Credit unions and building societies have welcomed the federal government’s guarantee for all Australian cash deposits.
Prime Minister Kevin Rudd today announced the government would guarantee all deposits – removing the previous $20,000 cap – held in Australian financial institutions for the next three years.
The blanket guarantee was one part of a three-pronged plan to further safeguard Australians from the fallout from the global financial crisis.
The government also will guarantee all term wholesale funding by Australian banks operating in international markets, enabling, Mr Rudd said, Australian banks to better compete against their global rivals, many of whom were getting guarantees from their governments.
The government will also put another $4 billion into residential-backed securities to help shore up the Australian mortgage market.
Abacus Australian Mutuals, the industry body for credit unions and mutual building societies, said it was pleased with “the government’s strong and decisive move”.
“The government is reassuring Australians that their credit union, building society or bank is a safe haven for their savings,” said Abacus CEO Louise Petschler.
“The guarantee removes any worry for Australians and means that every deposit with a credit union, bank or building society has full government support.
“The government’s announcement backs up its statements that the Australian banking system is sound and will further improve confidence in our local banking institutions.”
She said Abacus also backed the move to support term facilities for Australian authorised deposit-taking institutions, and called for close consultation with the mutual banking sector to ensure access.
“It’s critical that credit unions and building societies – now the main competitors to the big banks – are able to benefit from these measures to continue our vital competitive role.”