10: International integration

Australia has benefited substantially from financial integration with the rest of the world, most notably from trade and accessing international capital markets over many decades. Benefits have also flowed from opening up Australia’s financial services market to foreign competition and from exporting financial services to other markets, although these exports have not been as significant.

Since the global financial crisis (GFC), cross-border capital flows have declined globally, and the international regulatory response to the crisis has in part aimed to reduce the interconnectedness of the global financial system and increase its resilience to shocks. Although the risks are real, there remain long-term benefits from financial integration. The Inquiry supports efforts to drive greater international financial integration, provided they do not compromise appropriate standards for financial stability and conduct in Australia.

This chapter outlines the importance of international integration and provides a basis for engaging with stakeholders in more detail about the existence of impediments and which, if any, need to be addressed. It also discusses Australia’s exposure to increasing global regulatory influence and the need for better coordination on integration between Government, regulators and industry.The Inquiry has made the following observations about the international integration of the Australian financial system:

  • Although elements of Australia’s financial system are internationally integrated, a number of potential impediments have been identified. Financial system developments in the region will require continuing Government engagement to facilitate integration with Asia.
  • Government efforts to promote Australia’s policy interests on international standard-setting bodies have been successful. Domestic regulatory processes could be improved to better consider international standards and foreign regulation, including processes for collaboration and consultation for international standard implementation, and mutual recognition and equivalence assessment processes.
  • Coordination of Australia’s international financial integration could be improved.