2 March 2024
Topics: Armaguard, ACCC, Regional Banking Inquiry
E&OE
Nadia Mitsopoulos
Dean Smith is a WA Liberal Senator. He has some questions to ask about this in parliament. Senator, good morning.
Dean Smith
Good morning to you Nadia.
Nadia Mitsopoulos
How do you see the situation that Armaguard is in now?
Dean Smith
Well, I suspect we’re at the beginning and not the end of this issue. I think it is important to reassure West Australians, your listeners, that it’s the Reserve Bank of Australia’s view that there must be cash in the Australian economy and there must be access to that cash. So, people do not need to sort of unnecessarily worry that there might be restrictions on the availability of cash at post offices or at Coles or Woolworths or at the local ATM. But there are a couple of issues to be answered here. Armaguard and Prosegur, which is the other merger partner, went to the ACCC in 2022 asking for special permission to merge together in what we call cash in transit services.
The ACCC gave them that special approval as a special authorisation because as you have identified, it created a monopoly service provider in this new merged entity.
Part of the ACCC’s process was to forensically examine whether or not the financial viability of this merged entity could be met and sustained. And on the basis of that, the ACCC gave permission for the merged entity to operate. And very shortly after that, the merged entity then put up their hand and said things are much more severe than we thought they were. We can’t run the business with a viable financial structure. And then went to Coles and the supermarkets and banks and others looking for a very significant cash injection originally of $190 million over three years to make the entity viable.
So, for me, a couple of important questions: Why did the ACCC find it necessary to allow the merge structure to exist given the necessary authorisations? If we are going to find ourselves in a situation where we did last week where there was a risk to cash delivery services in the economy?
Nadia Mitsopoulos
At the time that permission was given, did you accept the reasoning that the ACCC was given giving and the reassurances?
Dean Smith
Yes, in February of this year at the Senate estimates, I had the opportunity to ask the governor of the Reserve Bank, but also the ACCC chair, whether or not this merger proposal was properly founded in the ACCC’s merger process. They reassured me that they had gone through all the necessary due diligence and satisfied themselves that the new entity would be viable. But that doesn’t make sense now, because we know that last week Lindsey Fox made a personal injection of $10 million. That’s after he asked others to make a $26 million injection.
Nadia Mitsopoulos
Which he then rejected.
Dean Smith
Which he then rejected because, because the banks and Coles and Woolies and others asked to see Armaguard’s books
Nadia Mitsopoulos
And he said no.
Dean Smith
And he said no.
Nadia Mitsopoulos
So, what do you read into that?
Dean Smith
I think that there is something going on here that deserves much greater scrutiny. In the last week of parliament prior to Easter, I had the opportunity again to inquire with the ACCC and the RBA where negotiations were up to. And they were particularly cagey with me, not wanting to reveal or respond to some of the questions that I had asked in public in Canberra. So, when we return back to the regional banking inquiry on the 16th of April, these are the same sorts of questions that I’ll be asking the RBA and the ACCC because I think there’s a very significant question to be answered here.
Nadia Mitsopoulos
What is going on? Dean Smith is my guest this morning Liberal Senator for WA what do you specifically want to know?
Dean Smith
I want to know what authorisations have actually been met. So, the ACCC in granting the merger to proceed would have asked Armaguard and Prosegur to comply with a number of undertakings and authorisations. I want to know, have they all been met? If they haven’t been met, why have they not been met? Secondly, I’m keen to understand what level of confidence the banks currently have, but also big retailers and organisations like Coles and Woolies and others, whether or not they are confident that cash in transit services can be sustained over the medium to longer term in this country.
Because there’s a very, very important issue for many people in Australia, despite the very significant uptake in digitization and digital payments. There are still many in our economy, people living in regional communities, the elderly, that use cash. 15% of people in Australia use cash for 80% or more of their transactions still. We also know that access to banks has been declining with bank closures.
Nadia Mitsopoulos
And ATMs!
Dean Smith
And ATMs closing, we know that the level of withdrawals from ATMs is also fallen significantly. So, there’s absolutely a change happening in the economy in terms of how cash is used. But as the RBA has made very, very clear, there must still always be access to cash available to people. And that’s, I suppose, at the end of the day, what am I seeking to achieve: a greater level of certainty and security that cash will be available on a day-to-day basis to people throughout the Australian economy.
Nadia Mitsopoulos
Senator Dean Smith, do you have confidence that Armaguard is viable moving forward?
Dean Smith
Well, I’ve not seen the books. I’ve not seen the books and they are really the questions for the RBA and the ACCC, the ACCC particularly because it’s given the authority to either allow or disallow mergers in the Australian economy to avoid the existence of anti-competitive behaviour. And I think there’s a real question: at a time when the ACCC is asking for greater merger powers in the Australian economy, as we have quite a significant merger here. I don’t believe its due diligence was as satisfactory as it needed to be because why have we found ourselves in this situation less than 12 months after the final authorisation was given?
Nadia Mitsopoulos
It’s the speed of this that I think is also the problem.
Dean Smith
I’m also keen to understand to what extent the Treasurer, Mr Chalmers, who has responsibility for the RBA, has responsibility for the ACCC, to what extent he has been involved in this, to what extent he has put his mind to the risks for cash in the Australian economy. Now I don’t have those answers just yet, but I suspect in coming weeks and months I’ll get them.
Nadia Mitsopoulos
Okay. Dean Smith is my guest this morning Liberal Senator for WA. Is there anything to support the notion of the RBA taking over control of this service? How do you feel about that? I mean, should this be something that the RBA should be doing?
Dean Smith
Not necessarily. And when I asked the Governor of the RBA Michelle Bullock this question directly in February, she made it very clear to myself and other Senators on the committee that the RBA sees its role as facilitating discussions to find a solution. It doesn’t believe that it needs to be the solution provider. And at this particular point in time, I absolutely agree with it. A solution can and should be found with the banks, with the big retailers, with Armaguard and Prosegur to guarantee and secure cash in transit services over the medium to longer term.
Nadia Mitsopoulos
And what if they can’t? I mean, we saw what Coles did last week. They said you can only take out no more than $200 cash and, now we’re actually sort of suspending those transit services for fear that their cash would be stuck in trucks across the Nullarbor.
Dean Smith
Exactly. Good point. Based on the opportunities I have had over the last few months, I have a high level of confidence that this is top of mind at the moment for the RBA and the ACCC. I think we saw that in the speed of events late last week. Last week on the eve of the Easter break. And I’ll have an opportunity again in the middle of April, as we examine this further, and then again in May when we go back to the budget and estimates process.
Nadia Mitsopoulos
We’ll watch that very, very closely. Can you see a time when we’ll be completely cash free? Do you think that’ll ever happen?
Dean Smith
No, I don’t because I can understand for lots of people, irrespective of their age, that cash does give them a degree of confidence and security.
Nadia Mitsopoulos
When there’s power outages or banks go down or a telecommunications company goes down, what then?
Dean Smith
Well, some of us wear wedding rings with expensive diamonds. Others might have gold buried in the yard. I think it’s a form of emotional and psychological security for many people. And, I don’t see a need, nor do I see the community crying out for less cash in the economy. In actual fact, I think with bank closures, closures of ATMs, more and more people are saying, hmm, I’m not really comfortable with the speed at which this is going. And I think this whole Armaguard-Prosegur matter really does demonstrate that as well.
Nadia Mitsopoulos
I think when we talk about this, and we talk about a lot, people feel like they’re being pressured or forced to go online by the banks. They don’t like that.
Dean Smith
Agreed.
Nadia Mitsopoulos
They don’t like paying a surcharge when they’re told this is no cash here, so you have to pay with your card. And by the way, you’re going to have to pay an extra 2%.
Dean Smith
That’s right. I think people get very unsettled when in one conversation they’re being told, we really support the idea of cash and you’re going to have access to your bank and access to the ATM. And they look around and they see the bank closing, they see the ATM no longer available. So, I think there’s a bit of double talk going, and this is why the regional banking inquiry, which is currently underway, which will report in early May, has been so important. It’s been traveling around Western Australia listening to regional retailers, listening to pastoralists and others in communities about just how important banks are. But they’re also a symbol of vitality in the community.
Nadia Mitsopoulos
Are you disappointed Bankwest is now a purely digital bank?
Dean Smith
I can understand the pressures on banks, but you know, Bankwest has a sentimental attachment for many West Australians, but there’s no doubt that there are very strong competitive pressures on banks. But we must have a banking system that is available to people and as the RBA keeps saying, cash is a legitimate form of transactions in the economy and the RBA is working hard to make sure that cash will continue to exist.
Nadia Mitsopoulos
And finally, Senator, I noticed today there’s been a loosely organized social media campaign if you like, and it’s asking people to take cash out of an ATM in a coordinated way to prove to the banks there is still demand for cash. I think one of them was flagging today as one of the dates. Is that a good idea?
Dean Smith
I don’t know if that’s necessary. And to be fair to the ACCC, one of the key considerations it had in allowing the merger between Armaguard and Prosegur was to ensure that was not a disorderly disruption to cash transit services in the economy. I don’t think that’s necessary. It sounds a little bit alarmist. People can have a high level of confidence that their money is still very safe in their wallet, in their bank, in the ATM. I don’t think these things are necessary.
Nadia Mitsopoulos
Good to talk to you. Appreciate you coming in. Always
Dean Smith
A pleasure. Thank you.
Nadia Mitsopoulos
We’ll keep an eye on your questions that you’ll be asking of the ACC and the RBA in the next couple of weeks and we’ll keep our listeners updated. That was Dean Smith, liberal senator for WA.
ENDS