Murray bides time for new finance review
David Murray, who steered the Commonwealth Bank through privatisation in the 1990s, says it is time for a proper review of the financial system, given the last review was nearly two decades ago.
His comments come after Joe Hockey, the shadow treasurer, last month said the Coalition would begin a comprehensive review of the country's financial system if it won the federal election.
"The last review by [Stan] Wallis recommended that a review be done within 10 years," Mr Murray said. "The system changes a lot, and the question to be asked isn't how [do] you regulate everybody as much as how does the economy get funded. And what is fundamentally different today is the size of the superannuation investment pool, and how that gets re-intermediated in the economy."
The last comprehensive review of Australia's financial system - the Wallis Review - took place in the mid-1990s, and reported in 1997 to then treasurer Peter Costello.
The biggest changes stemming out of Wallis were bringing about the so-called three peaks of regulation. Here regulatory functions were split between the Reserve Bank of Australia, securities regulator the Australian Securities and Investments Commission and the creation of the Australian Prudential Regulation Authority.
This went against the grain of other modern economies where the trend had been for banking regulators to be rolled up into a mega-prudential regulator. The review came just four years before the multibillion-dollar collapse of HIH Insurance in 2001.
"[The Wallis Report] set up a structure [for the financial system] and then soon after that we had HIH which forced the government to act on some aspects of the structure that needed reconsideration," Mr Murray said.
"After that John [Laker] took over the central role at APRA and his more scientific method of supervision has served them well."
Opposition spokesman on finance Joe Hockey has for the past few years been calling for a "root-and-branch" review of the architecture of Australia's financial system.
The Federal Treasury has also said that a comprehensive review of the country's financial system regulatory framework was needed in the wake of the global financial crisis.
Mr Murray, who is the former chairman of the Future Fund, also said Australia's three main financial institutions - the Reserve Bank, Treasury and the Australian Prudential Regulation Authority - should continue to balance transparency, independence and accountability, but that government needed to be more transparent about its dealings with the agencies.
"If you look at the lead-up to the global financial crisis and the post-crisis period, governments find it too easy to say, 'Well, the central bank's independent', or 'The numbers are from Treasury,' or 'The bank supervisor is independent'," he said. "[But] the reality is that the government remains accountable for the outcome."
Mr Murray said if he were asked to chair a review of the financial system he would give it "careful consideration". He also said he believed business confidence would pick up after the election if the election delivers a stable majority government.
And the new government would have to drive a productivity agenda that started to deal with the high cost structure of the economy.
Frequently Asked Questions about this Article…
David Murray is the former chief executive of the Commonwealth Bank and ex-chairman of the Future Fund. He has said he would consider chairing a comprehensive review of Australia’s financial system if asked, arguing the system needs a proper review because the last major review was nearly two decades ago.
A comprehensive review could lead to changes in how banks, regulators and superannuation funds operate and interact. That can affect market regulation, how investment funds are channelled into the economy, and ultimately investor protections and returns — especially given the growing size of the superannuation investment pool.
The Wallis Review was the last comprehensive review of Australia’s financial system, reported in 1997. It established the so‑called three peaks of regulation by splitting responsibilities between the Reserve Bank of Australia, the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA). It’s a key benchmark because it reshaped Australia’s regulatory architecture.
The article highlights that the size of the superannuation investment pool is a fundamentally different feature today. A review would likely examine how that pool is re‑intermediated into the economy — meaning how superannuation savings are invested through banks, funds and markets — which could influence investment rules, product design and flows into different asset classes.
Opposition finance spokesman Joe Hockey has been calling for a 'root-and-branch' review, and the Federal Treasury has also said a comprehensive review of the regulatory framework is needed in the wake of the global financial crisis.
Mr Murray said the Reserve Bank of Australia, Treasury and APRA should continue to balance transparency, independence and accountability. He also stressed governments need to be more transparent about their dealings with these agencies and reminded readers that the government remains accountable for outcomes, even when agencies are independent.
The article notes the HIH Insurance collapse in 2001 came soon after the Wallis Review and forced government action on aspects of the regulatory structure. It’s cited as an example that major failures can reveal weaknesses and prompt regulatory change — a point investors should keep in mind when evaluating system resilience.
Mr Murray suggested business confidence would recover after an election if it produced a stable majority government. He said a new government would need to drive a productivity agenda to tackle Australia’s high cost structure. Improved business confidence and productivity reforms can support economic growth, which is generally positive for investment returns over time.
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