It has been a big week for the financial services sector. The much-anticipated Australia as a Financial Centre report (the Johnson report) was released and Austrade revised its figures on the contribution the sector made to the Australian economy.
According to Austrade data, the financial sector was the largest contributor to Australia's national output, employment and economic growth, generating more than 10 per cent of Australian output.
"Finance and insurance overtook the manufacturing sector in 2006 as the largest sector in Australia's economy. The sector directly generated 10.8 per cent or $118 billion of real gross value added for the fiscal year 2008/09. This contribution is up from 8.4 per cent or $50 billion two decades ago," Austrade said.
Commenting on the figures, Investment and Financial Services Association (IFSA) deputy chief John O'Shaughnessy said that in the past five years, the sector had been recognised as a major part of Australia's economy.
"It's not only a significant contributor . it's the fastest-growing sector of the Australian economy. A lot of that is driven by the super guarantee on the funds management side," O'Shaughnessy said.
The Future Fund also welcomed the Johnson report, which reaffirmed the government's commitment to promoting Australia as a leading financial services centre.
"We have an incredibly sophisticated financial system sitting in an Asian time zone and we have an opportunity to trade off some tax revenues for genuine growth of that system. That's a very serious opportunity," Future Fund chairman David Murray told The Australian Financial Review.
However, not all are convinced the glowing reports paint a realistic picture of Australia's financial services industry.
Writing in the The Australian Financial Review on Tuesday, Independent Strategies managing director Peter Haggstrom compared the sector to "an outwardly beautiful woman who goes home dateless from a ball".
Haggstrom said Australia's 0.2 per cent share of the global pension, mutual and sovereign funds market was an exceptionally low number given the size of the country's funds management sector.
He pointed to the tax system as being the major 'hold-back' factor.
"Once that is fixed nirvana will not only be glimpsed, it will be touched up, ever so gently," he wrote.
"Financial Services Minister Chris Bowen needs to put aside all his backslapping contained in this report and put it through an intellectually rigorous wringer."
Also on Tuesday, Australian Financial Review financial services commentator Tony Boyd said "Australia's quest to become a financial hub will require more than just attractive tax breaks".
Boyd said the decision taken by French bank Société Generale to shift its Australian-based operations to Hong Kong was an example of the fact there was still work to do.
Bowen acknowledged in an interview on Radio National that there was still a way to go before Australia clinched the title of a global financial centre.
"I think that [a barrier to achieving that goal] is that Australia is simply a long way from Europe, where a lot of the decisions are made and people in Europe say to me that they really like the Australian market . but it's a long way away," he said.
"So we need to do extra to combat that. We need to ensure that our tax system is as transparent and open as possible."
And so we continue to wait until the recommendations of the Cooper and Henry reviews are released.
