7 October 2009

Interview with Ross Greenwood, 2GB

SUBJECTS: Austrade's Financial Services Benchmark Report, Australia as a financial services hub, RBA's cash rate decision

ROSS GREENWOOD:

Tonight, Austrade and the Minister for Financial Services and Superannuation, Chris Bowen are basically going to be relaunching Australia as a financial services export hub. Chris Bowen joins me now. Good evening to you, Chris.

CHRIS BOWEN:

Good evening Ross, good to talk to you.

GREENWOOD:

Good to talk to you as well. Before we go to Australia as being a hub, we've been talking tonight about word through the market today, about interest rates yesterday of course going up with the Reserve Bank, as to whether there may have been any selective leaks of that rate rise decision to columnists in our national newspapers.

What thoughts have you got on whether the Reserve Bank and if it does, it's highly independent; we know that, whether it does potentially soften up the market a little bit about potential rate rises?

BOWEN:

Look, Ross I haven't heard those reports, but I would be absolutely astounded and I would be very confident that is not the case. The Reserve Bank is, as you say, independent, they're highly professional. Their decisions on interest rates aren't actually taken until the morning that they're announced and it used to be the case that they're taken the day before, now they're taken the morning they're announced and I would defend the integrity of the Reserve Bank when it comes to keeping that announcement very confidential, until the second that it's released because it is very market sensitive, as you refer to. Stock exchanges go up and down based on these sorts of decisions and I would be quite confident the Reserve Bank wouldn't be doing that.

GREENWOOD:

But it's fair to say clearly, there have been signals from the Governor of the Reserve Bank, Glenn Stevens, over a period of time, in many speeches, that he believed that rate rises were inevitable. It was the timing that had never really been discussed.

BOWEN:

Yes that's accurate and that's a separate matter. One of the weapons in the armoury of the Reserve Bank is the signal that they send - the signal that they send through those sorts of public speeches etcetera and that is often very significant. The Governor makes no apologies for using that and I think that's appropriate.

GREENWOOD:

Well can we move onto Australia and what you're launching right now with Austrade. It really is trying to, if you like, have people recognise that our financial services industry is something that we could export to the rest of the world.

BOWEN:

That's right Ross. We have great potential in Australia to be exporting much more of our financial services and again, at the end of the day, what does that mean?

It means more jobs, better paid jobs for Australians.

We have a lot of advantages in Australia. We have the fourth largest pool of funds under management in the world. That means our superannuation industry over the last 20 years has created so much money, has been managed, that we have the fourth largest pool of managed funds in the world, bigger than many other economies which are much bigger than us.

That means we've built up great skills. As you said in your introduction, yes there's been a rough time for superannuation with the downturn in the market - it's been a rough time for pension funds throughout the world.

We've got great skills, we don't export those anywhere near enough and we need to capitalise on that and we've had a range of policy initiatives in place to try and help do that. The report I've released with Austrade tonight is more about those initiatives and what advantages we can bring.

GREENWOOD:

The observation I would make to you is that, in many cases, there have been a number of fund managers who I know personally, who now commute to say, for example on a weekly basis, or may commute to Hong Kong - leave the family here in Australia and ultimately go and commute to other places in Asia which are seen to be that hub destination, Singapore being one, potentially Hong Kong.

Does that mean Australia, and in particular Sydney will probably have to compete with those places as well?

BOWEN:

Yes it does, they're our main competitors. There's no doubt about that, others are trying, Kuala Lumpur, Shanghai, even New Delhi are trying to get a piece of the action as well. Around the world, there are a lot of people trying at this and the competition is very fierce. We need to make sure we make absolutely every single post a winner and we have a lot of advantages. Our quality of life in Australia - in Sydney and in Melbourne, in terms of attracting executives is very strong.

We have a good language base in our workforce, although I'd like to see it a lot better. Our prudential regulation is well respected. APRA, particularly over the last two years is respected as one of the world's best regulators so we have a lot of selling points. We need to make sure that there are no government-imposed impediments to our banks, fund managers, insurers exporting their products, and that's what we're doing.

GREENWOOD:

Does that mean, effectively, you have to have, if you like, bonds stores to be able to quarantine tax rates for people coming into this country. Do you believe there may be, as part of the Henry Review, done by the Treasury Secretary Ken Henry, some sort of suggestion that we effectively allow people to come here, have money managed and have perhaps their tax rates quarantined?

BOWEN:

Well, we've reduced our withholding tax on our distributions to foreign investors in our managed funds - we've already done that. When we came to office that was 30 per cent, which was the highest rate in the world. We've decided to reduce that and we announced that in our first budget, and that's going down to what will effectively be the lowest rate in the world, at seven and a half percent.

You might say, well why would you cut tax for foreigners? It means they're much more likely to invest their money here, it means creating jobs here, it means very highly paid, well skilled jobs for young Australians coming through so that's why you have to make sure we are as competitive as we can be. There are a whole range of other changes that we have made, in terms of the tax treatment of managed funds - just trying to make it simpler, easier and better for foreigners and Australians to understand.

GREENWOOD:

Just a quick question there, is it possible to manage a global portfolio from Australia? I mean, a lot of others would say for example that London would be the natural place to go and manage international money because it has traditionally been the home of managing foreign capital. Is it possible here, given the tyranny of distance, the amount of time you've got to spend in aircraft, to be able to properly, even with the right due diligence, manage that international money here in Australia?

BOWEN:

Ross, New York and London will always be in my view, for the foreseeable future, the global financial centres of the world.  They will be one and two.

Our competitors, as you say, are Hong Kong, Singapore, Kuala Lumpur - that second level. We can get there, that's a realistic objective. I mean, we've got to be realistic about our objectives here. Will we be London or New York? No, I don't think we will but can we be in that second tier? When investors around the world are thinking about where to invest and they think of Asia, can they think, 'why don't we go through Sydney or Melbourne as opposed to Singapore, Hong Kong or Kuala Lumpur?' I think we can get there. We're not there yet, there's still a lot more to do but I think that's a very realistic objective and if we do it, we'll be doing Australia a great service into the future because it will be a very big boost to our economy and to employment in Australia.

GREENWOOD:

Alright, many thanks then to Chris Bowen who is the Financial Services and Superannuation Minister, and I've got to say, he's absolutely right, that can be one of Australia's exports. There's no doubt we have pure skills in that area as well.