It is a pleasure to be invited to speak at the 13th Australasian Finance and Banking Conference, particularly at a time of such dynamic change in the financial sector worldwide.
These changes will have significant implications for financial centres of the future, including Australia.
It is on these developments that I will be speaking today.
The financial services sector has seen some of the most significant change of any industry in recent times. And this is expected to continue.
Many things have contributed to this change. The most prominent among these are globalisation, technological development, disintermediation and regulation.
Globalisation has enabled financial institutions to transcend international borders and develop truly global operations.
The culture of 24‑hour dealing and the passing of risk exposures across multiple time zones is now commonplace and this, in turn, has helped centres, such as Australia, become a more integral part of the international banking framework.
And it has been technological change that has contributed to globalisation in the financial sector.
Truly global financial markets have only been able to develop because of revolutionary breakthroughs in communication and computing technology.
You only have to reflect on the buzz words in financial markets such as "connectivity" or "straight through processing" to see what impact technology is having on the way transactions are executed and the variety and complexity of instruments used.
New technology has also delivered major advancements for retail consumers who can now access a range of financial products and services 24 hours a day, 7 days a week.
It is also much easier today for consumers to access these financial services.
In fact, the number of points of access around Australia have mushroomed over the last 5 years. In 1995 there were 86,000 points of access to banking for consumers.
As of June this year there were over 346,000 places where you could access your bank account. That is more than a 300 per cent increase.
This increase would be even higher if access to financial services through the Internet and telephone banking was included.
Technological change has brought into question the traditional role that financial agents play as intermediaries.
Non‑finance groups with strong technical skills aswell as better access to large cash‑flows and big pools of customers are now competing with traditional financial groups. Their competitionis often innovative and enthusiastic.
As a result, the financial services sector is arguably more open now to new entrants and increased competition than at any time over the last 30 years.
Technological change is allowing disparate groups of buyers and sellers of financial products to do business with each other without intermediaries.
The Internet is the ultimate development of this capability, and the greatest threat to traditional financial service providers like banks, insurance companies and even stockbrokers and financial advisers.
The rise of business‑to‑business and business‑to‑customer e‑commerce represents a huge challenge for financial intermediaries. Combine this with the globalisation and commoditisation of financial products and the warninhg bells for domestic players are ringing.
Whilst b2b and b2c are in their infancy their growth over the coming 5 years will be significant.
However this challenge provides traditional financial service providers with an opportunity to build new relevance.
This can only be done by building long term and trusting relationships with customers based on professional advice. New entrants to the Australian market place like Charles Schwab and MerrillHSBC are promoting the concept of full service relationships. Others industry wide like the Financial Planning industry now recognise that professional qualifications matter and have partnered with the University of Western Sydney to implement professional training for Financial Planners that transform their industry into a profession.
E‑commerce is currently so full of uncertainty and risk that professional financial service providers have a chance to survive through innovation.
Innovation is the foundation stone for the development of new global financial centres.
However I think everyone at this conference would agree that capital markets and their sound regulation, information technology and communication and supply of high‑skilled labour are the factors that will underpin the financial centres of the future.
These sit next to more fundamental characteristics sought by international financial institutions.
Fundamental characteristics such as a sound political and economic environment, a well‑established and dynamic financial sector, high‑quality information technology infrastructure, a skilled and multilingual workforce and a world‑class regulatory system.
Increasingly, I think financial centres will become part of broader knowledge centres, which will involve the clustering in one area of interdependent industries that require IT&C infrastructure and labour skilled in the application of new technology.
Australia's strength in these areas is becoming more widely acknowledged and, as a result, our standing as a financial centre of regional significance is enhanced.
While Europe and the US will inevitably continue to dominate international banking over the next 5 years, the country that will lead the way in Asia has yet to emerge.
Financial business is still scattered across the region, and despite the size of the Japanese economy, its financial sector is domestically focussed and is continuing to grapple with reform.
At the end of 1999, UK research body Central Banking Publications placed Sydney 7th as an international financial centre behind London, New York, Tokyo, Frankfurt, Paris and Zurich.
Hong Kong and Singapore ranked 8th and 9th respectively.
Economic strength has played a major role in Australia's rise as a global financial centre.
Australia survived the turmoil of the Asian financial crisis, escaping relatively unscathed, and now, almost four years later, Australia is still thriving.
In fact we are enjoying the longest economic expansion since the 1960s recording our 14th consecutive quarter of through‑the‑year growth at or above 4 per cent. This puts us in the top half‑dozen of the OECD's performers over the past decade.
What's more, inflation has risen less than 2 per cent a year for the past 4 years and unemployment, at less than 7 per cent, is at around it lowest level since 1990.
Australia has an entrenched democratic, legal and regulatory system underpinning not just the financial sector but general business as a whole.
The development of Australia's financial sector is reflected in the changing nature of the ASX's All Ordinaries Index.
Resource stocks have dropped from 55 per cent of the index in the 1970s to around 15 per cent now.
Financial services stocks have risen from 10 per cent of the index in the late 1970s to 33 per cent today. Floats such as the Commonwealth Bank, AMP, GIO and NRMA, to name a few have propelled this increase.
Australia's financial markets are stable and well‑established. In fact, they are one of the biggest sources of liquidity in the Asia‑Pacific.
The Morgan Stanley Capital International indices, which assess equity market depth, says the ASX was ranked 12th in the world in September 2000, making it the most liquid stock exchange in the region behind Japan.
The ASX is leading the world's bourses in the move to borderless markets, discussing alliances with a number of exchanges in the Asia Pacific region.
In a world‑first, it has established a trading link with the Singapore Stock Exchange that will allow members of each to trade stocks listed on the other in local currencies.
Australia's bond and equity markets, although small by international standards, are the 2nd‑biggest in the region after Japan.
Australia offers international issuers and investors some of the largest and most sophisticated debt markets in the Asia‑Pacific covering a variety of Government and private sector debt securities.
In terms of scale, Australia's debt markets are ranked 11th in the world and in the Asia‑Pacific region, our bond market is one of the largest.
In fact, at the end of June this year, total domestic debt on issue in Australia totalled $A400 billion or 65 per cent of GDP.
At this stage, most Asian bond markets are underdeveloped, with the size of the bond market to GDP less than 50 per cent for most economies in the region.
But further development of the bond market will help to channel long‑term savings to long‑term investment and reduce the reliance on bank lending and equity financing. This can only be a positive thing for the Asia region.
In parallel to the bond market, the Australian funds management industry has grown significantly. In June of this year, the value of the consolidated assets of the Australian fund management sector totalled $A600 billion representing an increase of about 13 per cent over the previous 12 months.
This gives Australia one of the biggest managed funds industries in the world and one that is well placed to service the world's growing demand.
Funds management has become one of the most important and dynamic aspects of international financial markets, and will continue to do so with increasingly aging populations in many countries.
While our managed funds industry is generating international interest so, too is our high quality IT&C infrastructure.
In fact, in 1999 Australia's spending on IT&C products and services was the 5th highest in the world and ahead of the US, Canada, Singapore and most European countries.
The list of Australia's techno credits does not end there.
Australia has more computers per capita than any other Asia‑Pacific nation.
Australia follows only Iceland and the United States in providing a secure Internet infrastructure, with roughly 130 secure servers per million inhabitants.
Almost half of Australia's adult population can now access the Internet, and this makes the Australian community one of the most connected in the world.
And we have excellent human capital. The Global New E‑economy Index ranks Australia second in terms of the availability of IT specialists.
It is information such as this which is helping Australia establish itself as an excellent business environment for large technology‑intensive enterprises such as global financial service providers.
This leaves Australia well positioned for online B2B e‑commerce in the Asia Pacific, with volumes expected to increase from $54 billion a year to $1.65 trillion by 2004.
I am proud to say the Australian Government has been quick to realise the opportunities associated with Australia's status as an information economy.
We have introduced a "light touch" legal and regulatory framework for electronic commerce and are committed to delivering all appropriate Government information and services online by 2001.
Development of the IT&C sector is being encouraged through a range of Government programs that support access to venture capital, innovation and skills development.
Technology goes hand in hand with financial sector development and it is essential that the workforce is not only skilled in the areas of financial services but highly techno‑literate.
A highly skilled workforce underpins Australia's development as a global financial centre.
Recently Professor Jeffrey Sachs of Harvard University rated Australia as one of the world's technological innovators along with Japan, Taiwan, South Korea, Europe and North America.
This IT&C skills base is supported by a comprehensive system of higher education and vocational training.
With almost 700,000 students enrolled in universities and colleges and a further 1.6 million students enrolled in vocational training courses, Australia has one of the highest levels of enrolment in tertiary education in the world.
Australia's world‑class regulatory system has also helped to encourage new players into the financial sector.
Since the early 1980s, the financial sector has been deregulated and opened up to competition.
At the same time we have put in place a new prudential framework, which has maintained the integrity of our system and made sure Australian consumers are well protected, at all times.
As a medium sized economy, Australia must maintain its world‑class regulation so it can stay on top of international developments.
So far we have done this, and as a result, our reforms have led the world.
The financial sector reforms announced in 1997 are now being used as a model for regulatory reform by other countries in the Asia Pacific as well as the UK and Canada.
The Wallis Inquiry, initiated by this Government in 1996, predicted the emergence of such developments as Internet‑driven E‑finance that are now taking place.
Most recently we have been revising our approach to regulation of the financial services to ensure our regulation will carry us into the next millennium.
Earlier this year, we released the Financial Services Reform Bill, which will put in place a regulatory framework for the financial services industry.
It will facilitate innovation and promote business, while at the same time ensuring adequate consumer protection and market integrity.
Ladies and gentlemen, the forces shaping the world's financial sector are often portrayed as an upheaval to the established order.
But I believe these rapid technological and cultural changes present great opportunities more than dire threats.
It is an exciting time with much to be gained.
The financial organisations which embrace this technological change are the organisations that will survive and thrive.
And as a Government, we will make sure our system of regulation keeps pace with these changes.
We will make sure the integrity of our markets is maintained and we will make sure that the interests of Australian consumers are sovereign.
And if we can do these things, then I know we will have achieved our goals.