Why Australia needs a new Strategy

The economic impacts of COVID‑19 have put pressure on the finances of millions of Australians. More broadly, the digital revolution has broadened and deepened, creating both opportunities and risks for Australians as they navigate their financial affairs. Internationally, there is greater recognition of financial capability as a policy imperative in its own right, including by the Organisation for Economic Cooperation and Development (OECD).

The Government is committed to building the financial capability of Australians. For this reason, it has moved responsibility for this issue from the Australian Securities and Investment Commission (ASIC), an independent Government agency, to the Treasury. A new Strategy presents an opportunity for a new approach to delivering financial capability.

The approach is threefold:

1. Targeted interventions for the most critical cohorts, starting with young people;
2. Embracing innovation in the deployment of tools that will engage the target cohorts; and
3. Setting clear benchmarks for success and evaluation of the performance of interventions.

Treasury undertook consultation with representatives from the financial capability community in 2020 and 2021. This strategy incorporates feedback received from these stakeholders.

This document begins by setting out a model for what financial capability includes and does not include. It then identifies the factors that influence financial capability outcomes.

This is followed by an outline of the guiding principles which will inform the Government’s activities and interventions in this area, and identification of the specific outcomes which interventions should be targeting. It then sets out the role of Government in this space and how the organisations in the financial capability community are working to improve outcomes.

To build the evidence base on where financial capability gaps exist and help target initiatives, the Strategy is accompanied by a financial capability monitoring and evaluation framework and a new biennial national financial capability survey.

Lastly, it outlines the approach to implementation of the Strategy for four target cohorts: young Australians; women; people in or nearing retirement; and Aboriginal and Torres Strait Islander peoples.

In October 2020, the OECD Council adopted a new recommendation regarding financial literacy. The recommendation presents a comprehensive instrument on financial literacy to assist governments, public authorities and relevant stakeholders in their efforts to design, implement and evaluate financial literacy policies. The recommendation covers three main areas: national strategies, the various sectors of the financial landscape and the effective delivery of programs. It also looks at how to address the needs of vulnerable groups and takes into account the increased digitalisation of finance. The recommendation has been considered in the development of this Strategy and will inform its ongoing implementation.