Thirty Two Questions and Supporting Evidence    Submission Letter to Royal Commission April-2018   Defined Terms & Documents  

12th Question

Will the Royal Commission ask the Governor of the Reserve Bank whose Board is chartered under Section 10(2) 'Functions of Reserve Bank Board' of the Reserve Bank Act 1959 to "best contribute to.......... the economic prosperity and welfare of the people of Australia" to confirm that the Board of the Reserve Bank is aware of the primary findings of the reports (published after 2005) from the Productivity Commission, the ABS and ASIC that measure and quantify the Financial Literacy Capacity of Australians that are ranked as low as less than Level 1 up to Level 5?
In particular that "For nearly half of the population were assessed at either levels 1 (the lowest level) or 2, both of which are below the minimum level deemed necessary to participate in a knowledge-based economy (level 3)."

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Supporting Documented Evidence re 12th Question

Chapter 1 notes 'inter alia':

1.        Productivity Commission's Staff Working Paper "Links Between Literacy and Numeracy Skills and Labour Market Outcomes" dated Aug 2010 noted:

For nearly half of the population were assessed at either levels 1 (the lowest level) or 2, both of which are below the minimum level deemed necessary to participate in a knowledge-based economy (level 3).

For example, level 3 is regarded by the survey developers as the ‘minimum required for individuals to meet the complex demands of everyday life and work in the emerging knowledge-based economy’ (ABS 2006, p. 5).

In 2006, the proportion of the working-age population (15–64 years) who had Language Literacy Numeracy (LLN) skills at levels 1 or 2, supposedly lower than the minimum required, was 44 per cent for prose literacy and document literacy, and 50 per cent for numeracy (figure F.1).  The proportion at level 3 was 39 per cent for prose literacy, 37 per cent for document literacy and 33 per cent for numeracy.  Productivity Commission Impacts of COAG Reforms: Research Report  - April 2012

2.        ABS report Adult Literacy and Life Skills Survey, Summary Results, Australia, 2006 included:   

*      "On the numeracy scale, approx. 7.9 million (53%) Australians were assessed at Level 1 or 2,  4.7 million (31%) at Level 3 and 2.4 million (16%) at Level 4/5".  

*       On the problem solving scale, approx. 10.6 million (70%) Australians were assessed at Level 1 or 2, 3.7 million (25%) at Level 3 and 800,000 (5%) at Level 4 (table 1)"

*       ABS - APPENDIX 1  -  LEVELS OF SKILLS for PROSE LITERACY,  DOCUMENTS SKILLS,  NUMERACY  and  PROBLEM SOLVING - explains the criteria for ABS's rankings.

3.        ASIC Report 224 "Access to financial advice in Australia" - December 2010 includes:

51 These results, when considered together with Australian Bureau of Statistics‘ research into Australians‘ general document literacy and numeracy,15 in particular their ability to meet the complex demands of a knowledge-based economy, suggest that about one in two Australians do not have the skills required to make informed choices in their interactions with the financial services sector.16 There is also an identifiable age link, with document proficiency tending to decrease with age.

14 For example the 2008 ANZ study of financial literacy found that ‗67% of respondents said that they understood the principle of compound interest, but only 28% were rated with a good level‘ of comprehension when they solved the problem‘, ANZ Banking Group Limited, ANZ survey of adult financial literacy in Australia, (The Social Research Centre) ANZ Banking Group, Melbourne, 2008, p. 19.

15 As part of an international study, the ABS measured skills in document literacy, prose literacy, numeracy and problem solving and found that approximately 7 million (46%) of Australians (and 7.9 million (53%) of Australians aged 15 to 74) had proficiency less than the minimum required for individuals to meet the complex demands of everyday life and work emerging in the knowledge-based economy‘ for document literacy and numeracy respectively‘, Australian Bureau of Statistics, Adult literacy and life skills survey results, cat. no. 4228.0, ABS, Canberra, 2006, p. 5.

16 These findings have implications for our regulatory regime, which relies upon disclosure as a critical element of our consumer protection system.