Plan for failure angers Linfox Armaguard
Australia’s financial regulators are rebuilding the cash-in-transit industry based on a 20-year plan that forecasts cash is dying. The government is setting a budget in case Armaguard, the dominant cash-in-transit operator, suddenly fails.
Araguard Executive Chairman Peter Fox said the plan was an “absolutely outrageous affront” and “absolutely ludicrous.”
Mr Fox told a heated Senate committee hearing the new powers to set prices and monitor the business put the new Independent Pricing Model at risk.
For three years Armaguard, with banks, supermarkets and Deloitte have been creating a new sustainable pricing regime for delivering cash.
“This is a nationalisation by stealth,” said Fox.
“[This] puts at risk every effort we’ve endeavoured over the last three years [to create] a sustainable business. Why would we agree to the independent pricing model?”
Former ACTU Secretary Bill Kelty, who now works for Linfox Armaguard, slammed the provision of $400 million of taxpayers’ money should Armaguard run into crisis and need to be taken over.
Banks should “pay a fair price” for Armaguard’s services, rather than taxpayers setting aside funds in case the system fails says Kelty.
Armauard has over 1,000 wholesale cash customers but the bulk of revenue comes from the big four banks, the big supermarket retailers and Australia Post.
Kelty said the $400 million contingency was a “totally entirely inappropriate public policy” and “a policy of lunacy and stupidity”.
Australian Banking Association CEO Simon Birmingham said the $400 million, should it ever be required, would probably be repaid by the big banks.
Mr Kelty said negotiations with banks, regulators and retailers during the Armaguard cash distribution crisis had been difficult because “there has been no clear national objective” in terms of fair pricing, investment, safety and security or a fair adjustment process.
Australia’s financial regulators are not planning for the success of the cash system but its decline and eventual death says Frane Maroevic’ the International Currency Association‘s Director General.
“Central banks in other countries are managing cash access and availability to ensure the cash system thrives and is viable for the long term.”
“Central banks are protecting, supporting and promoting cash access and acceptance.
“Cash is publicly-owned money, owned by the central bank on behalf of the people, for the people,” Frane said.
The big bank’s proposed Joint Venture Company (JVCo) could conceivably raise prices to commercial customers and squeeze the supply of cash.
“JVCo’s pricing structure is intended to be fair, non-discriminatory and equitable as between the Major Banks and Commercial Cash Distributors, taking into account the respective circumstances and roles in the cash distribution system, and differing credit risk positions.”
The bank’s application to the ACCC to establish JVCo is supported by an expert report by Warwick Davis from Frontier Economics, who explains that the cash system is in decline:
” …the market for cash is in decline, … The market decline is placing pressure on cash suppliers to cut costs and, in the case of Westpac, to seek to wind back its supply of commercial cash services to Commercial cash distributors.
“I find that, notwithstanding prevailing market concentration and some barriers to entry, there is little evidence of market power in commercial cash supply.”
There is more cash on issue now than at any other time in Australian history. The value of cash on issue in Australia is generally trending up.
The graph below of the RBA Balance Sheet shows note issuance (orange) is mostly positive and the total value of Australian notes circulating continues to generally grow (blue).
