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| Australian Financial System Inquiry | |
|---|---|
| Name | Australian Financial System Inquiry |
| Caption | 1981 Australian Financial System Inquiry report |
| Date | 1981 |
| Commissioner | 1981 Committee |
| Jurisdiction | Australia |
| Outcome | Financial deregulation, policy reforms |
Australian Financial System Inquiry The Australian Financial System Inquiry was a 1981 public review of financial regulation led by a committee of experts which produced a report that reshaped Reserve Bank of Australia policy, influenced Commonwealth Bank operations and guided reforms affecting the Australian Securities Exchange, AMP Limited and National Australia Bank. The inquiry’s recommendations fed into decisions by the Treasurer of Australia, informed the work of the Department of the Treasury and intersected with debates involving the High Court of Australia, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and state-based institutions such as the New South Wales Government.
In the late 1970s and early 1980s, Australia faced pressures from international developments including the Nixon shock, the 1973 oil crisis, the Bretton Woods system collapse and rising global inflation which affected Commonwealth Bank of Australia operations, ANZ Banking Group strategies and fiscal policy debates involving the Treasury (Australia), Department of Finance (Australia) and state treasuries. Domestic episodes such as debates over the role of the Reserve Bank of Australia versus the Commonwealth Bank and disputes involving the Australian Prices and Incomes Accord created impetus for a formal review endorsed by the Prime Minister of Australia and the Parliament of Australia. The inquiry drew on precedents including the Campbell Committee reviews, comparative studies of the Bank of England, the Federal Reserve System, Deutsche Bundesbank and Bank of Japan.
The inquiry received terms of reference set by the Treasurer of Australia and the Prime Minister of Australia that asked it to examine links between the Reserve Bank of Australia, the Commonwealth Bank, authorized deposit-taking institutions like Westpac Banking Corporation and non-bank intermediaries such as Australian Prudential Regulation Authority predecessors and the Insurance Council of Australia. Objectives included assessing the operation of the Australian Securities Exchange, capital account management linked to the International Monetary Fund, and the regulatory framework surrounding institutions like Suncorp and MetLife. The committee was charged to recommend reforms to promote competition among firms such as Colonial Limited, Perpetual Limited and Macquarie Group while considering implications for consumers represented by groups including the Australian Consumers Association.
The report recommended liberalization of interest rate controls and the phased removal of exchange controls, aligning with reforms pursued by policymakers such as the Treasurer John Howard’s successors and echoing recommendations from inquiries involving the Productivity Commission and the Hilmer Review. It advocated clearer division of responsibilities between the Reserve Bank of Australia and treasury institutions, the strengthening of prudential supervision anticipating roles later assigned to Australian Prudential Regulation Authority and Australian Securities and Investments Commission, and enhanced oversight of markets exemplified by the Australian Securities Exchange. Specific advice targeted deregulation affecting banks like Commonwealth Bank of Australia, National Australia Bank, ANZ Banking Group, and Westpac Banking Corporation and supported competition policies consistent with the Competition Policy Reform Act 1995 debates.
Implementation occurred through successive administrations involving treasurers such as Paul Keating and Peter Costello and regulators including leaders at the Reserve Bank of Australia and the later-formed Australian Prudential Regulation Authority and Australian Securities and Investments Commission. Reforms included the floating of the Australian dollar which tied into policies of the Treasurer of Australia and the Reserve Bank of Australia, removal of exchange controls affecting links with the International Monetary Fund and changes to bank licensing reflecting standards used by the Basel Committee on Banking Supervision. Legislative and administrative responses connected to debates in the Parliament of Australia and coordination with state authorities such as the Victorian Government and Queensland Government.
The inquiry’s recommendations accelerated modernization of institutions including Commonwealth Bank, ANZ Banking Group, National Australia Bank, Westpac Banking Corporation, AMP Limited, Suncorp, Macquarie Group and non-bank entities like Perpetual Limited and Colonial Limited. Markets such as the Australian Securities Exchange expanded, competition increased among life insurers like MetLife and superannuation funds connected with the Superannuation Guarantee (Administration) Act 1992 era. The regulatory landscape evolved toward the frameworks later embodied by Australian Prudential Regulation Authority and Australian Securities and Investments Commission, and interactions with international standards set by bodies like the International Monetary Fund, the World Bank and the Bank for International Settlements influenced capital flows and cross-border banking by institutions such as HSBC and Citigroup operating in Australia.
Later assessments, including reviews linked to the Productivity Commission, the Financial System Inquiry (2014) chaired by David Murray and inquiries culminating in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, revisited themes first raised by the 1981 panel. The legacy persists in debates among policymakers at the Treasury (Australia), academic analyses from institutions like the Australian National University and University of Melbourne, and in regulatory evolution reflected in legislation debated in the Parliament of Australia and decisions by the High Court of Australia. The inquiry is cited in scholarship from the Grattan Institute, commentary by media such as the Australian Financial Review and historical studies preserved by the National Archives of Australia.