For the financial system, the Global Financial Crisis of 2008/9 has been the largest seismic event for at least 70 years. While the crisis is not entirely over, it has now shifted mostly to fiscal problems, concentrated mainly in Europe and the United States. That clears the way for some re-evaluation, in the light of the crisis, of the role of and underpinnings required for an effective system of finance. This paper seeks to do that in a New Zealand context, as background to the review by the Commission for Financial Literacy and Retirement Income of New Zealand's retirement income policies and arrangements.
The paper is in four parts. The first provides a general discussion of the roles of the financial system in the economy: what it does and why they matter, along with discussion of some of the foundations required for it to perform those roles effectively.
Part two briefly reviews aspects of the role played by the New Zealand financial system more specifically as it relates to retirement incomes. There are two main aspects to that: enabling accumulation of financial capital that people can take into retirement, and the financing of housing, a home being the other main asset that they take into retirement.
The third part addresses how and why in the GFC financial systems failed, and how the authorities have responded.
Part four draws out some of the learnings and lessons for the future.