Introduction to the Forum on the Murray Financial System Inquiry

• Date: 01 June 2015
• Author: Ross Garnaut
• DOI: http://doi.org/10.1111/1467-8462.12108
• Published date: 01 June 2015

Policy Forum: The Murray Financial System Inquiry

Introduction to the Forum on the Murray Financial System

Inquiry

Ross Garnaut*

The Interim Report of the Murray Inquiry

1

was

released on 15 July 2014. The issues raised in

the Interim Report were the subject of a

meeting of the Melbourne Economic Forum

2

on 25 September 2014. The Final Report of the

Murray Inquiry was released on 7 December

2014.

The articles in this Policy Forum were f‌irst

presented at the Economic Forum. They

provide insights into the issues with which

the Murray Inquiry was grappling and provide

a framework for assessing some parts of

the recommendations of the Inquiry’s Final

Report. The insights are relevant to the debate

within the Australian community on the

Murray recommendations and related matters

of f‌inancial reform.

Some articles reach beyond the boundaries

of a report that has been put together with at

least one eye to possible adoption in the

foreseeable future. These present ideas that can

be taken up more energetically if unhappiness

over Australian economic performance makes

us less comfortable with incremental change.

My own assessment is that the Murray

Final Report is directed produ ctively at major

systemic issues and is analyticall y strong. It is

a high-quality contributi on to the Australian

discussion of f‌inancial system policy and

institutional reform. Un usually for off‌icially

sponsored reports on major po licy issues

commissioned by governme nts in recent

times, it shows strong signs of indep endence

from related business intere sts and political

government. The Final Repo rt is worth

reading for its illuminatio n of issues, as

well as for its many recommendati ons for

reform.

The articles in this Policy Forum take up an

important sub-set of the issues which are

examined by Murray. Although brief, they add

value by going further with economic analysis

on some issues or with the breadth of the

suggested agenda or because they look at issues

addressed by Murray from a different angle.

Davis, a member of the Inquiry, provides

analytical depth on competition and contest-

ability and their potential conf‌lict with other

desiderata including stability and consumer

protection. He introduces some special prob-

lems that have been increased by technological

change and the increasingly important role of

networks in provision of services. He draws

our attention to some of the literature that

helped to shape the recommendations.

Stevens places the Murray Inquiry in the

context of the history of f‌inancial sector reform,

to which the earlier reports of Campbell and

Wallis made large contributions. Both Davis an d

Stevens emphasise the high costs of f‌inancial

crises and therefore the high value of prudent

measures to avoid them. Australia was not

affected as muchas many other countries by the

Great Crash of 2008, but, they say, that argues

for maintaining strength in the f‌inancial system

and not for easing standards relative to other

countries. Davis and Stevens and the Murray

Final Report want us to strengthen our banks,

especially by increasing equity requirements.

The Murray recommendations for stronger

capitalisation have drawn predictable negative

comments from the commercial banks and we

* Melbourne Institute of Applied Economic and Social

Research, The University of Melbourne, Victoria 3010

Australia; email <ross.garnaut@unimelb.edu.au>.

The Australian Economic Review, vol. 48, no. 2, pp. 177–9

°

C2015 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research

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