House of Representatives Committees
Standing Committee on Economics, Finance and Public
Terms of reference
The Committee is concerned about the importance for economic policy
of the rapid growth in the extent, speed and sophistication of international
financial markets, aided by improvements in communications and information
technology. Some of the implications of these developments for the stability
of international markets and for the avoidance and management of crises
were taken up in the recent Prime Ministers' Task Force on International
Financial Reform which the Treasurer, the Hon Peter Costello MP, chaired.
But there are many implications for other areas of policy.
One area of central importance that has not been looked at recently
concerns the impact of globalisation on the conduct of macro-economic
policy. International financial markets clearly attach importance to the
quality of a country's macro-economic policies in assessing its attractiveness
as a destination for investment. Policy makers must therefore give weight
to likely market reactions in the formulation of policy. Some observers
see that as a healthy discipline; others have viewed it as impinging on
the sovereignty of economic policy. The inquiry could examine these issues,
bearing in mind that market judgements can be fallible, and consider the
implications of the potential volatility of international markets for
the design of macro-economic policies. It could also consider options
for improving the information available to markets in order to help ensure
their judgements are better based.
Terms of Reference
The following terms of reference were referred by the Treasurer, the
Hon Peter Costello MP, on 30 March 1999.
'The globalisation of international financial markets has raised important
issues for the conduct of macroeconomic policy and the operation of financial
markets. This inquiry will examine these matters with particular reference
- The implications of the globalisation of international financial markets
for the conduct of fiscal and monetary policies in Australia, including
medium-term and other strategies to cope with potential volatility in
- Information requirements for the stable and efficient operation of
international financial markets, including the provision of information
by governments and disclosure by market participants, especially by
large market participants including highly leveraged institutions.
- The relevance to these issues of recent developments in the international
framework for financial regulation.'
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