The Australian Financial System in the 1990s

Two recurring themes arise from this discussion. The first is that financial liberalisation looks to have been much more successful than appeared to be the case a decade ago. In 1991, the Reserve Bank devoted its entire Annual Conference to a stocktake of the benefits and costs of financial deregulation (see Macfarlane (1991)). While the various papers were able to point to some benefits, including more effective instruments of macroeconomic policy, wider access to credit and greater financial innovation, they also observed that interest margins remained relatively high, record losses were being recorded by financial institutions, and the framework for prudential supervision and regulation had not kept pace with changes in the financial system. At the time, there was a sense that liberalisation had promised much, but delivered relatively little, other than a speculative property boom and a lot of wasted investment.