Root and branch review of the nation’s financial system

The Federal Government has announced an inquiry into Australia’s financial system to make recommendations on how best to foster efficiency, competitiveness and flexibility.

As part of the inquiry process the government has released draft terms of reference for the review and is inviting submissions from all interested parties and organisations. The broadly designed draft terms of reference are charged with examining how the financial system can support Australia’s evolving needs and encourage economic growth and include:

  • a review of the developments in the Australian financial system since the previous 1997 financial system inquiry (the Wallis inquiry) and the global financial crisis
  • a dissection of the philosophy, principles and objectives underpinning the development of a well-functioning financial system
  • identifying and considering the emerging opportunities and challenges that are likely to drive further change in the financial system
  • recommending policy options that:

-         promote a competitive and stable financial system that improves productivity growth

-         promote the efficient allocation of capital and cost efficient access and services for users

-         support individuals and businesses to be reasonably able to manage their finances by understanding risks and rewards in the financial sector

-         foster dynamic and innovative financial service providers or

-         relate to other matters that fall within this terms of reference

  • an account of the regulation of the general operation of companies through corporations law to the extent that these impinge on the efficiency and effective allocation of capital within the financial system and
  • an examination of the taxation of financial arrangements, products or institutions to the extent that these impinge on the efficient and effective allocation of capital by the financial system.

The inquiry has been asked to also take account of the operation of monetary policy and the Reserve Bank of Australia in its recommendations.

The draft inquiry terms of reference have been released for a two-week consultation period with the government noting that there will be further opportunities for stakeholders to comment on substantive policy issues once the inquiry is under way. The final terms of reference and the final composition of the inquiry will be announced in mid-December, with the inquiry to publish an interim report by September 2014 and deliver a final report by November 2014.

The draft terms of reference can be viewed on the Treasury website.

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