Brad Parry is a Senior Dealer at Australian Office of Financial Management, the Australian Government’s debt manager. He was invited to be a member of the Financial System Inquiry (FSI or “Murray Inquiry”) secretariat in 2014.
How did you get seconded to the FSI?
My “day job” involves focussing on yield curves and running bond auctions so when the secretariat for the FSIwas being formed, my office agreed to contribute a staff member and asked me to join the Secretariat for the year.
What was your role in the secretariat?
I was part of the “Super Team” we called ourselves; the team principally responsible for superannuation. My focus was on the retirement phase of superannuation, which is less developed than the accumulation phase due mostly to the young age of our system and the relatively small volume of assets in the retirement phase. The ageing population and maturing of the compulsory superannuation system mean that retirement income issues will continue to grow in importance over the next few decades.
My work was varied and ranged from drafting chapters of the reports, meeting with stakeholders including the Actuaries Institute, to holding the microphone at public forums.
|6,500 – number of second round submissions received after Interim report|
How did the FSI go about its work?
The FSI Committee was appointed by the Treasurer in late 2013. Members were David Murray (Chair), Kevin Davis, Craig Dunn, Carolyn Hewson and Brian McNamee. The Committee was independent of Government and given a broad Terms of Reference that involved examining how the financial system could be positioned to best meet Australia’s evolving needs and support Australia’s economic growth. An International Advisory Panel was appointed to provide expert international perspectives on aspects of Terms of Reference.
The committee made it clear that they wanted to develop a policy blueprint for the Australian financial system, with a long-term time horizon. The report and its recommendations should stand the test of time.
“there were no easy answers, and the Secretariat was constantly grappling with policy trade-offs in seeking to address problems” – Brad Parry
The Committee was supported by a Secretariat. There were around 25 of us – half from Treasury and the remainder from consultancy firms and regulators. An impressive eight per cent of the Secretariat were actuaries – Geoff Atkins and me. The Secretariat supported the Committee in its investigations and deliberations by preparing papers and advice on issues and possible directions for their consideration and decisions.
The Committee met fortnightly for most of the year – more often in the lead-up to finalising each of the reports. At meetings they discussed ideas, stakeholder perspectives, and material prepared by the Secretariat, and provided guidance and feedback to the Secretariat.
How did the FSI consult with stakeholders?
The Inquiry consulted widely. We received more than 280 first round public submissions at the end of March. The Committee and Secretariat met extensively with stakeholders through bilateral meetings, roundtables and public forums. Following the release of the Interim Report, more than 6,500 second round submissions were received. The Inquiry was fortunate that stakeholders were often keen to meet with us and to help in other ways – recognising the importance of a strong and efficient financial system to their professions, employers and country. The feedback we received was important for the Committee in its deliberations and recommendations.
Which of your skills were particularly valuable to the Inquiry?
Policy formation requires a completely different skillset to my usual work. Developing other skills was a large part of the reason I wanted to work on the FSI. With that said, there were times when I was called upon to undertake quantitative analysis and it was useful to have an actuary on the team when we dealt with external actuaries.
What was the communication dynamic like within the secretariat?
Communication amongst the secretariat was open and constant. Each day began with a quick “stand-up” meeting, where the leadership team would discuss the plan or priorities for the day and next few days. Forums were held to test ideas and proposals within the Secretariat. Everyone was encouraged to speak up and to contribute their perspective to issues throughout the Inquiry.
Actuaries can be quite purist in their recommendations, did you learn anything about the need for practical compromises?
It was important that we delivered a package of considered, tested and implementable recommendations. We had to recognise that there are costs to any reform and that we were not starting with a blank sheet of paper. The Secretariat was comprised of staff with a diverse set of skills and experience, which ensured a wide range of perspectives were brought to bear on any issue. Invariably, there were no easy answers, and the Secretariat was constantly grappling with policy trade-offs in seeking to address problems.
The ageing population and maturing of the compulsory superannuation system mean that retirement income issues will continue to grow in importance…”
What were your greatest learnings from working on such a huge piece of public policy?
Although there were a broad range of skills and knowledge within the secretariat, a significant report with such broad Terms of Reference required drawing on the expertise and resources of industry, government and regulators. While stakeholders presented views from their own perspectives, it was clear that many stakeholders were genuinely interested in promoting a more efficient financial system.
Many parts of the financial sector complained about “regulatory fatigue”. It was important that, where we made recommendations, there was a strong case for change and that the benefits outweighed the costs. Reform is never easy – if it were, it would have been done already!
How did actuarial advice direct particular recommendations in the final FSI report?
The Actuaries Institute was involved in the FSI in several ways. It made helpful and considered submissions on both the Inquiry’s Terms of Reference and the Interim Report. There were various meetings between the FSI and the Institute (and members).
The Institute convened a panel of experts to form a working group on retirement income issues which met several times and produced a short paper for the committee. The FSI also worked closely on retirement income projects with Peter Martin and Adam Franklin at the AGA; and Michael Rice, Nathan Bonarius and the team at Rice Warner.
Non-actuary team members were always impressed with the work and advice we received from actuaries. It was clear that the profession has a reputation for high-quality analysis of complex problems, thoughtful insight, independence and a focus on public policy.
What did you get out of the FSI experience?
I learned a lot this year. The work was different and interesting, and I made many new contacts and friends. There is also satisfaction in working on public policy and contributing to improving the financial sector. Seeing your work discussed in the press most days – including speculation about what your report may or may not recommend – is interesting too. The biggest challenge was working out of my comfort zone, in an ambiguous and constantly changing environment.
Would you recommend other actuaries to get involved in future reviews?
If you get the opportunity to work on public policy, and you are interested, absolutely do it. If you don’t get involved in public policy, you probably shouldn’t complain about the outcomes you get!
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