The Financial System Inquiry, headed by David Murray (former Chairman of the Future Fund and CEO of Commonwealth Bank) has released its Interim Report (all 460 pages of it). For those who haven’t been following this, this inquiry (which is already known as the Murray inquiry) is the natural successor to the Wallis (1997) and Campbell (1981) inquiries, which recommended big changes to the Australian Financial system of regulation at the time (APRA and ASIC were one result of the Wallis inquiry, and many of the changes deregulating the system in the 1980s were recommended by Campbell’s report).
I haven’t managed to read all those 460 pages yet, so I thought I would quickly post some reactions.
While the report addresses the whole financial system, much of the reaction came from the chapter on superannuation and in particular, on financial planning.
Peter Martin, in the Age and SMH, was typical:
Its most radical suggestion is that Australia follow the lead of Chile and auction off the right to be the nation’s default super fund. The firm offering to charge the lowest fee would become the default provider for all new accounts until the next auction. Chile used the system to cut default fund fees by 65 per cent…
It is caustic in its findings about superannuation tax concessions observing that most go to the top 20 per cent of earners, people “likely to have saved sufficiently for their retirement even in the absence of compulsory superannuation or tax concessions”. It is likely to recommend changes to the system of super tax concessions that could form part of the white paper on tax reform to be developed next year.
Business Spectator had substantial coverage – my favourite post was this one, which posted their favourite charts from the report.
In the AFR, the headline was “Big Four Banks the Murray Inquiry’s big losers” . In Christopher Joye’s piece, notwithstanding the headline, the main reason for the loser tag for the banks was actually about superannuation and financial planning commissions, with the final comment:
If the inquiry fulfils its promise, it will be bad news for the larger, vertically integrated institutions that have profited so handsomely from a competitive and regulatory playing-field that historically rewarded size and scale.
If you want to read a bit more than the financial press, but can’t quite get through the whole thing, the big professional services firms have done some of the work for you:
Deloitte has an executive summary of a response, and then a handy summary of the sections. Ernst & Young has a nice summary without much opinion (handy if you’re trying to get to the bluffer’s guide).
And on 30 July, the Actuaries Institute is running an insights session to go through the key issues of the interim report. Following this, input will be sought from attendees for the Actuaries Institute’s response to the report (reading the Actuaries Institute submission might be useful if you are going to attend this one).
Inquiries like these don’t immediately change the system. But looking back at the last two, the changes to our regulatory system that came from them were profound. I’ll be trying to pay more attention between now and the final report. And if you are keen, second round submissions are due by 26 August.