Treasurer Joe Hockey, Assistant Treasurer Arthur Sinodinos and Finance Minister Mathias Cormann should think outside the box as they consider who to appoint to the government's stocktake of Australia's financial system that begins early next year.
Former Commonwealth bank and Future Fund boss David Murray has been most often mentioned as a possible head of the financial system inquiry. Former NAB executive Steve Tucker and economist and former Wallis financial system inquiry member Ian Harper have been mentioned as possible members.
This is an inquiry that will succeed if it avoids radical change, however. Coming after the Campbell inquiry in 1981 and the Wallis inquiry in 1997, it maintains a 16-year cycle, but it is being set up at a time when there is actually nothing major to do: the system architecture adopted after the Wallis inquiry is considered around the world to have worked well.
The inquiry should be conducted by people who understand how the system currently works, but have no fixed view about how it should work in future. An understanding of the global crisis, the regulatory response to it, and a working knowledge of the changes the internet is forcing will be key parts of the tool kit.
Murray, a high-conviction businessman who took CBA into the private sector and stepped down as chief executive in 2005, does not perfectly fit the bill.
However, few do. Those who are currently holding down high-level jobs are both time-poor and potentially conflicted. Those who have been out of the financial sector for a few years no longer have conflict-of-interest issues, but are in danger of being out of date.
A possible response? Go for generational change. Include some experienced heads to the inquiry, the secretariat that supports it and an international advisory committee that is also being pulled together, but weight the numbers towards the generation that has dealt first-hand with the crisis and its aftermath, and with the internet revolution.
Hockey will be looking for specific ideas, about how to better insulate the system from external shocks and mobilise domestic capital for growth-generating investment including, for example, infrastructure, and about how to improve liquidity in a national savings pool that includes long-term superannuation accounts.
If he wants the committee to imagine a future that internet-based platforms will dominate and then fine-tune the system to deal with it, he will avoid stuffing the inquiry with ageing baby boomers, and opt for youth.
Tick for big four
KPMG's survey of bank profits underlines that the banking part of the system isn't broken. The big four lifted cash earnings by 8.7 per cent to an aggregate $27.4 billion for the 2012-13 year, but their net interest margin actually declined slightly, from 2.17 per cent to 2.13 per cent.
Their return on funds invested was rock solid but not ridiculously high, rising from 15.9 per cent to 16.1 per cent during the year. This is well above single-digit crisis-affected returns being posted by big US and Euro-area banks including Citigroup, Barclays Lloyds, BNP, UBS, Santander and Bank of America, but banks including Wells Fargo, HSBC and JPMorgan are now posting returns above 10 per cent, and banks in Canada and Asia are beating the local big four.
The big four cut their aggregate cost-to-income ratio from 47 per cent in 2011-12 (and 50.7 per cent in 2003) to 44.3 per cent, ranking them alongside the Nordic banks as the most cost-efficient operations in the developed world.
They have also been redeploying margin into information technology, renewing their core platforms and rolling out internet-based applications including mobile banking.
Capitalised software balances on their books rose by a total of $1.5 billion or 23.5 per cent during the year. As KPMG notes, the spending is partly compulsory, as the banks introduce new processes to conform with post-global crisis rules and regulations.
However, it is also an investment that meets new consumer demand and lower costs, and the Australian banking sector is one of the few around the world that has been in a position to comfortably resource it in recent years.
The key statement in the Reserve Bank's Cup day announcement that its cash rate was staying at 2.5 per cent? That the Australian dollar is "uncomfortably high".
Without a cash rate cut that it clearly doesn't want to deliver at this time, I am not sure what the Reserve can do about it. The $A won't fall heavily until the US Federal Reserve begins tightening monetary policy, and with Washington due to argue about the debt ceiling again in January and February, that might not come until March.
Our central bank is agitated about the currency's strength, however, and it wants us to know.