12 FEBRUARY 1992: VCCA12: RICHARD RAXWORTHY TALKING TO ROB DAVY
Where were you born and when?
RD: Born in Coburg, Victoria 1947.
You grew up round there?
RD: Actually, I lived all my early years in Essendon, Abercauldie State School in Essendon, then moved on to Essendon High School where I completed my secondary education.
What sort of influence do you think you got from your parents?
RD: Parents. My father was an accountant so I guess I had a sort of a leaning towards the figures side of things from my father. I also developed a green thumb from my mother, she was very much involved in floral art work. In the latter years of her life she actually ran a florist’s shop in Moonee Ponds. Since then I have always been interested in gardening, especially landscape architecture. It is has been a little side hobby of mine.
Was there any religious or political influence?
RD: I wouldn’t say so. I used to go to the Methodist Church in Essendon, attending youth camps, etc. I found that quite enjoyable and had a great time in my early years.
I am not necessarily talking about party political, but you were involved in the credit union movement in some sort of political sense, you must have developed the skills somewhere. Have you got any idea where you might have got the bug?
RD: Well I think it really gets back to a caring attitude. I think a lot of the people I meet on a day-to-day basis in the credit union industry have a caring attitude and I guess one of my personality traits would be that. I suppose as far as my parents are concerned, I think both mum and dad were of a caring nature. The political side of things though we certainly didn’t discuss anything in relation to socio-economic levels, etc within the community at home. That was something that didn’t come up in discussion within our family circle.
What about being involved in the management of organisations?
RD: Myself?
Your parents.
RD: No, they were pretty straight shooters. I think they were very simple people. As I say, dad was an accountant working for a rabbit import-export company. Mum was a housewife while my brother, sister and I were growing up. Then as I say went into a florist shop for a number of years, which wasn’t a success because she was too generous to people. I just hearken back to when my father was doing the accounts and said, ‘Marj we are not making a quid out of this particular enterprise,’ and she said, ‘Well, it is probably because a lot of the pensioners that come in, they don’t have any cash and I indicate to them that they can just fix me up when they can. Unfortunately, most of them never come back.’ So the irony to the story is that you have to have a bit of business person about you as well as having a caring nature.
What did you like and dislike about school?
RD: Well I liked the company of others at school. I think that is something that has followed me right throughout my life. In fact, seven of the young chaps that I did the matriculation with, we meet on an annual basis as a reunion of the class of 1964. So once a year we meet, either in one of the homes or at a restaurant, and discuss our developments over the years. It is interesting to see the various walks of life that the chaps have gone into. Some have been self-employed, others have reached quite high levels within academia, etc. That has really been an enjoyable part of reflecting back on my education.
When you left school what did you do?
RD: When I left school I initially went to Southdown Press and was involved in a clerical area, in the Pay Roll Department, acting as Assistant Paymaster there for a number of years. Following that I moved on to GMAC, General Motors Acceptance Corporation, in St Kilda Road, Melbourne, and was a Credit Supervisor there for some four years. Subsequent to that I applied for two positions, one being the Victorian State Manager of Ford Credits here in Melbourne and also the position of General Manager of what was then the David Syme Employees’ Credit Co-operative Limited. I was successful in getting both positions and opted to move into the credit union arena to get away from what as I regarded as being a very Americanised attitude by GMAC and Ford Credit to the way in which they ran their business. Very much a big brother looking over the shoulder attitude. That was the beginning of my involvement in a management area with the credit union industry by becoming General Manager of the David Syme Employees’ Credit Union.
You had no knowledge of credit unions before that?
RD: I did actually. When I was working at Southdown Press back in 1969, a representative from the Victorian Credit Co-operative Association came around seeking support for the establishment of credit unions. The general thrust was a Field Officer would come out from the VCCA, approach management, who would then refer it to the union representative as to whether there was an interest in a credit union being formed. At Southdown Press this occurred. Being the Assistant Paymaster I attended the meeting and a Secretary-Treasurer was sought. I happened to put my hand up at the time, and that was the beginning of what was then known as the Southdown Employee’s Credit Co-operative Limited. I actually handled that for a number of years until I left that particular firm. As it would turn out, a little bit of an ironic twist, that when I eventually became General Manager of David Syme Employees’ Credit Co-operative Limited it merged with the Southdown Employees’ Credit Co-operative Ltd, which I had been the original Secretary-Treasurer of back in 1969.
You put your hand up for the Secretary-Treasurer’s job at the Southdown, did you?
RD: Yes that is right.
Nobody urged you?
RD: No, I guess it was a question of there were very few volunteers at that stage to do the bookwork. Back in those days everything was done on a manual basis, all the accounting and records were handled manually, so a lot of the work was done out of hours or at weekends.
You did it?
RD: Yes, I looked after that.
Any pay-roll deductions?
RD: Yes, there were pay-roll deductions coming from Southdown Press. That was the beginning of the credit union there, in a small way, because the staff complement at that stage was about six hundred. So the potential for the credit union to grow into a very large society was quite limited. Certainly it did have the hallmarks of initial industrial credit unions, as we now know it.
Did you take part in any Chapters at that stage?
RD: Well Chapter meetings were just getting off the ground through the VCCA. They were certainly not as well attended as they are nowadays. But the Melbourne Chapter of Credit Unions was something that both myself and also the Directors of the credit union were always very keen to attend because of the social interaction that could occur between Directors, management, of the various credit unions throughout Victoria.
Did you take any interest or part in the Chapter development?
RD: Not really. I didn’t hold any positions on the Chapters. In fact a number of our Directors over the years, Gary Taylor, Fred Churchyard, have been very much involved in the Melbourne Chapter. To that extent there was a degree of participation from the credit union that I was involved in, but not on a personal basis myself.
Did you go to any of the old credit union Schools?
RD: Not as much as a lot of my fellow credit union people. The aspects of the Warburton School etc., and Ian Larsson’s participation, etc. is well known. I used to go to a number of the functions that the VCCA put on at various external locations and one that comes to mind was down at Phillip Island where I remember Ian Larsson being involved there. That was a virtually ‘welcome aboard’ type session where the philosophy of credit unions was related to people and new entrants into the credit union. I guess nowadays with the flurry of what occurs in the administration of a credit union, that is often one of the aspects that is overlooked, just relating to new entrants, whether they be tellers or management people, the actual history of the credit union movement in Australia. It’s early formative years, how it has developed since the early 1950s and 1960s, in particular.
So when you became General Manager of the David Syme Employees’, was it called that at the time?
RD: Yes it was, the David Syme Credit Union, that’s right.
When did it change to Media?
RD: Right, 1975 I was appointed to the management position within David Syme Credit Union. In 1981 the name change occurred from David Syme Employees’ Credit Co-operative Limited, which was a bit of a mouthful, to Media Credit Union. We simultaneously merged, in 1981, with the Southdown Credit Union. So Southdown being of a similar media base, it was quite a comfortable fit in terms of the two credit unions merging as one. The asset base was around about $5 million on the merger, and moved forward from that date of merger in 1981 to current assets just prior to the merger with Outlook Credit Union, which occurred last year in 1991, assets had built up to $15 million.
Where did Outlook come from?
RD: Outlook Credit Union in fact look after the employees of the Ansett transport industry, so most of the members within the bond are drawn from the community, the business community of Ansett Transport Industries, mainly Ansett employees themselves.
Were any of the various credit unions that merged in any financial trouble? Or was it just a financial consideration that you would all be better off with the merger?
RD: Well the straight answer to that, Richard, is that it was really a matter of convenience more so than necessity through financial reasons. In both instances the merger of the David Syme and Southdown Credit Unions was seen as being a marriage of like credit unions for the benefit of all. Likewise with the merger of the Media Credit Union last year in 1991 with Outlook was seen as a means of consolidating one’s position in what is a changing mood in the climate of credit unions within Australia. I think we will see a lot more rationalisation of credit unions as we move forward into the ’90s.
At the time that you first became involved in Southdown, at what stage was the credit union movement in Victoria then? Was it attempting to widen the bond of parish credit unions and become community credit unions or had that already happened? Were the mergers being put in place because quite a number of the people had been deficit budgeting, were encouraged to deficit budget? What stage was it at when you became involved in the Southdown?
RD: Right. In 1969, with my involvement and the initial creation of Southdown Credit Union, there was not a lot of mergers occurring within credit unions. The VCCA, as I have indicated, were actually in the very embryonic stages of trying to get credit unions established within the State. The VCCA had taken on board a number of Field Officers, whose brief was to go out and create credit unions both in a parish environment and industrial environment. Later on those parish credit unions extended into the community because they found that the operation within their own parish environment was inappropriate to provide a seven day a week operation. So they gradually moved out into the community sphere. The Southdown operation was really the creation of one of the very many industrial credit unions that were formed in 1969. In fact there was a drive into the newspaper arena at that time with the Herald Credit Union, here in Melbourne, being formed simultaneously in 1969, as was David Syme and was Southdown Press. The three credit unions were formed simultaneously through the efforts of the VCCA field representatives going out and marketing the merits of credit unions.
Who were the representatives, do you know?
RD: At that time it was two gentlemen by the names of Don Harris and Leon Magree. They were the prime instigators of promoting credit unions within the State of Victoria.
Was there rivalry between the two of them?
RD: I guess they possibly would have had some internal rivalry as to what their success rate would be in establishing credit unions, but certainly I don’t think knowing the chaps that was the case. They were so pleased to get a credit union established because both of them were long-serving members of the credit union industry and to that extent I think their philosophies would have overridden any competitive rivalry between the two.
But a number of people have told me there was a rivalry between the previous parish credit unions, that became community ones, and the industrial ones.
RD: I think that competitive nature has continued for many years. It has probably been unfortunate there has always been that delineation between community, parish and industrial credit unions. Honestly the industrial credit unions have grown at a rate of knots and technology has been one of the things that has really overwhelmed the community and, in particular, the smaller parish credit unions. Legislative requirements, etc., has made it very difficult for parish credit unions to compete, particularly during the 1980s. I guess that is a sign of the times, but has been an unfortunate consequence of particularly the financial deregulation in Australia, what it has meant for the smaller credit unions.
When you went to David Syme Credit Union there, at what stage was it? What did your main job entail when you got there?
RD: OK. When I was appointed Manager in 1975, the credit union was operating in deficit. Your term of deficit budgeting was certainly in vogue at the time. It had an accumulated deficit of many thousands of dollars and my first reaction was immediately to increase the loan rate on personal loans to our members from 12 per cent, on which it had been fixed for a period of six years without movement, increase the loan rate by 4 per cent. Not one member complained on that move, which turned the credit union around from a deficit position to a surplus position within twelve months. From that point onwards we made handsome profits every year to dispose to the credit union. But the life of David Syme Credit Union from 1975, financially it moved forward, asset-size it moved forward. Quite obviously during the late 1970s and early ’80s, credit unions were bounding ahead in asset-size. People were seeing credit unions as offering a real alternative to banks and at that stage the banks were very archaic in their approach to things. Interest rates set by the banks were still at the old passbook rate of 3.75 per cent and they were not moving off that come hell and high water. So the growth of credit unions was considerable. The movement of our particular credit union, David Syme, as I have indicated in 1981 we merged and changed our name to Media Credit Union. The history then moved along that in 1985 we decided that the premises we had within the Age Building in Spencer Street were far too small for our requirements and we took what at that time was quite a forthright step in establishing a headquarters in Clarendon Street, South Melbourne. So it was quite a move for us to lease premises down there and we moved in 1985 and set up headquarters there. We also applied at that stage for a bond expansion into the community of South and Port Melbourne. Our credit union, Media, was one of the few to have in Victoria a dual community and industrial bond. What is known in New South Wales as a mutual credit union. So our bonded membership then extended to anyone within the media industry, as well as residents and workers in the communities of both South and Port Melbourne. There are only two other credit unions today that have a similar bond and that is Telecom Credit Union, that look after the western suburb community of Melbourne, and also the Transcom Credit Union, the railways credit union, that looks after the community of Sunshine as well.
Do you know how much the personalities and also the operations of the New South Wales League influenced credit unions and their development down here? For instance, Stan Arneil, I suppose he still is a critic of credit unions that have higher interest rates, 12 per cent was the magic top.
RD: Yes. Well the main influence on credit unions in Victoria, I believe, was not necessarily driving from New South Wales but from overseas. The involvement of CUNA Mutual.
Stan Arneil was Manager there.
RD: That’s right. But I guess it was the enthusiasm of the American counterparts to develop the credit union industry in Australia that was seen in Victoria as one of the driving forces. For instance, whilst the New South Wales Supply Department at that stage were providing a lot of the material, the hand-written ledger sheets, etc., that credit unions were using these were in fact coming from the United States. I guess there was a feeling that, OK we have this initiative given to say from the United States, and Canada for that matter as well, but New South Wales was acting as the pipeline for this data to come to us. Certainly back in those days there was a degree of rivalry as well between New South Wales and Victoria, that we do our own thing and you do yours and life will be very pleasant for the both of us.
Yes. But what I was trying to get at was the insurance split that happened in New South Wales and the influence of CUNA Mutual which was cut off in New South Wales for financial reasons, they say, and also for control purposes. There doesn’t seem to have been that in Victoria. It seems that CUNA Mutual has kept its influence in Victoria, whereas it has had to fight back in New South Wales. There are only a limited number of credit unions would use them over there for a number of years. Of course it crossed all borders, but nonetheless I wondered was there ever a proposal to have a head policy through the VCCA in Victoria that you know of?
RD: CUNA Mutual in fact did not gain a very sound footing here in Victoria. There are a number of large credit unions that still use CUNA Mutual but a number of other insurance companies have driven very extensively into the market. CIC Insurance, and others, have taken up the running where CUNA Mutual faltered in those earlier years when New South Wales virtually excommunicated CUNA from Australia. Their efforts in the last few years have been directed at trying to increase the number of credit unions utilising their facilities within Victoria, but it has been a very hard road for them to walk because of the established CIC foothold and other insurance companies that have tended to dominate.
As far as individual credit unions are concerned, I mean CUNA Mutual had problems with CUNA in America, whereby they tended to have influence which counteracted CUNA. New South Wales thought the same thing was happening there, so when it was thought they were uneconomical with a head policy, that is when the trouble happened and they stopped using them. But there doesn’t seem to have been any head policy of the VCCA in insurance in Victoria. Have you got any idea why?
RD: I think the insurance aspect and the communication between New South Wales and North America was left alone by the VCCA. It was deemed that the insurance aspect should be something that could be negotiated between New South Wales and CUNA for the benefit of all credit unions in Australia. I think the VCCA let it drop there and were not concerned with that aspect of it. Obviously there were implications for the credit unions in Victoria because of their requirement for insurance, but it was something that the VCCA did not see as a priority to get involved with.
But what New South Wales did was they were making money out of it. The New South Wales League was making money off it, it was their main source of income. They were trying to set up a Stabilisation Fund and they used that money initially to get the Stabilisation Fund going, the Savings Protection Fund going. Now later on Victoria did have some financial problems, do you think it was the lack of ongoing income from such entrepreneurial ventures in among the credit unions that might have caused them not to have the cash to be able to survive?
RD: Well, I think in Victoria, again, it must be seen as a different development to New South Wales. Certainly the New South Wales Association was the leader in Australia, there is no question of that, with the early development years. But from the point of view of Victoria, it was wanting to do its own thing . Even the development of their own Stabilisation Fund here within this State was something that followed on from the New South Wales creation. I guess in hindsight it was fortuitous that we did get to the stage of developing an initial Stabilisation Fund, which then became a Guarantee Fund and then a Reserve Fund, which has protected the credit union industry within this State as distinct from many of the other States in Australia.
What was the catalyst for the setting up of the Stabilisation Fund in Victoria?
RD: It was the fear of a credit union crash. There is no question of that.
What an individual crash that was about to happen?
RD: I don’t think so. No, it was foresight that credit union experience throughout the world had been such that it was inevitable. As you continued to grow and more credit unions would spring up throughout the land, you would inevitably have mismanagement and financial crisis. It was seen, and I can only take off my hat to those were instrumental in getting the credit union Stabilisation Fund formed, that it was something that was seen to be a necessity as credit unions started to spring up and grow.
Incidentally, and I suppose it is not my job to argue with you on this, but it was before what we have been talking about, I really dispute in fact that New South Wales was the leader to Victoria. I think that Victoria was going very early on, in fact a lot earlier than anywhere else in Australia. I mean there were only isolated little bits and pieces. I have a feeling there was the bank that started back in 1906. Then of course there were all these parish credit unions that grew out of co-operatives, which were going long before people seemed to recognise. I think this is going to happen. I am doing the Young Catholic Workers’ Co-operative shortly. I have already picked up bits and pieces and I think things happened a lot earlier than people are prepared to recognise, in Victoria.
RD: Certainly in the general co-operative area I would agree with you. But specifically in relation to credit unions, the credit unions did not really start to hit their straps until the 1960s here in Victoria. That was when the VCCA’s efforts in promoting credit unions started. They weren’t springing up, other than the parish credit unions, of their own accord. There was that general knowledge of credit unions out there within the parish community side of things, but in the industrial belt there were no credit unions of any substance out there. So, certainly co-operative ventures have been in Victoria for a long time, but credit unions per se really started to motor during the 1960s and 1970s.
Now we come to the period when you were involved with the VCCA on the Board. How did that happen?
RD: Merely through an election process. I nominated.
Whose idea?
RD: Well it was my idea, and the Board’s. I guess those things have to be looked at in unison, that both management and Board need to consider who should be a representative on the Boards of State Associations, etc. But I was very enthusiastic about it. At that stage in 1980 the credit union was just about to approach a new phase in its life, our particular credit union of David Syme at that stage, about to go for a name change etc. It was felt appropriate to get involved more thoroughly in the industrial credit union arena and the involvement on the VCCA Board was, whilst in my case it was a very short term, was very interesting and quite a period during the development of credit unions within the State.
Who did you stand against? Was there any factional interest in this?
RD: At that particular stage I don’t believe there was an election per se. I might have in fact filled a casual vacancy. It is going back eleven years now and I am not too sure of precisely what occurred there. But factional interests, I guess, have always been relevant in the election of Directors within the credit union industry in this State. The VCCA Board has invariably been a combination of industrial and community credit unions. For better or for worse there was a general understanding and impression that there needed to be a balance of community representation and industrial representation. That has continued on for quite some time, although the dominance of community credit unions nowadays has waned significantly, as the industrial credit unions have come to the fore. I believe that is another point of uniqueness about Victoria, the development of community, rural credit unions compared with New South Wales and elsewhere. I think it is something that Victorians have been served very well by, the springing up of credit unions throughout the rural areas in Morwell, Bendigo, etc. They, in the early days in particular, caused a number of finance companies, in particular, to shut their branch agency doors because they were not in a position to match the rates and terms and conditions being offered by the credit unions in those areas. I think that all went well for the community of Victoria.
Did you see any financial abuses in the various jobs that you were in? You were in the account side and in the pay side. Did you see any abuses in the area from the finance companies or from any other financial organisations?
RD: Well back in the early days of total unregulation of the finance industry there was a lot of abuse. My days with GMAC told me that a number of car dealers were very unscrupulous in their activities, charging up to the legal limit of 48 per cent on personal loans, building five years of insurance into contracts with young people that would end up with a debt which would be equivalent to the purchase cost of a house back in those days.
End Tape 1A: 4634 Words: 1 hour 40 minutes.
12 FEBRUARY 1992: VCCA12: RICHARD RAXWORTHY TALKING TO ROB DAVY
When you were on the Board, can you remember any factionalism?
RD: There was certainly factionalism inherent, I guess, on the Board. At the time that I was appointed to the Board of the VCCA we had a number of Directors that I guess were very concerned about the direction being taken by the VCCA in matters such as Jubilee Lake and also Teledata. I don’t know whether Teledata has come up in reference from other credit union representatives that have been around for a while.
It certainly has.
RD: Has it. There were two Directors on the Board at the time I served and they were Nigel Westerby and also John Ordhams, Nigel being the Manager of Bentmore Credit Union and John Ordhams from the old Municipal Officers Association Credit Union, MOA Credit Union. Both of these gentlemen were very much against any change of direction of the VCCA in moving towards investment in Jubilee Lake or Teledata. As a result of that it seemed a tide of change was required because of the ventures that the VCCA had gone into a number of years prior to even my appointment to the Board. As a result of that there was a spill of the Board initiated and what was regarded as the ‘new Turks’ were appointed to the Board. In terms of those Directors that were asked to stand down, there were a number who felt it was appropriate to stand down as a matter of course because they had been Directors for a number of years. In my instance, I had only been a Director for some eight to nine months, but felt it appropriate at the time because of the requirement to flush out the Board and enable new direction. There was an appointment of a new General Manager being mooted at that time. Phillip Elliot was actually the Acting General Manager and then David Dinning’s appointment followed shortly after. Certainly from the time that the new Board was appointed, David Dinning’s arrival to the scene in 1981, the credit union movement and also the VCCA didn’t look back from that point.
Were you on any committees when you were on the Board?
RD: One of the great opportunities I had was to get involved with Teledata in its very rough days. Both Ian Larssen and myself were appointed to a supervisory role with Teledata, to actually try and guide their financial demise. Ultimately they merged with a company called GCS, which was the forerunner of what we now know as FCS, the computer organisation. Both Ian Larssen and myself spent some very torrid evenings pouring over the finances and trying to decide how this company could be saved because the VCCA had a vested interest financially in the organisation, which ultimately led to a significant loss for the VCCA and caused the restructure and call to arms for credit unions to underpin the VCCA through share capital injection etc. during 1981/1982.
When you were pouring over these accounts, what was the real problem do you think, with Teledata?
RD: Well the problem was with Teledata, I guess, they were just not in a position to be able to adequately manage the operations of a computer organisation. They had terrific opposition from GCS, who were dominating the field at that stage. Whilst they were trying to get a market niche, it was very difficult to match the software development that was occurring with GCS. They were on the back foot all the time and they were really under-capitalised and did not have the injection of funds to cause that company to move ahead. A very difficult time. There were a number of computer companies that were starting up during the early ’80s to try and take advantage of computerisation and new technology and unfortunately Teledata was just not in a position to take benefit of the developments that were occurring.
Some people have mentioned that they thought that Teledata’s strength was in the hardware rather than the software. Is this so do you think?
RD: I agree with that, yes. The software expertise was being driven by GCS, their major complotter.
They weren’t actually involved in hardware much at all at that time, although they are now.
RD: That is correct. They were specialists in developing software for credit unions. Progressively over the years, when GCS became FCS, credit unions just moved right away across to that mode of software right throughout Australia.
To what extent do you think the problem was with buying out Teledata and leaving the person who they bought it from as Manager?
RD: Well that was certainly a rather awkward one. In hindsight I guess it was not necessarily a great decision to have been made. But, nevertheless, I think as it turned out, there was no harm done in that decision. The Teledata operation was washed up very quickly as far as the VCCA was concerned and it was just slotted away as part of history. I guess in the growth of any organisation there some winners, there are some losers and Teledata and Jubilee Lake were a couple of errors. Just on Jubilee Lake, I think that was an area where for the credit union industry in Victoria timing was very important. Just at the time that capital was being called for, an injection of capital from credit unions, the liquidity of the industry dropped severely in Victoria and we were not able to go on with it. In hindsight, I believe if we had been in a position to move forward, if Jubilee Lake had been established, the conference centre, it would have been a terrific plus, not only for the credit union industry but for the State of Victoria. For many years after that, there were many crying out for conference centres both within Melbourne and also country areas, where large corporations could go and have strategic planning meetings, etc. So I think the concept was great, unfortunately the timing was just not applicable.
In Victoria I believe GCS was taken up by a number of credit unions, long before it was taken up in New South Wales. Why do you think that they didn’t manage to persuade people to go that way rather than the Teledata way? Or was Teledata ahead of that way?
RD: I guess in terms of software development many of the credit unions were not prepared to make a change very quickly. Most credit unions wanted to bide their time, see what others were doing and then make a decision. There is a significant capital cost involved if you do make a switch from one company to another, whether that is a change in the hardware platform, etc, it has to be looked at very seriously. I think this was one of the reasons for the slowness of change across to a new software supplier.
What about Cuecard and the teller machines. Were you involved in that at all?
RD: In the early stages of the Cuecard, the credit union industry in Victoria was just starting to establish a company called VICNET. Our credit union, Media Credit Union, was one of the initial shareholders in VICNET, there are a dozen shareholders. The Cuecard was quickly taken over by the Redicard issue. Victoria was in fact the guinea-pig for the introduction of Redicard on line with the National Australia Bank. Unfortunately it wasn’t as successful as we would have hoped in the early stages, and there was a lot of problems in Victoria, but eventually we have got on top of it. Now obviously Redicard is now one of the primary cards used by the community throughout Australia, an excellent product. But someone has to be the catalyst in these things. It was a New South Wales’ decision to actually allow Victoria to be the guinea-pig, and we were quite anxious to move into the plastic card market in Victoria. We took the running, but the on-line facility was a real problem. It is one of those things, when you look back, we would have hoped New South Wales would have been the guinea-pig.
Well, to be fair, seven credit unions in New South Wales did put the money up front in the first place.
RD: Up front for what?
For EFTS, for the terminals.
RD: Correct. For the installation of ATM’s. I guess what I am referring to is not necessarily the ATM network owned by credit unions, but the access of the banking ATM network. Here in Victoria, as different from New South Wales, credit unions have not set up their own network of ATM’s. We have relied on the interchangeability between the banking facility and the credit union industry. So the majority of members in this State actually utilise the National Australia Bank, ANZ, etc., terminals rather than the Reditellers that dominate, particularly in New South Wales.
Yes, they all use them there, but I mean all the ones that developed here, there was the competition that used the State Bank, that is highly successful too isn’t it in Victoria?
RD: Yes it is. Certainly there was a split between those credit unions that wanted to do their own thing, dealing directly with a bank, versus those credit unions that wanted to stay in the mainstream and use the generic credit union product. Unfortunately, as it has unfolded, a number of those credit unions have gone out and done their own thing and are now subservient to the banks to which they have made these agreements. They might rue the day that in fact they have gone away from the mainstream, because the banks will now charge them whatever they want. The economics will dictate what charges they are going to bestow on those particular credit unions. Whereas at least being within our own organisation, having our own generic card, we have some degree of control over the costing.
The early days of ATM’s when there was the off-line one from Queensland Teachers’, did you hear about that at all? Was there any credit unions here who took it up in Victoria?
RD: In fact, the early days of ATM’s was such that we used to promote the fact that the credit union industry were the first financial organisation in Australia to install an automatic teller machine. We ran on that for many, many years as a plus in all promotion activities. Because banks would aggressively promote the fact that they have got these ATM’s, but we would counter that by saying that the credit union industry, through the Queensland Teachers’, were the first to actually introduce an ATM in the country.
They also introduced the plastic card.
RD: That’s right. There is a number of other things that credit unions were instrumental in getting underway. The first being a cheque a month type of account, where you would pay interest on a monthly basis. The banks would never do that, it was an annual creditation of interest, not a monthly. So a cheque a month plan was devised. Also the fact of sending off periodical payments and a number of other aspects that credit unions were quite unique in introducing in the early days.
Now what about the other aspect of VICNET, does VICNET compete with AUSNET?
RD: VICNET does not compete with AUSNET. VICNET is in fact an organisation set up within the VCCA, it is a wholly-owned subsidiary of the VCCA, to merely administer the interchange of transactions for credit unions within this State, through the use of automatic teller machines and EFTPOS, electronic funds transfer devices. So we don’t compete, we certainly use EFTEL and the facility of a national switch, but certainly in no way do we compete with that organisation. We are really just a clearing house and an administration facility for those credit unions within this State that want to use the generic Redicard or Visa product.
Does the VCCA handle the member chequeing for the whole of the State as well?
RD: They certainly do. Member chequeing is slotted in to the VCCA administration, whereas VICNET looks after the plastic card scenario, together with what is growing now, the direct entry facility. That is something that is growing in leaps and bounds as more companies now decide to move away from salary deductions or credits to bank accounts. They are now looking at direct crediting of entire salaries straight through to nominated payees such as the credit union industry.
Whole of pay.
RD: Yes, whole of pay.
Now you are still on the Board of VICNET are you?
RD: Still Chairman of VICNET, I have been Chairman for a number of years, now.
So what does that entail, over the years?
RD: Over the years, well I guess the main thing has been the development of the network within the interchange banking system. The Australian Federation of Credit Union Leagues, AFCUL, have really been the driving force in the negotiation of contracts. Because the banks are national, we have to deal nationally. But certainly the Directors of VICNET have been encouraged by what has occurred, interchange facilities now being established through not only the State Bank of Victoria, hopefully in the near future the Commonwealth Bank machines will be on-line for our credit union members, also the ANZ, National Australia Bank, Bank of Melbourne and all the building society machines are accessible to our members that actually use Redicard and/or Visa. So that has been the primary thrust, just the administration of that. VICNET has operated very successfully. The last two years we have returned a 10 per cent dividend to our shareholders as a sign of the profitability of the company. So to that extent it has justified the shareholders’ initial investment of $10,000 per credit union, which the majority lodged back in the early days of VICNET’s development in 1984.
To what extent have you been involved with computerisation, generally, at the VCCA and in Victoria?
RD: No direct involvement, either in FCS or any of the hardware suppliers.
With the disaster recovery unit they have set up?
RD: No, that has certainly been part of Graham Rushton’s involvement through the VCCA. I have had no direct involvement with the disaster recovery program.
Is it being accepted by a large number of credit unions, do you know?
RD: It certainly has. Obviously the Reserve Board, our supervisory body, is enthusiastic for credit unions to have a disaster recovery facility such as has been established in Huntingdale. It is something that is a must for credit unions, particularly nowadays with the whole of pay facility growing. There is a reliance now on members being able to access their funds come hell or high water, because their entire salary is in there. If the credit union computer system collapses, so does the intake of bread within the family.
I was in Newcastle in New South Wales immediately after the earthquake, I went up there to interview Bill Prince. Their computer had actually shifted, it was in two pieces, and it had shifted about two and a half feet across the sub floor and was just sort of hanging over the edge, sitting there. They couldn’t get back into the building because the outer structure, the skin, was completely shattered although the steel framing was holding it up. So what they did, they went down the road to the nearest branch and got a terminal and came up the road in car and they started the computer from outside the building. It worked that way until they were allowed back into the building.
RD: Is that right. Well it goes to show you what necessity will do, won’t it. You have to be innovative in situations like that.
They actually bought a house about three doors down from the building and set up in that, an old derelict house, to take over the main duties. It lasted for a couple of weeks until they could get back into the main building.
RD: Well I guess that does show the importance of a disaster recovery centre. I guess even Huntingdale, if we had an earthquake down here, may not be saved during an earthquake. But there are many other contingencies, fire and flood, etc., that we have to look at.
But several of the credit unions in that area, which operate together, did have trouble. But they all managed to work through each other somehow by the back door, or whatever.
RD: Excellent. That’s it I guess, the co-operation. That is the whole essence of the Huntingdale project, the co-operation of credit unions just to pool their resources and make sure they have got a central operation.
But it was the switching that did it, the fact that they were all together in the switching.
RD: Right I understand. Well again it gets back to just a unified approach to these things. Standing alone you will suffer all sorts of problems, but collectively there are ways and means of helping one another out.
When AUSNET, well it is called EFTEL now and it was starting off as EFTS wasn’t it, when they were developing the switching arrangements there, how much input was there from VICNET in Victoria in order to achieve that? Was there co-operation between New South Wales, Victoria and AFCUL at that time in order to get the whole network going?
RD: There was co-operation. I guess AFCUL took the lead in ensuring that there was a progressive movement towards each of the States coming on board in terms of the national switching facility. It was the only way to go about it for two reasons. First of all the National Australia Bank who was the first involved in the switching as an interchange through the banking industry would not want to take on a whole mass of transactions in one fell swoop. So it was done progressively and certainly VICNET was in a position to be able to encourage its credit unions to progressively come on board and take advantage of EFTEL’s, back in those days AUSNET’s, new facility that was set in place. We obviously went through teething stages there, even with EFTEL, with the old tandem computer system that they were running. It has now been replaced by new technology and a computer system known as Mercury, which has certainly enhanced the ability of fast movement of transactions around Australia. That has been a big plus which has only occurred in the last eighteen months, the transition of credit union data across to the new fast Mercury system.
Are there any systems here set up amongst credit unions as joint facilities in the computer field?
RD: FCS, Financial Computing Services, here in Melbourne have a bureau facility, as distinct from New South Wales and South Australia where they actually have data centres where credit unions are pooled together and have a common bureau. Here in this State, FCS has taken the running with that. Many small credit unions have been a part of that bureau for a number of years. In recent times there has been moves towards major credit unions considering the concept of a bureau rather than doing their own thing with their own computer. Defence Credit Union, for instance, have recently signed a contract to move on to the bureau facility through FCS. That has been a major move, a shift in the direction of credit unions within this State towards a using a bureau rather than having stand alone facilities within their own credit union.
Nobody has been able to answer this yet, so I will ask you, do you know which credit union it was that brought FCS, well GCS originally, from Western Australia over to Victoria and then on to New South Wales? But it came to Victoria first.
RD: The answer is no, I can’t tell you the answer.
I have a feeling it was Defence.
RD: Could be, but I couldn’t comment on that, Richard.
Because what happened over there is that the ones in New South Wales, and that was the two McIntyres, Helen and John McIntyre, their credit unions, they didn’t see Western Australia first, they saw operations going in Victoria. They immediately got the system up and running in their individual credit unions. Then people started looking around in New South Wales and they started picking it up. But it was operating in Victoria before it was operating in New South Wales. But who brought it from Western Australia I do not know yet.
RD: No, I couldn’t comment there. Interesting.
Who was behind the decision to set up a FCS bureau in Victoria, rather than operating it any other way?
RD: Well, I think that was a natural progression for FCS to get involved in a bureau facility. Many small credit unions saw that they were not in a position to be able to afford the capital to establish their own computer system, nor did they have the expertise to run it. With that in mind they approached FCS many years ago to ask whether they could piggy-back on their facility and use their expertise. So it has just grown over the years from one or two small credit unions using the facilities, and now as I say Defence Credit Union moving on has certainly opened a new door in the development of FCS as a information technology centre for the credit union industry within this State.
The other thing is the development of the insurance company which is run by VCCA now. Who was responsible for that? Do you know anything about it?
RD: Which insurance company are you referring to?
Well it was advertised in a number of the Australian credit union magazines.
RD: Are you referring to CIC?
No, it was actually started by the VCCA in conjunction with another insurance company, I don’t know which. Nobody has mentioned it, I have just seen it advertised in the credit union magazine.
RD: Insurance?
Yes.
RD: No, I don’t know of an insurance operation. CIC is certainly endorsed by AFCUL as the supplier of insurance.
No, not AFCUL, this is the VCCA.
RD: The VCCA? An insurance operation?
Either that, or it is an independent insurance operation which has got VC.
RD: Ah, it is VACC, that is what it is. Victorian Automobile Chamber of Commerce. That is just one of the insurance companies that offers its facilities to credit unions within this State, mainly for motor vehicles. That is the answer to that one.
Right. Well I was looking at that and thinking there must be a head policy down here too.
RD: No, similar initials, but totally different operation.
New South Wales always insisted on having a head policy and using that as a method of raising funds.
RD: Correct. Well the fact that AFCUL and the VCCA have endorsed CIC as the preferred domestic insurance provider, it has meant a revenue flow from CIC to AFCUL and then indirectly to Victoria. So the old CUNA rationale has continued even though it has not been CUNA but someone else that has taken up the running.
Now what have you been involved in that we haven’t picked up, that we haven’t talked about as yet?
RD: Well I guess one of the other areas that I have been involved in very significantly is the Australian Institute of Credit Union Management. My involvement at both a local level, within the State as a State Councillor for a number of years, and then I was also elected to the National Board of AICUM and acted as its National Treasurer for two years, from 1989 to 1990. AICUM is involved in the professional development of credit union Managers throughout Australia and provides a number of facilities. My time that I have spent in those roles, both on a State and national basis, have been a real eye-opener for me and have been very rewarding. The other aspect, we were talking about insurance, I have been Chairman of the CIC Credit Union Advisory Board here in Victoria from 1987 to today. That has been interesting as well, looking at the development of insurance for credit unions. Specialised packages developed by CIC, which as I mentioned earlier is the endorsed insurance company through AFCUL. I have also been involved on the Reserve Board here in this State for a number of years. I served as a member of that Board from 1987 to 1988. I was nominated by the VCCA to serve on the Reserve Board, which has obviously gone through a period of change as well. It is now going through further change due to changes of State and Federal legislation affecting the development and prudential standards of credit unions.
Do you approve of the new changes?
RD: Well I think the Australian Financial Institutions Code Legislation, AFIC Bill that is proposed is a step forward. We have to look at national uniform legislation to control credit unions and I am certainly all in favour and endorse the approach being taken by the respective State Governments. Unfortunately the Victorian Government looks as though they are now decided to have cold feet on the whole matter, which I trust does not result in the momentum being lost so we are not in a position to move with this initiative that has been started. 1 July 1991 is proposed to be the stage for the cut over to the new legislation, and I trust that timetable is met.
Going back to AICUM, to what extent do you think AICUM has taken over as an educator of credit union staff from the Chapters and from the running of Schools around the place?
RD: I certainly think that has occurred. Again, I believe it is a natural progression. Back in the earlier days the Chapter meetings, and even today I guess, serve a purpose of an interaction between Directors and staff of credit unions, management in particular, on a convivial-type of atmosphere, where you can just talk about your own credit unions. But it is not necessarily an educational role and that is where AICUM has taken the running, through the holding of various types of financial management courses throughout Australia. Operations courses, etc., in each of the States, having guests from overseas, conducting various seminars where they have expertise in certain areas. It has really been a great benefit to both senior and middle management within credit unions. I believe AFCUL has recognised the input that AICUM has made in the development and professionalism of credit union staff and management and recognised that to be of benefit to the movement.
Now, is there anything else? We are just coming to the end of this tape, and I don’t think we have got another tape on the subject.
RD: Right. No, I think just in general, my outside activities revolve around my four children. I guess I have been involved in those types of activities such as Cubs and Scouts and Treasurer of the Pre-school and all those sorts of things. Interest wise I am certainly very interested in golf. My son is an excellent golfer at eighteen years of age and I get out and participate with him as often as I can. I have a set of twin boys, they are fifteen years of age, so that has been a learning experience in itself coping with those young fellows.
So, you always found enough time for credit unions. Has it taken you away from your family at all, do you think?
RD: I don’t believe so. I think there has been an intertwining of family and business activities which have blended very well over the years. My involvement in credit unions, as we have discussed, goes back to 1969 and it has been a very fruitful association both from a business and a personal point of view. I am glad that I made that choice not to go with Ford Credits back in 1975, but to lunge in to the credit union industry. I have found it to be a very caring organisation. I think that word is very appropriate in how credit unions, and the people involved in credit unions, see the entire co-operative movement.
Well I will say thank you very much Mr Rob Davy.
RD: Thank you very much Richard for your time.
End Tape 1B: 4752 Words: 1 hour 45 minutes.