Who needs a review of the financial system in Australia? the case of the Wallis inquiry
Australian Journal of Political Science
The Howard government reorientated the then existing institutionally-based financial regulation towards a functionally-based regime with new prudential and disclosure regulators in 1998. This paper uses the governmental agenda setting framework of John Kingdon (1995) to explain this financial regulatory change undertaken in Australia following the Wallis Inquiry (1996). It also examines the role of the Inquiry in the policy process. It will show that the financial regulatory change was on the
... change was on the bureaucratic agenda of the Treasury Department. The abstract financial regulatory model (ie the 'twin peaks') was already out there. The Treasury sold this idea to the then Labor government Treasurer and Liberal Party opposition shadow Treasurer before the March 1996 federal election. However, Treasury's problem was that it had difficulty connecting its solutions to the political leadership during the years when Paul Keating was Prime Minister. A window of opportunity opened following the federal election with the new government, which was keen to achieve financial regulatory reforms to address future regulatory challenges proactively while the new Treasurer wanted to consolidate his power within markets and politics. Treasurer Peter Costello coupled the Treasury's solutions to problems and to political processes. The Wallis Committee was 'packed' by the government in accordance with its regulatory policy preferences. Its role was to legitimise the government's policy preferences publicly, and to transfer the 'governmental agenda' into the 'public agenda.' However, this was not a case of the government pressuring for its policy preferences over the financial services industry. In fact, the Inquiry was used as a 'venue' to generate industry and public support for the regulatory changes, and was used to build a network of alliances within and outside the parliament. The statesman who nominates the [members of a] commission can almost always determine the course that it is going to take, since he will have a pretty good knowledge beforehand of the minds of the experts whom he puts on it, while of course, avoiding any appearance of 'packing' of [sic] his team.