The financial system plays an essential role in the functioning of modern economies: by efficiently allocating resources across space and time, it is instrumental to ensure long-term non-inflationary growth. Furthermore, from a central banking perspective, the financial system represents the primary channel through which monetary policy affects the economy.
Another important development was the abolition of capital controls and the floating of the Australian dollar. Prior to the 1980s, there were a range of constraints on capital flows that were intended to prevent or discourage firms from undertaking foreign borrowing. Since these controls were relaxed, banks and other corporations have obtained a significant proportion of funding from offshore bond markets.