Australia’s financial system must be strong and stable. But equally, it should ensure that the households and businesses who use the financial system are well served.

It is most often competition that can deliver the price rivalry between providers that is necessary for consumers to share fully in the benefits of having a strong financial system.

More than just price rivalry, competition drives innovation and overall value for customers.

Some innovation in Australian financial services is clear. Australians have ready access to funds at all hours of the day, can get rapid home loan approvals, quickly and safely move money between accounts, pay for products with the tap of a card, smartphone or watch, and have investment portfolios managed by robo-advisers.

Value for customers is less obvious. Prices are not transparent and product choice is often vague or overwhelming. Regulation is dense and it may act against customers’ interests. Those who advise and assist customers face conflicting, unclear incentives.

In brief, we find that households and businesses may be paying, through unnecessary fees and low-value products, for a system that is exposed to use of entrenched market power.

This inquiry focusses on competition in Australia’s financial system as a means to improve consumer outcomes, enhance the productivity and international competitiveness of the financial system and the broader economy, and support ongoing innovation — without undermining financial stability objectives. Our recommended reforms are aimed at getting Australia’s financial markets to be workably competitive, with higher standards of respect for customer interests.

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