World’s best tag for financial sector reforms

Reforms to Australia’s financial services sector have left the country’s capital markets in a better position than most other OECD nations, according to a new report from the National Competition Council.

The report, commissioned from the Allen Group, concluded that micro-economic reform of Australia’s capital market had kept it at the forefront of international best practice.

The Australian system was compared with those in New Zealand, Canada, the United States and the UK/EU.

The American comparison revealed that unlike Australia’s CLERP initiatives, which were initiated independent of specific market abuses, US capital market reforms have been largely in response to a series of corporate scandals.

New US compliance burdens are expected to be significant, the report warns.

“To the extent that this burden becomes onerous to investors or issuers, it may reduce the attractiveness of United States capital markets,” the report said.

The report also noted that: “During the last three decades, the Australian Government has commissioned a series of major financial sector reviews aimed at removing distortions and inefficiencies within Australia’s capital market as well as facilitating its integration globally”.

It said these reforms have seen Australia either move “in step or ahead of its international counterparts in terms of improving market efficiencies, integrating with global markets and adopting technologies to facilitate capital raising and exchange.”

Financial sector reforms globally have aimed to strengthen market integrity and rebuild investor confidence, the report noted, adding: “Australia has been proactive in this sphere, and continues to shore up regulatory mechanisms to protect market participants.

“In general, few lessons are gleaned from international efforts. No other country appears to have introduced a measure that Australia has not implemented or considered.

“Reforms to Australia’s capital markets are, within current market and technological contexts, already at or exceed world best practice.”

It said opportunities to further advance reform in this sphere appear limited.

The report also suggested that consolidation of some capital markets “would be advantageous”, and said an Australian/New Zealand alliance would be beneficial.