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Philosophical Foundations of the Wallis Report

Published online by Cambridge University Press:  01 January 2023

Jeffrey Carmichael
Jeffrey Carmichael*
Affiliation:
The Financial System Inquiry
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Abstract

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The Wallis Report, adopted by the Government in September of this year, contained a wide-ranging set of reforms that are likely to alter significantly the style and structure of financial regulation in Australia. This survey offers some reflections on the Wallis Report, its key recommendations and the thinking underlying them.

The Committee saw market failure as the primary rationale for regulation. Markets fail to produce efficient, competitive outcomes for one or more of the following reasons: anti-competitive behaviour; market misconduct; information asymmetry; and systemic instability.

The Committee’s recommended reforms were designed to create a regulatory structure that matched the four motives for regulation. This will create a regulatory structure based on regulatory functions rather than institutions. The new structure should be more efficient, less duplicative and better able to cope with the regulatory pressures that are likely to emerge in coming years from on-going technological innovation.

Type
Research Article
Information
The Economic and Labour Relations Review , Volume 8 , Issue 2 , December 1997 , pp. 293 - 307
Copyright
Copyright © The Author(s) 1997

References

Notes

1. The Committee’s estimates of the costs and inefficiencies of the Australian financial system are presented in Chapter 6 of Financial System Inquiry 1997, Final Report, (Mr S. Wallis, Chairman), AGPS, Canberra.

2. Final Report, p. 233.

3. Ibid, p. 233.

4. The case for treating deposits and insurance as characterised by asymmetric information is relatively straightforward. The inclusion of superannuation in this category is less obvious. Ultimately, the Committee was convinced to include superannuation because of the consequences of promissory breach, the difficulty of assessing the quality of promises made and the additional commitment of Governmental promises in the form of tax concessions and compulsion. At the same time, the Committee acknowledged that the form and intensity of regulation involved in superannuation would be quite different than that applied to other prudentially regulated financial products (see the discussion on pp. 303-305 of the Final Report).