Acknowledgments
The Hon. John Fahey, my distinguished former colleague,
The Hon. Bob Carr, Premier of New South Wales,
Mr Don Layton, Vice Chairman, JP Morgan Chase,
Distinguished Guests all.
Welcome
- Good evening, welcome to Sydney.
- Convey sympathies of Government and people of Australia to JP Morgan and guests for losses- colleagues, friends and associates.
- Tomorrow - Australia Day 26th January - hope you have the chance to enjoy the many and varied the public celebrations for our National Holiday.
- Congratulations to JP Morgan Chase for organising this important conference and in drawing together the economic might of Asia to how our countries can continue to meet the economic challenges of our times.
- Its my pleasure to be here tonight representing the Prime Minister, John Howard, and in my capacity as Minister for Revenue and Assistant Treasurer.
Australia's Place in the Region
Enoch Powell, the Conservative British Politician, once observed that for a politician to complain about the press is like a ship's captain complaining about the sea. Despite this warning and in the face of futility, I feel that the observation I am about to make is warranted.
Certain analysts and writers in this country do like to make a national pastime out of questioning Australia's place in Asia. I happen to believe that this perennial Hamlet-like navel-gazing misses the point entirely.
The realities are that -
- Australia's history and culture as distinct from its regional neighbours;
- Australia must and does maintain close economic, security and other ties to the US and Europe - as many Asian nations do;
- We must and are building closer cooperation with our Asian neighbours;
These not as competing but complementary imperatives for a mature trading economy such as Australia's, particularly as the world economy becomes increasingly globalised. Our nation's economic interests - as well as those of our regional trading partners - are best served by this flexibility and diversity.
Australia's ability to weather the Asian and now global economic downturn owes as much to this approach as to the strong economic and fiscal reforms of the Government which have delivered economic growth beyond other developed countries.
The fact is that Australia's ties with Asia are deep and will continue to deepen.
Furthermore, our ties with the region are not driven purely by economic or material considerations. Australia shares strong strategic, security and political alliances across Asia - and has done so for generations.
The Howard Government has done much to continue to develop these relationships since first coming to Office in March 1996. Our actions have demonstrated the importance we attach to the region. For example -
- Australia's pro-active and supportive response to the Asian Economic Crisis of 1997 and 1998;
- our work in developing closer trade relationships within the region - including through the recent pursuit of bilateral Free Trade Agreements;
- our extensive technical assistance, including for example our support of the World Bank's Virtual Colombo Plan;
- the deepening of our educational exchanges;
- our co-operative efforts to combat money laundering; and
- our decisive action on the war against terrorism, demonstrate not only the priority we attach to our region, but our willingness to assist our friends and neighbours.
Equally, the Howard Government has been very determined to lay a strong foundation at home - through the pursuit of wide ranging economic reforms as well as by implementing strong macroeconomic policy - to provide both Government and the all important business sectors with the necessary platform to broaden and deepen our relationships within the region.
Whilst I would like to return to some of these issues later, I am pleased to say that as the Howard Government embarks on its third term in Office, a key priority will be to extend and broaden our regional partnerships.
Economic Climate
We live in extraordinary times. Australians, perhaps more than at any time in our history, feel confident about the economic prospects for the future. More Australians are working than ever before. Interest rates are at the lowest levels in thirty years. Australia is now respected throughout the world for the productivity of its workers and the freedom it celebrates.
This despite a global economic downturn amplified by the tragic events of September 11.
On Wednesday, the Treasurer noted that the world economy is in a very parlous state. The fact that the Australian economy continues to grow should not give us any false comfort about the seriousness of the international situation.
The Treasurer's remarks underscore the point made by the Prime Minister at the Shanghai APEC summit in October:
"As leaders we must deliver the domestic structural reforms and institutional reforms needed to ensure growth. We must encourage investor confidence by getting on with economic and technical cooperation to ensure strong institutions, strong corporate governance and financial regulation and microeconomic reform".
The recovery in the United States, and more generally the world economy, is now expected to be delayed until mid-2002.
Importantly, we see that recovery in East Asia is contingent on a pick-up in the United States economy. The strength of trade linkages between the United States and Asia has become clear during this current episode and recovery in the United States, once it takes hold, should underpin a solid and quick recovery in Asia.
It is also important that we do not fall into the trap of thinking that all we need to do is wait for US recovery. If countries in the region are to achieve sustainable and long term economic growth, it is essential for there to be on-going structural reform.
I note that JP Morgan's economists take a slightly more optimistic view than our own Treasury, predicting a faster than expected rebound in overall growth.
Notwithstanding the slowdown in the global environment, I am optimistic about the outlook for the Australian economy.
- Australia's economy was among the fastest growing industrial economies last year. Over the first three-quarters of 2001, Australia grew at an annual rate of 4 per cent.
- In contrast, the G-7 countries grew at a rate of just 0.3 per cent and the European Union countries at only 1 per cent over that period.
- Of Australia's major trading partners in the East Asian region, only China is growing at a faster rate.
Importantly, the growth outlook remains very positive - according to Consensus forecasts, Australia is likely to be one of the top-performing economies in 2002.
The positive outlook for the Australian economy was supported by both the OECD in its November Economic Outlook and the IMF in its special December World Economic Outlook and. The IMF painted a very favourable picture of the Australian economy, with an outlook for solid economic growth and continued low inflation. This solid outlook for economic growth in Australia is, in part, a reward for the integrated, forward looking macroeconomic policies of this Government.
Extending Our Regional Partnerships
In November 2001, the Australian people re-elected the Howard Government for a historic third term.
I am proud to have joined a highly energetic Ministerial team that is firmly committed to progressing a dynamic policy agenda that will involve Australia broadening and extending its partnerships within the region.
The Government will do this by continuing to pursue economic policy reforms that will make Australia an even more attractive place to invest in, to do business in and to visit.
Both the Prime Minister and the Treasurer stated during the election that the Government intended to continue its reform program. Let me outline briefly some of these policy reforms that are continuing to lay a strong foundation upon which to build our important regional ties.
Taxation Reform
The Howard Government has undertaken an extensive programme of taxation reform.
These reforms have benefited not only families, but also SMEs and the corporate sector.
The tax reform programme has meant that businesses located in Australia have enjoyed, amongst other things, a reduced company tax rate and capital gains tax reforms. They will soon benefit from an improved treatment of venture capital and expatriates.
However, more work remains to be done.
Future initiatives include a priority review of Australia's international tax arrangements. That review will examine tax impediments to regionally and internationally focussed businesses locating in Australia.
In undertaking such a review, Australia faces some tax policy challenges not faced by most other advanced industrialised nations. These arise from its proximity to a dynamic region, which is highly tax competitive given generally lower levels of government outlays that require funding. Despite those challenges, the Government believes it can continue to deliver a competitive tax system that will enable Australian based companies to operate regionally as well globally.
As part of my portfolio responsibilities as the new Minister for Revenue I have charge of implementing further business tax reform. Our objective is to enhance our competitive position, to promote investment and to make Australia an even more attractive location for overseas investment and operations.
Trade Liberalisation
The Government is committed to maximising and enhancing Australia's trading opportunities across the region and globally.
In 2002 and throughout this term of office, Australia will be working hard to progress the latest WTO round. We will also continue to pursue appropriate bilateral trade agreements, such as the ongoing negotiations to develop a Free Trade Agreement between Australia and Singapore, with countries in the region.
Foreign Investment Policy
Before I outline some of the ongoing reforms to Australia's foreign investment policy, I would like to reflect briefly on Australia's foreign investment regime.
I do this to refute the claims that some observers have made that Australia is somehow fearful of foreign investment.
Foreign investment has, and will continue to make, a significant contribution to Australia's economic development. The Government recognises that our growth potential can only be fully realised with the assistance of overseas investment.
While the United States, United Kingdom, Germany and Canada are the major sources of approved investment proposals, considerable potential investment is coming from Hong Kong and Japan (amounting to $3.1 billion and $2.7 billion respectively in 2000-01) as well as Singapore.
These proposals straddle a range of sectors, including agriculture and forestry, finance, insurance, manufacturing, mineral exploration & development and other services.
Foreign investment approvals in excess of $50 million can expect to be approved by the Treasurer, taking into account the advice of the Foreign Investment Review Board, unless there is a conflict with the national interest.
It is worth noting that, in the last financial year, only 46 proposals were rejected. This represented 1.4% of all proposals considered. Further, of these 46 proposals, 44 were in the real estate sector.
Enhancing Regional Investment
Australia also continues to be actively involved in enhancing the environment for investment in the Asia-Pacific region, through the work of APEC, and as a signatory to a number of Investment Promotion and Protection Agreements.
To date, agreements have been signed with Hong Kong, Indonesia, Papua New Guinea, the People's Republic of China, the Philippines and Vietnam.
Financial Sector Reform
Another area where the Howard Government will be continuing its reform agenda is in Australia's financial services industry.
The Financial Services Reform Act 2001, which commences on March 11 this year, introduces a harmonised licensing, disclosure and conduct framework under the Corporations Act for all financial service providers.
It also streamlines the regulatory regime for financial markets and clearing and settlement facilities, which will facilitate competition and improve efficiency, making Australia an even more competitive place to do business.
Financial Centre Strategy
The Government is committed, through the work of AXISS Australia, to continue promoting Australia's strengths as a destination for financial services.
An important objective of this work is to further develop and broaden our networks and partnerships in the region.
This is achieved not only through encouraging major multinationals to locate some of their operations in Australia, but also for example, through the active promotion of Australian finance sector training courses to the region.
The Role of the Business Sector
The Australian business sector has built very important relationships in the region. This has involved not only our more traditional sectors - such as agriculture and mining, but also industries such as financial services, property, construction, education and information technology.
At a time when businesses from other parts of the world are perhaps refraining from making the longer term commitments to the region, the Howard Government will be challenging the Australian corporate sector to embrace the many opportunities that exist within the region.
I am confident that the Australian corporate sector has what it takes to take up this challenge - especially given the high quality of its people; its cost competitiveness and the willingness to get the job done.
Economic Cooperation and Reform
In conclusion, I would like to make this observation about economic cooperation and reform.
Firstly, I think it goes without saying that they go hand in hand. They are mutually reinforcing goals.
Secondly, viewed functionally, reform tends to have a spill-over effect. Reform and closer integration or harmonisation in one area of the economy often leads to reforms and cooperation in other areas. This has been the experience in Europe and North America.
In our region, take the example of the recently launched Australian and Singapore stock exchange co-listing agreement. It was necessary for the two exchanges to sign a memorandum of understanding to facilitate the carrying out of their respective regulatory duties.
As exchanges around the world continue this trend toward co-listing, it is not surprising that we have also seen a push toward harmonisation of a variety of other regulatory functions such as accounting standards and company disclosure rules.
Integration in the region in which Australia calls home will necessarily take a unique and distinctive course. It will arise from different historical circumstances and experiences than that of Europe or North America and will take place in a markedly different global economic context.
I wouldn't venture to suggest what that precise course will be; how broad or how deep cooperation and integration will become. But in the end, Australia's best practice reform example will facilitate reforms elsewhere, while providing a safe harbour for regional investment and a catalyst for greater regional cooperation.
Expect a continued vigorous engagement in the region by the Howard Government, which has already been recognised by the Japanese Prime Minister in Singapore on 14 January where he announced his vision of a stronger regional community including Australia:
"If one considers the specific challenges to be tackled in the region, it is only natural that these countries will deepen their partnerships with each other. Through…concrete cooperation, I expect that the countries of ASEAN, Japan, China, the Republic of Korea, Australia and New Zealand will be core members of such a community."
I very much welcome the words of Prime Minister Koizumi and wish to emphasise that as a new Minister in a committed Government, I can assure all of you that I am very determined to do what needs to be done to ensure closer, deeper and broader partnerships within the region, but also a more dynamic and prosperous region for us all.
Thank you.