Good evening ladies and gentlemen and thank you for inviting me to speak at this year's Personal Investor Bank of the Year Awards.
I have recently returned from what today's Financial Review described as a "fact-finding mission" to Europe and North America.
What I was exploring there were the steps we need to take secure Australia's position as a centre for global financial services in the Asia-Pacific time zone.
What struck me most, wherever I visited, was the speed at which technology and convergence are affecting the financial service industry.
I agree with the Commonwealth Bank's managing director David Murray that "E-commerce will completely redefine the structure of industry, and the banking industry is at the forefront of this change."
Put simply, it will change the way the world does business.
The e-commerce revolution is a high-speed locomotive that continues to gather pace.
Within the next 18 months I predict that it will be almost impossible to do business with any of the world's major corporations without using electronic orders, electronic payment and communication systems.
According to BRW the number of Australian Internet users is expected to treble to 11 million in the next 3 years.
In the 3 months to February 1999 the number of people using the Internet to pay bills or transfer funds doubled from the same period last year.
All this at a time when the high speed cable modem is still a little way off for the majority of Australian consumers.
And what we are seeing now is just the front of an enormous and powerful train emerging from the tunnel.
How long before your television is a platform for you to do on-line banking or shopping, not to mention access to more mundane products like music or movies on demand?
I'm sure many of you are aware of the consequences this will have for your industry.
I'm not sure anyone in this room could accurately predict the financial services landscape 2 years from now, but I think we can identify some powerful trends that are at work today, and that are reshaping this sector.
The Government is listening and is watching as these trends emerge.
We are determined to proactively maintain a regulatory framework that delivers market integrity - a feature I firmly believe represents a competitive advantage for us in this time-zone and globally.
The trends that I see emerging are:
Globalisation: for years we've heard talk about globalisation without any real understanding of what it is or what it means.
I'm not sure I can tell you yet what it means exactly, but I can tell you what consequences it is having right now.
Today's global communication networks provide the platform for worldwide access to products and services, whether its Mick's Whips or a Boston mutual fund.
The access is right here, right now.
This year Australian investors, as a result of Government initiatives, will be able to consider whether to invest in US style investment products which will facilitate direct comparison between Australian and US fund managers.
I have no doubt that our funds will be able to go head to head with the US funds and retain and win business because for a long time they've known they live in a world where their performance is measured on a global basis.
Commoditisation: In the financial service sector the last few years have seen consumers realise what the business sector has known for a long time, that many of the financial sectors traditional products are fungible, they are commodities to be bought and sold.
A 25-year floating rate mortgage is essentially the same product whether it's sold by a bank, a building society or a web based mortgage broker. In this world cost and scale are the drivers.
The market segment of one: the internet through products like "my excite" and "my yahoo" is fast showing sellers that they had better start thinking about their customers on an individual basis or they will be left behind.
The development of Internet based personalised search engines are a powerful example of this.
In the not too distant future consumers will be able to choose from a wide variety of providers and use sophisticated algorithms to transparently compare complex products with each other in a way that is relevant to them.
Soon you will be able give your personalised search engine access to your telecommunications account. And it will tell you the plans that best suit you.
This will translate into who should be you mobile carrier in all the major destinations of the world. It will then program your phone to select each of those carriers when you travel to those locations.
For the financial services industry - and Government - these trends present enormous challenges.
Organisations that we traditionally called banks have moved into areas such as stockbroking and superannuation, even setting up alliances with telecoms companies, supermarkets and fast food restaurants.
Organisations that we traditionally called insurers have moved into banking.
Delineation along traditional lines is becoming blurry and in fact, no longer appropriate.
I wonder how long we'll continue to use the term "bank"? Does any of us really understand the usefulness of such labels any more?
If they do have real meaning should they be protected by regulation or in some other way?
The only constant I can see is consumer protection and this is a fundamental that the Government is committed to maintaining.
The financial service sector is, as I have outlined, in the throes of a revolution that will rival the introduction of the steam engine.
A revolution that is primarily technology driven and affects all of us here tonight.
A revolution that is making the systems developers here and in the United States into the equivalent of the railroad barons of the 21st century.
And these barons are laying the tracks for the communication revolution of the next millennium.
These information railways will open new markets and drive many protected insular industries into extinction.
Ladies and gentlemen, the relentless march of technology offers financial institutions the chance to harness a potent force that can provide real competitive advantage and allow Australian industries to shrug off the historic disadvantage of our geography.
The Internet gives cost effective channels of communication with existing customers and the chance to market to new ones.
In this burgeoning new paradigm, size matters.
People - both staff and customers - matter.
Technology expertise matters.
Provision of superior products matters.
But above all, the ability to successfully bring these elements together will decide who are the winners and who are the losers.
The Government believes Australian financial institutions can be amongst the biggest winners in the "new economy" of post-industrialism.
Australia has built a world-class financial sector regulatory regime which provides security and integrity, two ingredients vital to investor confidence.
The International Monetary Fund has hailed these changes as 'path breaking reforms which put Australia at the forefront of international practice'.
That integrity is a product feature that will be vital to the success of any financial institution being able to compete on the world stage.
We need to recognise our competitive advantage and be vigilant and to ensure that we maintain a regulatory framework that engenders consumers with confidence and certainty and still leaves room for innovation and change.
The challenges are many and varied: from timely cost effective dispute resolution to electronic purchasing of investment products worth hundreds of thousands of dollars.
To prosper the financial service industry must meet these challenges.
This Government understands these challenges and is addressing them through reforms such as the CLERP initiatives and other areas of law reform to make sure that we provide this industry with the right prudential regulation.
Meanwhile, we have recognised the need to have a competitive taxation regime to allow our corporations to compete on a world stage.
As you know, the Government has undertaken a total overhaul of Australia's tax system. While the spearhead of these reforms is a broad-based goods and services tax other changes will go a long way to making Australia a better place from which to do global business.
For instance, we are working hard to abolish a range of inefficient financial services taxes including financial institutions duty and stamp duty on marketable securities, saving billions of dollars in taxes and compliance costs.
We will also remove hidden taxes on exports including exports of financial services, which will be GST-free.
The Review of Business Taxation will also shortly deliver its report that will form the basis of a new business tax regime.
The Report will make recommendations on the fundamental design of the business income tax system, including changes to the capital gains tax and the corporate tax rate.
We have been listening and we understand that in the "new world economy" you must have to have a tax system that as far as possible, makes location neutral.
Australian financial institutions have the opportunity, not only to overcome the challenges that I have discussed, but also to take full advantage of the opportunities they represent.
Australia has the people; it has the skills and it has the dynamic institutions represented here tonight to join the exciting journey that we see before us.
The Government is determined to watch and listen to industry, to embrace these challenges and to work with you to build a world class regulatory environment so you can maximise the these factors that will put the Australian financial service sector firmly in first class on this global journey.
And that will ultimately benefit all Australians.