Thank you for the opportunity to address the Asia Pacific Financial Markets Conference.
It is encouraging to note the theme of this conference: The Way Forward.
That theme is entirely appropriate in light of this week's comments by the International Monetary Fund that the Asian economy has turned the corner.
Confidence is returning to the region's markets.
That's good news, not only for the regional economies that have been hit hardest during this period, but also for those, like our own, which have flourished.
Ladies and gentlemen, the Australian Government has made no secret of its ambition to establish Australia as a centre for global financial services. In fact, my own Ministry was established specifically to oversee this goal.
But we recognise the best way forward is in partnership with our regional neighbours, not in isolation.
As the Prime Minister of Singapore, Mr Goh Chok Tong, said recently: "I think both of us will be better off with both of us succeeding as financial centres".
We can add the interests of Hong Kong to that equation, because working in isolation, we can all compete for a bigger slice of the regional financial services pie.
However, working in partnership, we can grow the pie itself and each take a larger piece of it. If the Asian regional economy is healthy, we can all prosper.
During this difficult period, Australia has come into its own in several ways.
We have come of age as an investment destination. But more importantly, we are providing the leadership required to help steer the region through these troubled waters.
The Australian Prime Minister has given strong personal support to restoring regional stability, particularly through his Task Force on International Financial Reform, which has made a number of recommendations.
Australia, as a consequence, is playing a key part in raising regional awareness of the role of improved transparency and accountability in increasing the stability of the international financial system.
And, we have also put our money where our mouth is.
We have increased our aid budget for Thailand and Indonesia. Indeed, Australia is one of only two nations to contribute to all three IMF assistance packages for Korea, Thailand and Indonesia.
The Prime Minister pledged $A50 million at the a APEC summit in Kuala Lumpur to provide advice and expertise in areas such as improving fiscal transparency, banking supervision and securities regulation.
In addition, Australian regulatory authorities are providing hands-on technical assistance in financial sector supervisory skills.
Then there are the stories of innovative Australian companies providing technological know-how to the financial sector.
Companies like ComputerShare, which provides financial software for exchanges.
Its SMARTS system -- already installed at the Jakarta Stock Exchange and the Moscow Inter-bank Currency Exchange -- will operate at the Hong Kong Stock Exchange and the Hong Kong Futures and Securities Commission from July 1.
Australia is in an excellent position to provide the support I have just outlined because of our remarkable performance throughout the regional financial crisis.
In fact, just this morning, Merrill Lynch in the South China Morning Post described Australia's economy as "the wonder of Asia Pacific".
But this performance has not occurred by accident.
The Howard Government, since coming to office in March 1996, has pursued a credible, transparent and forward-looking framework for macro and micro economic policy.
We have returned the Government budget to surplus, through a major program of fiscal consolidation to promote increased national saving.
We have provided greater certainty of the independence and objectives of our central bank, the Reserve Bank of Australia.
We have undertaken a series of financial sector reforms, which I will detail later.
And, as a result of these policies, Australia -- in a weak world economy -- recently recorded its fifth consecutive quarter of growth of 1 per cent or more.
Our economy grew by 5.1 per cent in the 1998 calendar year. It is growing faster than the G7, faster than the OECD average, and faster than the much lauded US economy.
In fact, our policies have delivered subdued price pressures, moderate wages growth, ongoing productivity growth and healthy corporate profits.
More broadly, they have played a central role in boosting international investor confidence in Australia.
As Paul Krugman recently wrote in Fortune Magazine: "Australia, in case you didn't know, is the miracle economy of the world financial crisis".
And the International Monetary Fund said recently our reforms had "built the foundation for Australia's impressive record of strong growth and low inflation in recent years."
In other words, our economic performance is a direct result of the reforms we have delivered over the past three years.
Without them, we simply could not be in the strong position we are today.
They are an integral part of our claim as an international investment location. They show that we have got the foundations right.
Australia is now looking to expand its financial centre activity beyond its borders, and we have four key points on which we have built our reputation as a centre for global financial services.
One, we offer deep and liquid financial markets.
Two, we have a well-educated, highly affordable, multi-skilled, multi-lingual workforce.
Three, we provide a secure business environment -- offering political stability, a sound and effectively regulated financial sector, and world-class commercial infrastructure.
And finally, we have an eye to the future, with an ongoing reform process to prepare Australia for the challenges of the new millennium.
Turning to the first point, Australia has naturally developed financial markets, which are liquid, transparent and well run. Its participants are innovative and skilled in dealing with a range of sophisticated products.
We are particularly competitive in areas such as financial futures and options. But in just about every area -- whether it's equities, bonds, synthetics or managed funds -- we continue to punch above our weight.
The 1998 Australian Financial Markets Association survey bears this out.
In the 12 months to July last year, total turnover in Australian financial markets rose 13 per cent to more than $A34,500 billion.
This included a 22 per cent increase in sharemarket volumes, a 70 per cent rise in currency options turnover and a 29 per cent increase in repo turnover.
One of the reasons for our growing appeal is the exceptionally high standard of the security and level of service offered by our markets.
Global Securities Consulting Services rated the Australian equities market as one of the top 3 in the world for equity settlement services, operational risk and value for money -- and has done so 4 times in the past 5 years.
Australia also has a time zone advantage, which enables us to span the close of business in the United States and the opening of Europe's trading day.
This was demonstrated perfectly with the launch in January of the Euro, where our time zone advantage meant Australian forex dealers were among the first to actively trade the new world currency in a liquid market.
Of course, the quality of our financial markets would be irrelevant without a skilled workforce.
Our workforce is highly educated 42 per cent hold university, trade or diploma qualifications. That is double Singapore's rate. In addition, 29 per cent of Australians with tertiary degrees also have post-graduate qualifications.
Our workforce is multi-lingual -- a product of a multicultural community that has benefited from more than two centuries of immigration.
In fact, more than 2.4 million Australians -- 13 per cent of the population -- speak a language other than English at home. And about 800,000 speak an Asian language.
This ensures companies can draw on skilled managerial and technical staff, who are also fluent in the languages of the region.
Which also indicates that Australian financial markets are an excellent training ground for key personnel.
Our workforce is also very affordable by international and regional standards -- with executive salaries up to 58 per cent lower than in Hong Kong.
And our reputation for industrial disputes is now a thing of the past.
Our labour market reforms have resulted in a 40 per cent reduction in working days lost over the past 2 years.
Our third major foundation as a centre for global financial services is our secure business environment - security based largely on the world-class regulatory regime we have established.
This was not a knee-jerk reaction to the events in world financial markets but a considered policy that formed part of our Government's election platform in March 1996.
Last year, we introduced an improved regime for financial system regulation at the Commonwealth level, following the most fundamental stocktake of the Australian financial system and its regulatory framework in almost 20 years.
This regime underpins our financial system with security and certainty -- ingredients vital to investor confidence.
It allows the financial sector to operate more freely and more efficiently but at the same time tightens the safety net for consumers.
In this way, the financial sector is given the flexibility to innovate and adapt, without in any way undermining its stability or the strength of consumer protection.
We have achieved this by streamlining our regulatory bodies, giving them clearly defined responsibilities and ensuring they co-operate with each other to prevent any regulatory gaps.
Ladies and gentlemen, the International Monetary Fund has hailed these changes as "pathbreaking reforms which put Australia at the forefront of international practice".
We are now embarking on the second tranche of our regulatory reform, focussing on corporate law.
Our Corporate Law Economic Reform Program has the same goals in mind -- streamlining regulations, while maintaining consumer protection and market integrity.
Legislation is now before Parliament that will give our accounting standards a more commercial and international focus, streamline fundraising regulation, clarify directors' duties with safe harbour provisions - and facilitate a more competitive takeover market.
We also intend to simplify regulations relating to the provision of financial products.
I would be remiss if, in talking about our business environment, I didn't mention the Australian taxation system.
The Australian Government recognises the need for an attractive taxation regime in this highly competitive global environment.
But where we offer tax concessions and investment incentives, it is with a view to building sustained and meaningful investment relationships. We want investors with a long-term commitment to Australia and the Asia region.
To that end, we have moved to increase the attractiveness of the tax regime for Offshore Banking Units, by extending the available tax concessions.
Funds managers, life insurance companies and providers of custodial services are now eligible for these tax concessions, which exempt certain offshore parties from Australian tax and provide a 10 per cent tax rate on the taxable incomes of Offshore Banking Units.
We have also taken steps to open up the corporate debt market to international investors with the result there is growing support for the increasing number of domestic $A bond issues.
Legislation is now before Parliament to widen the exemption from interest withholding tax to include Australian-sourced interest paid to offshore investors on eligible debentures issued by companies.
In addition, we encourage direct investment through specific programs.
The national agency, Invest Australia, facilitates major investment projects and provides a range of services to companies seeking to establish operations in Australia.
Incentives offered under the Regional Headquarters Program encourage companies to make Australia their servicing base for the Asia-Pacific region. These include tax incentives and help with other matters, such as immigration for executives.
Australia also offers excellent cost-effective commercial infrastructure, including legal, accounting, actuarial and insurance services. And our prime Sydney CBD office space costs are a fraction of those levied in Tokyo, Hong Kong, and Singapore.
Despite these comparative advantages, we are not resting on our laurels.
Which brings me to the fourth foundation -- future preparedness.
As we head to the new millennium, Australia can boast it is better prepared than most of the world for the challenges of January 1 2000.
The Australian Treasurer announced on 15 April that he has been "advised that the Australian banking and financial sector is well advanced in its Year 2000 preparedness and is internationally recognised as being at world's best practice".
Remediation and internal testing of critical systems has largely been completed and the majority of Australian financial institutions expect to complete external testing by end-June 1999.
Disclosure of Year 2000 preparations is important, as it ensures that other financial institutions, customers and the community -- both domestically and internationally -- are kept informed of progress.
For this reason, the Australian Government passed the Year 2000 Information Disclosure Act 1999 (the "Good Samaritan" legislation), which will assist institutions in making disclosures.
The Australian Stock Exchange requires all listed companies to make Year 2000 disclosure statements, and the Australian Prudential Regulation Authority is closely monitoring financial institutions' Year 2000 preparations.
The Australian Government also recognises the need for structural reform of the taxation system. That is why we are building a taxation system fit for the new millennium.
We currently have before the Parliament a taxation package that includes an indirect tax proposal that will abolish $3 billion a year in financial services taxes including abolition of stamp duty on transfer of shares. It will also remove $4.5 million a year in tax on exports, including exports of financial services.
Personal income tax will also be significantly reduced and we are undertaking a full review of business taxation covering issues such as corporate tax and capital gains tax, with a view of achieving a corporate tax rate of 30% - very low for an OECD nation and competitive with Singapore and other parts of Asia outside Hong Kong.
It means that by the end of next year, Australia will have the most modern and progressive tax system in the OECD.
In conclusion, the Australian Government has a strong commitment to further growth of the region's financial services pie and increasing Australia's share of it.
Our claims to further enhance the ranking of our naturally developed financial markets are justified.
We have one of the strongest economies in the world.
We have a stable political climate, a large international financial services sector, a secure business environment, excellent commercial infrastructure and a very affordable skilled workforce.
And we have demonstrated we are prepared for the future, keeping a close eye on international trends and pressing on with an agenda, which will bring more sweeping reform.
On these foundations, we are determined to increase our share of the financial services pie.
But we are also working in partnership with our regional neighbours to increase the size of that pie, so we can all take a bigger slice.
That is, after all, the best way forward.