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The Australian economy is too reliant on the financial services sector, according to Michael McAlary, chief executive officer of Wealthmaker Financial Services.
Mr McAlary said Australia’s excessively large financial services industry will hinder economic growth.
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“In July 2012, the Bank for International Settlements (BIS) published a study on the banking systems of 22 countries over a 30-year period. Its findings were that if a financial services sector was too small in terms of size of GDP, then it was an inhibitor to economic growth, whereas if it is too large, it becomes a drag on economic growth,” he said.
“Financial institutions are mobilisers and astute allocators of capital, and are an enabler to sustainable economic growth. They are not in their own right producers of real economic growth.”
While Australia’s four major banks are all ranked in the top five companies listed on the ASX by market capitalisation, only three of the top 30 companies in the combined Dow/Nasdaq are financial institutions.
According to Mr McAlary, the USA has re-structured its economic base over the past 30 years to become less reliant on any one sector, while Australia has become obsessed with financial services.
“The USA has produced global IT corporations such as Microsoft, Apple, Oracle, Google, Yahoo!, Amazon and Cisco Systems and pharmaceutical and biotech companies like Merck, Gilead Sciences and Pfizer that through innovation are helping to transform the US economy,” he said.
Mr McAlary believes innovation is key to re-structuring the Australian economy and has called on the new Abbott government to implement strategies encouraging this.
“If Australia is to remain internationally competitive and experience continued economic growth in the future, the new Australian government should begin implementing strategies that will encourage and allow innovative and sustainable industries to flourish,” he said.
