David Murray says he will put Australia's dependence on foreign capital under the microscope as part a sweeping review of how well the financial system is working.
After being appointed to head the first review of its type since 1997, the former Commonwealth Bank chief signalled on Thursday that a key goal would be to curb the country's exposure to volatile global funding markets.
"The object of this review is the right one, and that's how do you fund the Australian economy and make sure that it's done in a way that contributes to growth and productivity in the economy," he told BusinessDay.
The nation's dependence on foreign funds was highlighted during the financial crisis, when the government was forced to guarantee the banking sector's wholesale liabilities.
"That foreign dependency caught us out, as it did many others during the crisis," he said. "And so it means there has to be an understanding of that dependency and the consequences for where we get capital to fund growth, and whether that's done on a productive basis. I think that is the question facing the economy and the system."
Under draft terms of reference, Mr Murray and a four-member panel will have a year to recommend how to create a more flexible and competitive system, without compromising stability.
Mr Murray, who ran Commonwealth Bank for 13 years, said the review's scope was necessarily broad, taking in the banks, insurers and the $1.75 trillion superannuation sector.
Another goal of the review is to look at how to allocate savings and foreign capital more efficiently.
"When you're dependent on foreign capital you've got to use that capital very wisely, you've got to have a highly productive system that generates as much domestic savings as you can," he said.
"How the capital flows and how it's used, and whether there are inefficiencies in that, is probably the highest value-adding part of the work."
Mr Murray's comments came as the finance industry - including the biggest players, Commonwealth Bank, Westpac, ANZ and NAB - welcomed the review.
Westpac chief Gail Kelly said the financial world had undergone hefty changes since the financial crisis, and the bank looked forward to contributing to the review.
"While Australia fared well compared to most other countries, we must protect the resilience of our system for any future shocks," she said.