The Financial System inquiry is, like the Campbell report in 1981 and the Wallis report in 1997, a once-in-a-generation chance to look into the health and sustainability of Australia’s financial system.
After receiving submissions from industry in March this year the members of the panel – which includes former CBA boss David Murray, Professor of Finance Kevin Davis at the University of Melbourne, former AMP CEO Craig Dunn, investment banker Carolyn Hewson and former CSL CEO Brian Mcnamee – have had 3 months to consider a myriad of competitive forces and interest groups, sort the wheat from the chaff and today has released its interim report.
The interim report says that “The Australian economy will face a number of opportunities and challenges in the coming decades. Each of these has implications for the financial system:
- Future financial crises: History has demonstrated that financial crises can and will occur at significant cost to the economy. Although we cannot predict their cause or timing, our financial system framework should reduce the likelihood and impact of such events.
- Fiscal pressures: The Commonwealth’s fiscal position will continue to come under long-term pressure, particularly from the effect of an ageing population.
- Productivity growth: On its current trajectory, productivity growth will not be able to sustain the same rate of income growth experienced over the past decade. The financial system has an important role to play in facilitating higher productivity growth through funding the economy more efficiently, including funding new businesses and using new technology.
- Technology change: The rapid pace of technology change has already had a significant impact on both consumers’ interaction with the financial system and
how the system functions. Although difficult to predict, future changes will present both opportunities and risks for the financial system and are expected to continue to have a significant impact.
- International integration: Although Australia’s key financial relationships remain with Europe and the United States, the weight of global economic activity is shifting towards Asia. This trend presents opportunities and risks for Australia.
More analysis to come.