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Connexus : Issue 41
I f it ain’t broke, don’t fix it, so the adage goes. There is a growing belief, however, that the financial system, which helped Australia sail through the global financial cr isis relatively unscathed, is overdue for a thorough investigation. With the landmark Wallis repor t of 1997 the last time an inquiry of this scope was held, the aftermath of the GFC has some leading economists and industr y groups believing it is time for a full-fledged independent inquiry into the regulator y framework of the Australian banking sector, amid concer ns stability has skewed in favour of the major bank s at the expense of market competition and consumers. It’s not the first time for such a call for change. In 2009, a group of leading economists called for an update of the Wallis report. The proponents included Professor Ian Har per, a member of chair man Stan Wallis’s review team and now a par tner at Deloitte Access Economics. He is one of the authors of a new report from the economics advisor y practice that suggests a new road map is required to supersede the Wallis report as a result of the GFC. The report points to an imbalance between stability and competition in the nation’s banking sector. One of the key claims in the Deloitte ‘Competition in Banking’ report, commissioned by Abacus, is that a too-big-to-fail guarantee from government for the major banks has given them an advantage over smaller institutions @ Briefly Australia’s financial system was robust enough to survive the Global Financial Crisis but questions are now being asked about its suitability for the future. Calls are growing for a Wallis- style review of the system to update the assumptions and goals of the inquiry held 15 years ago. Critics of the current system say the focus on stability is leaving competition and innovation under threat. www.abacus.org.au 31