Define what is meant by the financial sector. Explain why it is important that the government exercise some control over the financial sector. Explain how the Reserve Bank uses domestic Market operations in order to influence over all level of economic ac

Financial markets play a crucial role in the operation of modern market economies. They provide a return for those who have excess funds or savings, while making loan funds available to those who need additional money. Not only is the financial service industry one of the largest industry in Australia, but its actions also influence all other industries because of its key role in the economy. For this reason, the deregulation of the financial sector in Australia since the 1980s has brought far reaching consequences.

Financial markets are commonly divided into two main types -
• Primary markets involve direct transactions between purchases and the initial seller of some sort of security. A security is a document entitling its owner to a financial asset, such as a share in a company or interest payments on a debt. When a company is first floated on the stock market, this represents a primary market transaction. Companies that wish to issue securities to the general public ...