Managing "public expectations of when and where governments will intervene" is emerging as one of the chief themes of the Financial System Inquiry. David Murray, chair of the inquiry, said yesterday: "the GFC shifted public expectations …. The question for us now is whether we are content to accept that shift." He reminded his audience, the Australian Business Economists, that Stan Wallis, who chaired the prior inquiry in 1997 said: "Regulation cannot and should not ensure that all financial promises are kept. … Primary responsibility should remain with those who make financial promises. "It would be inequitable for the government to underwrite some financial promises but not other promises made by participants in the broader economy." Murray acknowledged that "there is a long global history of governments using taxpayer funds to support distressed businesses in the financial system," including, in Australia, the wholesale debt guarantee, the Financial Claims Scheme and support for the securitisation market. Touching on one central controversy, he said: "the perception of the government as a backstop may provide competitive advantages to some, and can distort prices and the efficient allocation of capital." He did not, however, sketch out any scenario on how to proceed. Anyone waiting on the inquiry's ideas on this topic will have to wait for its interim report, in July. One other theme canvassed yesterday by Murray was the flow of funds in the financial sector, where he observed: "we can expect Australia will reduce its dependency on traditional sources of international capital flows and tilt toward Asia." He also fretted over "a weakness of the superannuation system in the retirement phase." His third and final theme was technology where the big issue, he said, was balancing "a trade-off between stability (particularly of our payments system) and fostering an environment where innovation and technology can better meet user needs." "We will be posing questions in our Interim Report on a number of areas where technology is challenging existing business models, delivery channels and current regulatory settings," Murray said.