Delivering a speech at an FSC/Deloitte lunch in Sydney yesterday, Mr Brogden said domestic and international regulation can have “profound” effects on the financial system’s “integrity, efficiency, competitiveness and stability”.
“The FSC is evaluating the regulatory architecture of Australia’s financial system to assess what changes could be made to facilitate it better meeting these principles,” said Mr Brogden.
While he said the Australian system’s ‘twin peaks’ model with a corporate regulator (ASIC) and a prudential regulator (APRA) was “robust and appropriate”, Mr Brogden said “the scope and the scale of the two regulators needs to be examined”.
“On too many occasions over the past few years the Parliament has ceded its authority to regulators,” he said.
“The role of Parliament is to write the law, and the role of regulators is to enforce it,” said Mr Brogden.
He also announced the release of two FSC-commissioned research papers to assist the Murray Inquiry in its deliberations.
The first paper, prepared by Mercer, compares Australia’s asset allocation in superannuation to that of “other comparable private pension schemes around the world”, said Mr Brogden.
“Four of the five largest pension systems in the world – of which Australia is the fourth largest – have an allocation to equities of between 35 and 50 per cent,” he said.
He went on to list a number of reasons that explained the Australian system’s apparently high allocation to equities.
“The fact is when superannuation is compared objectively to other leading private pension systems in the world the allocation to equities is broadly in line and for APRA funds reflects rational decisions by investors,” said Mr Brogden.
He went on to discuss an FSC-commissioned paper authored by Professor Rodney Maddock titled Superannuation asset allocations and growth projections.
“Maddock finds that compulsory superannuation by adding to national savings will reduce our dependence on net foreign capital inflows delivering higher levels of domestic ownership,” said Mr Brogden.
“He finds that either foreign inflow will fall or Australian outward investment will rise to achieve this end. It may also reduce foreign ownership of Australian assets, and boost local investment,” he said.
