The Inquiry has been asked to examine how the Australian financial system allocates funding and risk to maximise growth opportunities for the Australian economy.
By allocating funding and risk efficiently, the financial system can promote higher productivity growth. Transparent and accurate pricing of risk ensures that risks can be distributed to entities that are willing and able to bear those risks.
The Inquiry has made the following observations about the allocation of funding and risk in the Australian economy:
- Ongoing access to foreign funding has enabled Australia to sustain higher growth than otherwise would have been the case. The risks associated with Australia’s use of foreign funding can be mitigated by having a prudent supervisory and regulatory regime and sound public sector finances.
- There are structural impediments for small- and medium-sized enterprises (SMEs) to access finance. These impediments include information asymmetries, regulation and taxation.
- Australia has an established domestic bond market, although a range of regulatory and tax factors have limited its development.
The Inquiry has identified a number of tax issues that affect the allocation of funding and risk in the economy. Those issues that are not currently under active Government consideration should be considered as part of the Tax White Paper process.