In April 1998, the G221 formed three working groups to examine issues relating to the stability of the international financial system. One group considered the contribution transparency and accountability could make to improving economic performance.
Improved transparency contributes to a more efficient allocation of resources by: ensuring market participants have sufficient information to identify risks; informing market expectations; contributing to the effectiveness of announced policies; and ultimately enhancing the stability of financial markets by assisting in the prevention of a build up of financial and economic imbalances.
The Working Group's October 1998 report noted that improvements in transparency depend on the implementation of internationally recognised disclosure standards, for which the economic benefits of transparency provided the strongest incentive. The incentive for compliance would be strengthened through monitoring or independent assessment of an economy's observance of recognised disclosure standards, including through publication of a transparency report.
The Working Group recommended that the International Monetary Fund (IMF), in the context of its Article IV consultations, prepare transparency reports for economies summarising the degree to which the economy meets internationally recognised disclosure standards.
In their communiqu of 30 October 1998, the G7 Finance Ministers and Central Bank Governors called upon all countries which participate in global capital markets to commit to comply with a set of internationally agreed codes and standards, including for example, the IMF's Code of Good Practices on Fiscal Transparency. The G7 also called upon the IMF to monitor the implementation of these codes and standards as part of Article IV surveillance and to publish the results of its surveillance of compliance with these codes and standards in transparency reports.
Impetus for an Australian transparency report
In October 1998, the Australian Prime Minister commissioned a task force to advise on how Australia could contribute to international financial reform. The Task Force, chaired by the Treasurer, endorsed the G22 recommendation that the IMF prepare transparency reports, and recommended that, in addition, Australia take the lead in preparing a self-assessment transparency report, providing a format and methodology that other countries may choose to follow.
Scope
Both the report of the G22 Working Group and the G7 communiqu recommended that economies comply with various international disclosure standards, including:
- The IMF Code of Good Practices on Fiscal Transparency;
- The IMF Code of Good Practices on Transparency in Monetary and Financial Policies (currently in draft form); and
- International Accounting Standard Committee accounting standards.
This report is aimed at increasing Australia's ‘transparency about transparency’. It goes beyond discussing Australia's adherence to disclosure standards such as those above, to discuss also Australia's adherence to various other sound practice principles (legal and voluntary) that relate to the efficiency of financial markets. The body of the report provides contextual information on Australia's institutional framework and a brief discussion of Australia's adherence to various standards and generally accepted practices. A detailed discussion of Australia's transparency record is provided in attachments.
The report is divided into three sections:
- Transparency in government policies;
- Transparency in the private sector; and
- Transparency in economic and financial data.
Page viii provides a more detailed explanation of the layout of the Report.
Status of report
This is a self-assessment report. It was prepared by senior officials from the Department of the Treasury. The views expressed are not necessarily those of the Australian Government. The report has benefited from contributions from the Department of Finance and Administration, the Australian Bureau of Statistics, the Australian Taxation Office and the Australian National Audit Office. The Reserve Bank of Australia, the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority also provided assistance.
To enhance the integrity of the report, a panel of senior Treasury officials reviewed its content and production process. The review panel was assisted by IMF staff. The IMF does not, however, share responsibility for the content of the report.
The report presents a stock take of current Australian performance against a number of standards, some of which are still being developed. Furthermore, the methodology adopted for this report is somewhat experimental. It is anticipated that, as Australia and other countries develop expertise in preparing these reports, refined methodologies will be developed.
There are, then, three senses in which this report should be viewed as a ‘work-in-progress’: (i) Australia's transparency practices will continue to evolve; (ii) so too will the standards against which country performance might be assessed; and (iii) methodologies for making transparency assessments will also continue to evolve.
Structure of the report
Part I: Transparency in government policy
| Fiscal policy framework | |||
| Institutional framework | Page 3 | ||
| Transparency | Page 6 | ||
| Assessment against the IMF Code of Good Practices on Fiscal Transparency | Page 6 | Detailed assessment in Attachment A | Page 51 |
| Monetary policy framework | |||
| Institutional framework | Page 9 | ||
| Transparency | Page 11 | ||
| Assessment against the Draft IMF Code of Good Practices on Transparency in Monetary and Financial Policies | Page 11 | Detailed assessment in Attachment B | Page 93 |
| Foreign direct investment policy | |||
| Institutional framework | Page 13 | ||
| Transparency | Page 13 | ||
| Assessment of practice under the OECD Code of Liberalisation of Capital Movements and the National Treatment Instrument for Foreign Controlled Enterprises | Page 14 | Detailed assessment in Attachment C | Page 129 |
Part II: Transparency in the private sector
| Corporate governance framework | |||
| Institutional framework | Page 19 | ||
| Transparency | Page 21 | ||
| Assessment of adherence to the OECD Draft Corporate Governance Principles | Page 22 | Detailed assessment in Attachment D | Page 133 |
| Financial reporting requirements and accounting standards | |||
| Institutional framework | Page 23 | ||
| Transparency | Page 29 | ||
| Assessment of harmonisation of accounting standards with those determined by the International Accounting Standards Committee (IASC) | Page 30 | Detailed assessment in Attachment E | Page 145 |
| Assessment of compliance with international audit standards issued by the International Auditing Practices Committee of the International Federation of Accountants | Page 30 | Detailed assessment in Attachment F | Page 161 |
| Corporate insolvency | |||
| Institutional framework | Page 31 | ||
| Transparency | Page 34 | ||
| Assessment of consistency with the features and principles contained in the October 1998 report of the G22 Working Group on International Financial Crises | Page 34 | Detailed assessment in Attachment G | Page 175 |
| Financial sector supervision | |||
| Institutional framework | Page 35 | ||
| Transparency | Page 37 | ||
| Assessment against the Draft IMF Code of Good Practices on Transparency in Monetary and Financial Policies | Page 37 | Detailed assessment in Attachment B | Page 112 |
| Assessment of conformity with the Core Principles for Effective Banking Supervision | Page 38 | Detailed assessment in Attachment H | Page 179 |
| Assessment of the collection and reporting of international banking statistics for the Bank for International Settlements | Page 38 | ||
| Assessment of conformity with regulatory principles developed by the International Association of Insurance Supervisors | Page 38 | ||
| Assessment of conformity with International Disclosure Standards for Cross-border Offerings and Initial Listings by Foreign Issuers developed by the IOSCO | Page 39 | ||
| Assessment of conformity with the Statement of Objectives and Principles of Securities Regulation developed by the IOSCO | Page 41 | Detailed assessment in Attachment I | Page 199 |
Part III: Transparency of economic and financial data
| Macroeconomic data | |||
| Institutional framework | Page 45 | ||
| Transparency | Page 46 | ||
| Assessment of adherence to the Special Data Dissemination Standard (SDDS) | Page 47 |
1 In response to the crisis in Asia, Finance Ministers and Central Bank Governors from 22 systemically significant economies met in Washington D.C. to examine issues related to strengthening the international financial architecture. Members at the first meeting were: Australia, the G7, Argentina, Brazil, China, Hong-Kong-SAR, India, Indonesia, Korea, Malaysia, Mexico, Poland, Russia, Singapore, South Africa, and Thailand. Officials from the International Monetary Fund, World Bank, Bank for International Settlements and the Organisation for Economic Co-operation and Development also participated.
A second meeting was held in Washington on 5 October 1998. The Netherlands, Belgium, Switzerland and Sweden also participated in the second meeting.