My year

In the day job, for most of this year I was seconded onto the Australian Government’s Financial System Inquiry. The Inquiry was established to provide a broad review of the Australian financial system, looking at system stability, competition, consumer protection, technological change and whether the system was serving the needs of users.

The Inquiry’s final report is now out and available here. It has received a lot of press here - I think my favourite article so far is this one (if you hit the paywall, google “David Murray has gone rogue” and try that link).

Among other things, there are recommendations to increase bank capitalisation, introduce new obligations on financial product issuer and distributors, and to hold a review into the ownership and use of customers’ financial data. But given my role in the Inquiry and the stage the Government is at - it is now seeking public comment - it’s not really appropriate for me to say which recommendations I support.

Possibly the most interesting recommendations are in the retirement income space. Australia has a compulsory superannuation system, where (currently) 9.5 per cent of our income is required to go into retirement savings. But after a lifetime of being forced to save, once we reach what is called the “preservation age”, you can take the money out. You are free to blow it on a holiday, sportcars or pension means-test exempt house, and then receive the pension.

To try to change this behaviour, the Inquiry recommended introduction of a default retirement product, which will have some mix of income flow and longevity insurance (so your money doesn’t run out before you die). It will be an interesting exercise to design a system where that default will be an successful anchor. It will require a lot of tax, pension and other social policy settings to stop people from ignoring that default and taking their lump of cash in another way.

The other big event of the year was the arrival of twin boys. We think they are identical - four months of confusing who is who is the basis for that - but DNA tests are on the way to confirm. And I’ll be keeping one locked in the cupboard for the next five years to prove to the genetic determinists that environment does matter.