The Wallis Inquiry, an Information Brief from the Perspective of a Political Economic Historian

Abstract

This paper presents an overview of the findings, recommendations and the rationale of the Wallis Inquiry compared to those of a major competitor, a conference on the future of the Australian Financial System run by the Economic Group of the Reserve Bank of Australia. The conclusion of this overview is that although the Wallis Inquiry presents the potential for radical change in the financial system vis a changing of the deliniation between the banking and non banking sectors, in relation to loosening protective measures aimed at confining bank shareholdings, in relation to removing restrictive measures confining equity links between banks and customers and industrial investors, and removing measures preventing the opening up of the financial sector to more competition and more concentration, the final outcome will probably be minimalistic. One, because the position and lobbying power of the banking sector, combined with the countervailing power of providers of insurance and superannuation, will ensure their particular interests are protected. Two, because the power of the Australian Competition and Consumer Commission (ACCC) has been changed in terms of vetoing mergers and acquisitions in the financial sector, possibly deflecting flack from the government for unpopular decisions. Three, because the Reserve Bank of Australia remains vehemently oposed to the hiving off of prudential supervision to a new Commonwealth agency, The Australian Prudential Regulation Commission (APRC) as well as the combining of prudential supervision of all financial institutions in the one body. Finally, whether the approach of the Wallis Inquiry is adopted or not depends on the passage of legislation through both houses of parliament, a political factor which could mean that the Wallis Inquiry is merely an academic exercise in scenario analysis.