Against a background of volatile capital flows and a growing recognition that better liquidity management was needed, the Government instigated a major review of the Australian financial system. The Campbell Committee Inquiry in 1979 marked the first major wave of financial sector reform. This Inquiry responded not just to the increasing importance of NBFIs and the difficulties with operating monetary policy, but also answered the need for a review and assessment of the range of regulatory changes that had occurred on an almost ad hoc basis during the 1960s and 1970s.The Campbell Committee inquired into the regulation, control and structure of the financial system in order to promote efficiency, while at the same time ensuring the stability of the system.It released its report in 1981.The Inquiry recommended the removal of regulation that undermined efficiency, such as interest rate controls and lending restrictions, and the strengthening of prudential oversight to bolster stability. In its report, the Campbell Committee argued that deregulation would increase efficiency of the financial system in three ways:•    it would improve allocative efficiency by removing the barriers to the flow of savings into the highest-yielding investments.•    it would increase operational efficiency by reducing the very wide interest rate margins maintained by the Australian banks, and•    it would enhance dynamic efficiency in the form of greater financial innovation to meet the needs of consumers of financial services.The Committee suggested a number of reforms including the removal of ceilings on interest rates on bank deposits, the lifting of maturity restrictions on bank deposits, the introduction of a tender system for selling government securities, the relaxation of portfolio controls on savings banks, relaxation of capital controls and removal of restrictions on the entry of foreign banks. These recommendations were implemented in the first half of the 1980s.A further recommendation of the Campbell Committee was the floating of the Australian dollar. At the time there was increasing recognition in Australia and elsewhere that it was not possible to pursue an independent monetary policy while defending a fixed exchange rate with mobile capital. This broader concern, in conjunction with short-term pressures associated with speculation against the Australian dollar, led to the floating of the currency in 1983.As an entire generation had known only a highly-regulated environment, the Government understandably allowed time for the business community, bureaucracy and general community to absorb the Campbell Report. In 1983, the newly elected Labor Government adopted an investigation into the financial system having regard to the Campbell Report and the new government's economic and social objectives. The Report of the Martin Review Group strongly endorsed the major recommendations of the Campbell Committee and from then on the Government's commitment to deregulation was unreserved and, in rapid succession, the major recommendations of both reports were implemented.