This submission responds to the Terms of Reference for the Inquiry by canvassing the performance of the Australian financial system and identifying key issues to be considered by the Inquiry. The submission is structured as follows:
- An Executive Summary highlights the priority issues discussed in more depth in the submission.
- Part 1 outlines the objectives and functions of the financial system. This part considers some of the principles associated with the regulation of the financial system. The discussion of the underlying rationale for regulation and how current arrangements have evolved since the previous financial system inquiry assists in considering the appropriate regulatory arrangements for the financial system.
- Part 2 highlights issues affecting the effectiveness of Australia's regulatory architecture. A discussion of the regulatory architecture complements previous sections dealing with the strengths of Australia's regulatory approach by highlighting areas that warrant further consideration.
- Part 3 canvasses the priority sectoral issues affecting banking, superannuation, insurance and capital markets, drawing on the discussion of the objectives of the financial system and the principles of effective regulation in earlier parts.
- An Appendix covering Australia's saving and investment balance is provided to highlight the important role Australia's open capital account plays in enabling the Australian economy to access global capital markets, facilitating investment that has boosted Australia's capital stock and productivity.
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