The Australian Financial System

The Australian financial system is made up of a range of different financial institutions, financial markets and financial market infrastructures. Together, they form a network that connects households and businesses so they can save, borrow, invest, insure, make payments, manage financial risk and plan for the future.

Financial institutions

Financial institutions are the organisations that provide financial services to households and businesses. The main types of financial institutions in Australia include:

  • Authorised deposit-taking institutions (ADIs), such as banks, building societies and credit unions, which provide core banking services like deposits and loans.
  • Funds managers, such as superannuation funds, trusts and other asset managers, which help households and businesses invest and manage wealth.
  • Insurers, such as life, health and general insurance companies, which provide protection against financial risks.
  • Other non-ADI financial institutions, such as finance companies, broker-dealers and securitisers, which offer specialised financial services and products.

Financial markets

Financial markets are where trading in financial instruments occurs. The main types of financial markets in Australia include:

  • Debt markets, such as those for government and corporate bonds.
  • Money markets, where participants trade short-term, highly liquid financial instruments such as bank bills.
  • Foreign exchange markets, where participants buy and sell different currencies.
  • Equity markets, where company shares are listed, bought and sold.
  • Commodities markets, such as those for agricultural products, energy resources and precious metals.
  • Derivatives markets, such as those for swaps, futures and options contracts linked to equities, fixed-income securities and commodities.

Financial market infrastructures

Financial market infrastructures are the systems and platforms that connect the financial system and keep things running smoothly. The main types of financial market infrastructures in Australia include:

  • Payment systems, which are the tools and networks that enable consumers, businesses and other organisations to transfer funds to one another.
  • Securities settlement facilities, which make sure that when people trade shares and bonds, the deals complete properly so that both sides get what they agreed to.
  • Central securities depositories, which keep records of who owns shares or bonds and stores them safely, and handle things like paying dividends or redeeming bonds when they mature.
  • Central counterparties, which act as middlemen in financial trades, standing between buyers and sellers to reduce the risk that one side won’t pay or deliver what they promised.