So she might get out of it. Now the next thing is the Association of Credit Unions, Western Australia, who has got the records? The Minutes and all that sort of thing? Annual Reports.
BP: The only records I think Reg Beale has.
That is not the Association, that is the League.
BP: The current records John Clark has got in Sydney.
Has he? John Clark has got them in Sydney?
BP: Yes he has. We transferred our engagements under the latest legislation across to CUSCAL. So all the records we had have gone over there as well.
Why John Clark?
BP: Because he is the Secretary.
Now wait a minute, this is all wrong as far as I am concerned. The Historical Co-operative have got a proposal in at the present moment that CUSCAL microfilm all the Minutes and Annual Reports and newsletters. That they return the originals to the State Libraries in the States concerned. That they keep a microfilm and let us have a microfilm. That is what we have asked them to do there. You haven’t got anything. You don’t have any Annual Reports or newsletters, anything?
BP: We have got newsletters. Well, we never had newsletters what we had were circulars. We used to send circulars out to credit unions. We never really had a newsletter. We have got Annual Reports, I would be able to find them, dig them up. That is about all we have got. All the Minutes and everything else have gone to John Clark.
Is there any prospect of us getting photocopies of the salient pages, that is the ones with the Officers and public information for each year?
BP: From the Balance Sheet?
No you have got to have the name of the Directors and Chairman, Manager.
BP: Yes the Balance Sheet.
What all the Directors are on the Balance Sheet are they? That is amazing.
BP: I think they are, I am pretty sure they are. I think we name them all.
Any way we could develop something because we know nothing about Western Australian credit unions or the League as far as that is concerned. In the Historical Co-operative all we have got is a few Annual Reports of individual credit unions which Beresford Calverley collected. They are mostly back in the days of the League. Now I know Reg Beale has got the records of the old League. I will recommend that CUSCAL allow Reg the money to microfilm them too. This is the proposal we have. We have also got proposals in ?????? re the Queensland end of things, so the whole lot can be covered. What about recording? There is nobody doing any recording over there. Yet you have got the finest oral history library in Australia over there, the Battye Library. Rhonda Jamieson is one of the main experts in oral history for the whole country. She is one of the leading lights in the Oral History Association of the whole of Australia. She won’t do it, but she will train anybody and help them join the Association and what have you, keep it on the right track, but there has got to be somebody out there doing it. It is not hard. What we really wanted was somebody appointed to do it. We have got nobody over there at all.
BP: No. In fact the CUSCAL Office is becoming less and less. In fact I am leaving this month.
What is the arrangement there?
BP: In terms of the CUSCAL Office? I am not sure what the arrangements are.
I hear tell now that there is only going to be two regions. Is that so or not?
BP: That is right.
That is ridiculous.
BP: There will be Victoria, one out of Victoria, which will be Victoria, South Australia, WA Northern Territory and Tasmania and one out of New South Wales which will be New South Wales and Queensland.
That all ready is, and ACT.
BP: ACT yes, sorry.
That is Keith Mannix.
BP: That is Keith Mannix and Peter Ford is the guy out of Victoria.
I know him well enough, but I didn’t realise they were going to do that. You have got to have a local office though, surely?
BP: There will be a local office.
So what will the person be there?
BP: Well what they call a State representative. Essentially that will be Grahame Carty. He will be what they call the State representative but he will only be looking after the commercial activities. He will not be doing any of the trade association type activities. All you will have on that side of things is that I have got a young girl who here who is a Compliance Officer. She does all that sort of work and she will be carrying on that. The rest of it will be done by Peter Ford I imagine, from Victoria. I wish him luck.
He was always a well organised bloke. As a matter of fact he organised my trips to do the recording in Victoria and he was very organised. Everything went well and there were no problems and what’s more he still kept his hand on the result too. But every time I see him now he looks more and more frantic. So I don’t know how he is going to go.
BP: No, neither do I. So I depart this month so it will be someone else who will have to look after it.
What are you going to do?
BP: Well I am not sure at this stage.
Back to the building societies?
BP: Maybe, I am not sure at this stage.
Fishing?
BP: Yes, I might do a bit of that. I am looking at maybe some franchises or doing something.
Next thing I will go into McDonald’s over there and I will see you.
BP: Well I have actually applied to them.
You are joking?
BP: No, I am not.
This a big aspect of the break-up of the State organisations, some really talented people have gone off into the wide blue yonder.
BP: Yes there are.
I became aware of this when I was doing the New South Wales oral history project. Dennis Rutherford supervised me and all of a sudden he was gone. So I realised what was going to happen.
BP: I was the only one there that actually started up and set up an association and its companies. There is no-one left in the system that actually started one up at all.
So what was happening between the year 1974 and 1985 then. The Association officially started in 1974 didn’t it?
BP: It was run on a part-time basis.
By whom?
BP: Dennis Hagan was operating it when I came in. I don’t know who did it before him. They had a secretary I think that gave him a hand on Association matters, but it was really low key. If something came up then what they would do is they would call some people out of the credit unions and they would do it on a sort of a part-time basis. They didn’t have full-time professional representation in the State. It cost them in the early days, there is no doubt about it.
What about your involvement in AICUM?
BP: I don’t have a lot of involvement with AICUM. I go to some of their seminars and that sort of thing.
Did you do training in Western Australia?
BP: We do, but not a lot of training in WA at all.
Not for credit unions?
BP: No. Credit unions didn’t put resources into it so I never did much about it. My biggest involvement with AICUM was that AICUM runs a local seminar here every year. When I came in they were really foundering so I took it on and I developed it and built it up to something quite spectacular I might say. Then when I had built it up and made it pretty successful they promptly whipped it off me and took it back from me, so I said they could have it. It is now just meandering on I think, not really going anywhere. It is not well supported. We have luncheons every month and that is about it over here. You would get half a dozen people to the luncheons. In fact, my organisation would be the major contributor.
Any Chapters over there?
BP: No, because you have got everybody in one place.
Well there is only one left in New South Wales, it is the City of Sydney. I don’t think there are any other Chapters left.
BP: I thought there might have been some in the country.
Not any more no, finished. I don’t know what is going to happen know incidentally. As a matter of fact there is a move around the place to resuscitate some of the old associations. Years ago they had sort of associations which used to meet around the place. There was first the Chapters and then there were some other industry associations like the Electricity and Local Government Credit Unions they used to have meetings around the place. The next thing the regional meetings for ANSWCU started up and the whole of that faded out. Well now that ANSWCU is finished and there are no regional meetings any more. So that old organisation, the Local Government and Electricity industry credit unions, they are sort of starting up in little pockets around the place again.
BP: Yes, in fact they are getting a lot stronger those groups.
Of course there is a whole lot of them. There is the Police and the Teachers’, APS, it goes on. They meet every so often.
BP: That’s right and those associations are getting very strong.
Yes and they are crossing the boundaries of whether they are CUSCAL or NCUA or whatever. What about that in Western Australia? You don’t seem to have had a second organisation over there, although there have been some non-affiliates.
BP: We haven’t had any non-affiliates since I have been in. They have all been affiliated to the system, to AFCUL first up and now CUSCAL. They are aware of the alternative up in Queensland but there is no serious suggestion here that anyone would go across to them.
In Queensland they are still going across. What surprised me that some of them had been AFCUL affiliates for so many years. They wouldn’t have a bar of the opposition. But all of a sudden they have gone across. People like Capricornia. I think myself it is one of our mob who has provided the know-how from the banking industry in order to get them across. It is the Commonwealth Bank actually and I think he is one of our Directors.
BP: Oh well competition is good. They have got to make it and make it by themselves like we have got to make by ourself. Only the years will decide where to put their representation.
What about World Council?
BP: I have had no involvement in World Council at all.
Right. Anything we haven’t covered?
BP: No, I think that is about it. Oh I started up the Institute of Credit Union Directors here too. We didn’t have that here, then I got it going. Then I handed it across to the Institute and I might say it struggles as well.
You wouldn’t have had anything to do with CUES of course, because AICUM had already started?
BP: That’s right.
It is going all right now isn’t it, ICUD?
BP: ICUD? Oh I think nationally they are going quite well.
Yes it is going well nationally.
BP: Here, I mean it is getting by here. It is not doing world-beating things but it is progressing OK.
Do you think it provides a little training for Directors?
BP: I think it is an excellent idea and I think there should be more effort put into it quite frankly. One of the things when we talk to politicians and when we talk to the media, in particular, the first thing they ask is, ‘How good are your Directors?’ Of course we tell them they are very good and we tell them what we do with ICUD and AICUM and our training. How the system provides education and keeps them up to date and all those sorts of things. But in reality I think we should be doing a lot more.
End Tape 1B: 4854 Words: 2 hours.