Government begins process to reform financial system

Australia’s financial system and superannuation system are to be the subject of two separate reviews by the Productivity Commission.

The federal government has asked the Productivity Commission to undertake an inquiry into competition in Australia’s financial system, with submissions due by 15 September.

This broad inquiry will look into products and services provided to households, small businesses and large corporations, as well as financial system infrastructure.

The scope of the inquiry (excluding the segments in grey)

The times they are a-changin’

New technologies are creating rapid evolution in the financial system, according to the Productivity Commission.

This can deliver better value to consumers but can also make it harder for new companies to enter a market and challenge the incumbents.

The Productivity Commission said a balance needs to be struck on regulation – too much might stifle business but too little might threaten consumers’ rights.

“For consumers, a competitive financial system should deliver products that fit individual needs, and are accessible and flexible,” it said.

“Competition in the financial system should work in concert with stability and the smooth operation of financial markets. This is particularly the case in times of global uncertainty, given the interconnected nature of global financial markets.”

World-first superannuation review

The Productivity Commission will also review the competitiveness and efficiency of the superannuation system, with submissions due by 21 August.

No other country has ever taken such a comprehensive look at the competitiveness and efficiency of a superannuation or pension system, according to the Productivity Commission.

“The sheer size of the superannuation system, with more than $2 trillion of Australian assets, combined with its compulsory nature, highlights the importance of this inquiry,” it said.

“There could be very large gains to the community from increasing the system’s efficiency. And competition is often the impetus to promote efficiency and members’ best interests – an important means to a wellbeing end.”

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