The utility of Australia's financial system over the last two decades is the subject of a harsh critique by one of the industry sectors that has most benefited from the "financialisation" of the economy."The finance sector is not as efficient as it could be," Industry Super Australia, the lobby group that represents industry funds, says in an analysis released yesterday."Notwithstanding that the finance sector has grown faster than any other over recent decades, and the sector is among the largest in Australia, the formation of capital attributable to financial intermediation is weak by historical standards," the lobbyist finds. "Capital formation facilitated by Australia's financial system is much lower" in recent decades, it says.In the paper, Industry Super advocates "reforms to encourage capital raising, and to create incentives for long-term investment in productivity-enhancing projects.""Consideration should also be given to reforms to ensure excessive secondary market trading does not run counter to these objectives.""It is possible for the financial services industry, like any industry, to be productive, but to be slow and costly in doing so, or to produce goods and services of poor quality," Zachary May, director of policy at Industry Super and Matt Saunders, a policy analyst, wrote. "Efficiency in the sense used in this report compares the level and price of economic resources (measured by value added) allocated to financial services against the level of capital formation attributable to financial intermediation.""More of the country's economic resources are allocated to financial services than to any other industry. "The per-unit cost of capital formation is actually rising. The capital formation efficiency of financial intermediation is below levels achieved decades ago, notwithstanding improvements in technology and other productivity enhancements. "This is in contrast to most other areas of industrial activity in Australia, which have seen the unit cost of output decline."May and Saunders also highlight the major structural change in the finance sector since 2006."The most striking feature of the Australian finance sector over time is the sustained growth as measured by value added. It is the fastest growing sector of the Australian economy over the last 30 years, and this is particularly pronounced in the last 20 years. "Over the previous 10 years, in the midst of the mining boom and the GFC, the financial services sector has sustained strong growth at 5.1 per cent per year, outpacing the 3.1 per cent growth rate of the mining industry."