The Australian Centre for Financial Studies launched the "Funding Australia's Future" project on the 10th July, 2013 to undertake a stock-take of the Australian financial system, and its role in facilitating economic growth within the wider economy.
The productivity of Australia’s financial system is one of the key determinants of Australia’s overall economic performance and the well-being of its population. Throughout the economy, the finance sector underpins the efficient allocation of existing resources, the accumulation of resources for future use and the management of risk. It affects the performance of every aspect of the economy either directly or indirectly.
Stage one of the project sets the scene, establishing an evidence base which assists in identifying issues that warrant more detailed examination. Daniel's paper, “Improving Australia’s Financial Infrastructure”, casts a wide net over Australia’s financial infrastructure. It identifies six key functions for a financial services sector: clearing and settling payments; pooling resources and subdividing shares in firms and investment vehicles; transferring resources across space and time; managing risk; disseminating information; and governance – including the management of incentive issues and information asymmetries. These six functions provide a prism through which he assesses Australia’s financial architecture.
More broadly, the three papers in stage one of the project flag a number of issues relating to the functioning of Australia’s finance sector and its ability to allocate capital for the long term benefit of the economy:
AFR subscribers can read more on AFR.com.au, including commentary on Daniel's paperhere.
The report was widely covered in the Australian Financial Review. If you have access to AFR online, you can read the various articles below:
Australia has a pressing need for substantial infrastructure investment to support the nation’s long-term growth. Key areas include metropolitan road and rail transport networks, long distance inter-city travel, social infrastructure such as hospitals and schools, and national fibre consumer telecommunications.
In the post-GFC environment, financing constraints mean that traditional public private partnership models cannot be used for projects significantly larger than $2bn to $3bn. Indeed, for these projects the choice of a conventional PPP may constrain competition, increase pricing and place additional pressure on government balance sheets.
The White Paper "Building Australia", which I helped to write, explored new delivery models and financing structures that can unlock much larger projects. These ideas have been widely field tested with stakeholders from around the world, and we are continuing to refine them in the light of these discussions. We welcome your own thoughts and commentary as well.