Good afternoon
Its a pleasure to be here at the Asian Financial Forum. And its an honour to share the floor with my counterparts from Korea, Japan, Malaysia and Hong Kong.
We share a common goal: to ensure that our respective nations and the broader Asian region, continue to grow and prosper in the wake of the global financial crisis.
This afternoon, Id like to share some perspectives about Australias performance through the global economic crisis, the reasons for this and the importance to Australia of continued regional engagement and co-operation on financial sector issues.
Australias recent performance
Australia has the sixteenth largest economy in the G20 and the fifth largest in the Asia-Pacific.
Australia's equity market is the seventh largest in the world and the second largest in Asia.
Over the two years to June 2009, the Australian economy has grown by almost four per cent. Australias unemployment rate – at 5.5% – remains lower than the other major advanced economies except for Japan, and compares to an unemployment rate of 10% in both the US and Europe.
Without wanting to appear boastful, Id like to share some perspectives on the reasons for Australias performance. There were a range of important contributing factors – Australian employers and employees showed admirable flexibility in responding to the crisis avoiding lay-offs wherever possible; our financial and regulatory system is strong with four out of the nine AA-rated banks being Australian; our strong trade links to China and the rest of Asia, and the Australian Governments response to the crisis was swift.
The Governments move to provide enhanced depositor protection and a temporary guarantee of banks debt funding helped to ensure the Australian financial sector's stability and liquidity at the height of the market turbulence.
The Reserve Bank of Australia also implemented several measures to improve market liquidity and provide institutions with greater flexibility.
However, it was clear given the severity of the crisis, more needed to be done to prevent further spill-over into the Australian economy. Therefore, to complement these financial market measures, the Australian Government also implemented a co‑ordinated fiscal stimulus package to support confidence, growth and jobs.
These fiscal stimulus measures were a combination of temporary and targeted income support to low and middle income households, as well as investment in a range of nation-building infrastructure projects.
Australias Regulatory Framework
While the global banking system was at the epicentre of the financial crisis, Australian banks have fared comparatively well.
The Australian regulatory framework is based on the 'twin peaks model in which there are two financial sector regulators with clearly defined roles. APRA, the Australian Prudential Regulation Authority, is responsible for prudential regulation, including overseeing banking, insurance and most members of the pension fund (or superannuation) industry. The second regulator, ASIC, the Australian Securities and Investments Commission, is responsible for the integrity of financial markets.
The Australian 'twin peaks regulation model has worked and continues to work. In other jurisdictions, where the regulators are combined, there is inevitably a dominance of prudential over financial markets or vice versa within the organisation. The two complement each other but each needs to have its own independent focus to ensure both are able to give 100 per cent of their attention to their respective areas of regulation.
In other words, that an organisation exists with prudential regulation as its core business and an organisation exists with corporate regulation as its core business.
Our regulators are also complemented by the work of the Reserve Bank of Australia, which is responsible for the stability of the financial system as a whole
Now let me just say something about regulation generally. International assessments of financial centres indicate that an appropriately balanced regulatory framework is one of the keys to becoming an attractive financial services centre.
However, this does not mean that you should have the lightest regulation in the world. Rather, it is about having the best balanced regulation so that investors and issuers of capital can have a very high degree of confidence.
Financial services reform
The global financial crisis highlighted some weaknesses in the regulation and oversight of financial institutions and markets.
Australia is fully participating in the work of international forums, principally the G20, to promote international cooperation in financial system regulation, corporate governance and financial reporting.
A key focus of the international regulatory reform agenda has been to strengthen capital and liquidity requirements for financial institutions. The measures currently being developed in international forums will further strengthen the resilience of the financial sector.
These reforms will be implemented in Australia by APRA in consultation with the financial sector. In implementing internationally agreed standards, APRA will take account of Australias particular circumstances.
Regional engagement
Asia remains the fastest growing-region in the world.
In fact, in 2010, over half of world growth is expected to come from emerging Asian economies.
Led by China, India and Indonesia — now the three fastest-growing economies in the G20 — Asia is driving the global recovery.
As the world economy starts to recover, the potential growth of the financial services sector is a prime opportunity for the region. As confidence returns to markets, investors will be looking for safe havens for investment.
They will be looking for nations and regions which have withstood the current economic crisis well, and have sound integrated and cooperative regulatory systems.
The Australian Government is looking at ways not only to promote Australia as a financial centre within the region, but also to develop stronger relationships with other jurisdictions that also have very well developed financial markets.
Thats why, in September 2008, we established the Australian Financial Centre Forum. The Forum was given the task of progressing the Australian Governments initiative to position our nation as a leading financial services centre - one that would attract global business to Australia and to the broader Asian region.
Recently I was pleased to release the Forums report – Australia as a Financial Centre: Building on our Strengths. The Government is currently considering the recommendations in the report including how we can promote greater regional engagement in financial services. One of the key recommendations of the Report is the creation of an Asian funds 'passport, enabling a fund manager to offer products to retail investors in any 'passport country in the region as long as the fund manager complies with a core set of common regulatory requirements.
Obviously there is some competition between various countries of the region for financial services centre status. But there is also much to gain by working towards co-operation between the countries of the region on financial services issues.
It is in all our interests to promote stronger cross-border flows throughout the region.
Greater co-operation between regional financial centres has the potential to realise significant mutual benefits.
We will all benefit directly from this co-operation.
Some of this work has already been progressed by ASIC, as part of its objective of promoting greater cross-border capital flows. For example, in 2008, ASIC and the Hong Kong Securities and Futures Commission entered into a mutual recognition arrangement in relation to the offerings of managed investment products in each jurisdiction. This allows domestic issuers to offer their products in the foreign jurisdiction without having to also comply with all the regulatory requirements in that jurisdiction.
The Government will continue to promote greater cooperation within the region as a means of promoting the Australian financial services sector and achieving better outcomes for the Australian economy and the Australian financial services sector.
Conclusion
Ladies and gentlemen, as you can see from my brief words this afternoon, Australia recognises that our economic destiny is firmly linked to the countries of the Asia-Pacific.
This recognition is part of a proud tradition of engagement with Asia that has been pursued by successive Australian Governments since the 1970s. We are very glad to be continuing that tradition.
Thank you.