1st May 2014 –  Stunned.  Incredulous. Shocked.

Financial counsellors around Australia will be aghast that the Commission of Audit can so blithely – in 72 words – recommend de-funding all but $6 million of the $100 million the Commonwealth Government invests in the Financial Management Program.[1]

The Commission of Audit has also recommended the de-funding of rural financial counselling services.

We urge the Government to reject these recommendations.

We note in particular that the Government has consistently said it will protect people who are vulnerable.

The Commission of Audit does not appear to have considered the benefits and avoided costs of these vital programs.

Financial counselling ($20 million) – when people lose their jobs, get sick or they’re struggling on low incomes, debts soon mount up. Financial counsellors help people re-prioritise payments, save people from bankruptcy and get back on track.  The benefits of financial counselling are well documented and far exceed the costs – see below.

Emergency relief ($84 million) – sometimes people find themselves in such dire straits that they don’t have enough food, face disconnection from essential services or can’t pay their rent. Emergency relief funding helps people through a crisis so they can stablise their position.

Money management services – are targeted toward Aboriginal and Torres Strait Islander consumers, primarily in rural and remote areas.  These workers provide basic financial literacy skills and make an enormous difference in helping people with budgeting and managing money.  Aboriginal and Torres Strait Islander consumers face high levels of financial exclusion.[2]

While some state and local governments also fund financial counselling, demand far exceeds supply and there are long waiting lists.  These programs are a shared Commonwealth/State responsibility. We note that the Commonwealth has sole responsibility for the regulation of credit.

Financial counsellors would understand if the Commission of Audit had suggested a review of the Commonwealth Financial Counselling Program. It has been operating for nearly 25 years and and although we are continually trying to improve, it would be sensible to take stock of service delivery mechanisms, approaches and locations. But de-funding the program simply doesn’t make economic sense.  It saves the government far more money than it costs.

Financial counsellors: community-based professionals providing information, support and advocacy for people in financial difficulty.

Anyone who is in financial difficulty can contact a free and independent financial counsellor on 1800 007 007 or visit www.debtselfhelp.org.au. 

For further comment please contact:  Fiona Guthrie 0402 426 835

Notes for Editors 

Excerpt from the Commission of Audit report, Phase 2 Report

“Recommendation 16: Commonwealth grant programmes – Further to the Commission’s recommendations to improve the administration of grant programmes, including through the establishment of a central register of grants, the Commission recommends that … (c) in addition to the specific grants programmes identified for abolition in its Phase One Report that a further 14 grants programmes identified be abolished”. (page xxvii)

“Table 4.4 sets out 14 programmes, accounting for around $330 million, which should be abolished”. (Table 4.4 is headed “Grants programmes identified for cessation” and lists the Financial Management Program.) (Page 98)

“The Financial Management Program provides some $100 million to fund financial counselling, money management, emergency relief, retirement information services and the Home Energy Saver Scheme. Around $6 million funds the Gambling Help Online (funding is scheduled to expire on 30 June 2015). While the funding for problem gambling should continue, there should be a re-assessment of the remaining programmes’ structures and delivery. Some State and provide these or similar services.” (Page 99)

About Financial Counselling

Financial counsellors provide information, support and advocacy to people in financial difficulty. They are trained professionals, work in community organisations and their services are free, independent and confidential.

The Commonwealth Financial Counselling Program began in 1990 – it is nearly 25 years old.

In the current financial year, Commonwealth-funded face to face services will assist 80,000 people in financial difficulty.

The national telephone financial counselling service will answer over 140,000 calls.

An evaluation[3] of financial counselling found that:

  • 66% of clients have their financial difficulties resolved;
  • 74% avoid legal action;
  • 53% avoid bankruptcy;
  • 63% improve their mental wellbeing
  • 45% improve their physical health.
  • 53% avoided bankruptcy.

A cost-benefit analysis of financial counselling found that each $1 invested resulted in a $5 return.[4]

The impact of a complete loss of funding

  • The closure of the national financial counselling helpline 1800 007 007
  • Remaining state-funded face-to-face financial counselling services, which are already dealing with long waiting lists, will be further stretched. Services which are entirely Commonwealth-funded will close;
  • government departments, financial institutions, telcos and utilities will need to amend websites and referral processes as financial counselling services will not be able to respond to the demand this creates;[5]
  • the government will need to amend relevant provisions in the National Credit Code that reference financial counselling and the 1800 007 007 number. For example, this legislation requires this information to be included on direct debit default notices.

 

[1] See quote from the Commission at the end of this media release.
[2] National Australia Bank and The Centre for Social Impact, Measuring Financial Exclusion in Australia (2012). This report had a specific focus on Indigenous consumers. The report showed that 43.1% of this group were either severely or fully excluded from financial services, compared to the national figure of 17.2%.
[3] Dr Nicola Brackertz, Swinburne University, “I Wish I’d Known Sooner” 2012.
[4] Australian Workplace Innovation and Social Research Centre, Adelaide University, “Paying it Forward: A cost benefit analysis of the Wyatt Trust Funded Financial Counselling Services”, 2014.
[5] See FCA Media Release re our report “Click Here: Who is referring to Financial Counselling”.