Ladies and Gentlemen. Thank you Ross for inviting me to speak at this seminar on Korean Reform, Recovery and Implications for Asia and the Pacific.
As the Government awaits the official passage of our tax package in the Senate this afternoon, the topic of reform is most appropriate, especially when discussing financial downturns and economic crises.
Indeed, economic development over the past two years in Korea and the other countries of East Asia has attracted major attention in Australia.
This is a reflection of the importance we attach to our relationship with our Asian neighbours and an acknowledgement of the importance of Asia to Australia's future prosperity.
For these reasons, Australia has been at the forefront of international efforts to help those countries most severely affected by the regional economic and financial crisis.
This has been through financial help as part of IMF-supported reform programs as well as participation in regional and international fora.
Although the workings of the world financial system have had a lot of attention, it is important to recognise that a country's economic wellbeing still lies very much in the hands of its domestic policy makers.
And Australia's performance is testimony to this.
Today, I'd like to show why Australia's economic performance is a fantastic argument for pursuing sound domestic policy reform.
Why has Australia defied logic and withstood the contagion of the Asian financial crises?
Because Japan and the crisis economies of East Asia account for almost 40 per cent of our merchandise exports.
These countries taken together contracted by 3 per cent in 1998, after growing by over 3 per cent on average over the previous 10 years.
The collapse in Asia has contributed to a sharp fall in commodity prices.
And stories of the problems in Asia were headline news for months in Australia, which had a dangerous effect on business and consumer confidence.
But not only have we survived, we have thrived.
Australia is now one of the fastest growing economies in the OECD. Over the year to the March quarter, GDP grew by 4.8 per cent.
The economy has now been growing by more than 4 per cent a year for 8 successive quarters.
But this outstanding economic performance didn't happen by chance.
The introduction of sound and credible monetary and fiscal policy in recent years has delivered a stable and low interest rate environment for Australia an environment that has helped sustain domestic demand throughout the regional crisis.
What is more, structural reform, by making the economy more competitive and more dynamic and by removing distortions that misallocate resources, has also contributed to the economy's resilience.
And underlying the economy's growth performance is an upturn in productivity growth in recent years, reversing the decline of the 1970s and 1980s.
The fact that the economy is now subject to greater competitive pressures has helped maintain low inflation in the face of a large currency depreciation.
An important part of this reform has been the National Competition Policy. This includes a national competition policy regime which aims to cut anti-competitive legislation, to achieve competitive neutrality between private sector firms and any competing government business operations and to reform public monopolies.
Changes to workplace relations have also had a part to play.
These reforms have increased the responsiveness of the labour market to economic change, cut impediments to job creation, encouraged participation in employment, and improved productivity.
So much so that last year we lost fewer working days in industrial disputes than any other year since 1913!
The recent crisis in Korea - and the rest of Asia - emphasised the importance of sound corporate governance and independent prudential supervision.
And these issues are at the forefront of international efforts to make sure these crises don't happen again.
In fact, the soundness of Australia's arrangements has been the main reason business and investors have kept supporting the Australian economy.
The Government's Corporate Law Economic Reform Program (CLERP) is modernising fundraising regulation, modernising takeovers regulation, modernising corporate governance, and modernising financial reporting regulation and the regulation relating to financial markets disclosure.
And our reform agenda has been given international approval by international ratings agencies.
Our investment climate has not only remained favourable, but in the eyes of these rating agencies, has actually improved recently.
During the 1980s when our current account deficit approached 6 per cent of GDP, credit rating agencies downgraded Australia's sovereign credit rating.
Now, with our current account deficit again approaching these levels, our credit rating has been upgraded.
And a key reason behind this is the Government's robust fiscal strategy.
Following its election in 1996, the Government moved quickly to slash the budget deficit and return it to surplus.
As the Commonwealth general government sector is not drawing on private saving to fund its own activities, it is not directly contributing to the national saving-investment imbalance - as shown in the current account deficit.
Therefore, the increase in the deficit on this occasion reflects private saving and private investment decisions, rather than government borrowing.
However, this is only half of the story.
Many of the crisis economies in East Asia also had current account deficits that had their roots in private sector decisions.
This does not necessarily mean that the investments are soundly based and that they will generate sufficient returns to enable borrowers to repay their loans.
The fact that the foreign debt is predominately private counts for nothing if investment decisions and saving decisions are severely distorted by government incentives, distorted by regulation, distorted by exchange market intervention or distorted by high inflation.
What we've done in Australia, by maintaining low and stable inflation and pursuing broad-based microeconomic reform, is set up an environment that ensures that private sector decisions are soundly based.
This has given foreign investors the confidence to keep lending to Australian businesses during a time of extreme international turmoil.
And solid economic policies must be complemented by transparent institutional and policy frameworks in Government policy and in the private sector.
Transparency of information helps economic performance by making sure market players have enough information to identify risks and then to make informed decisions.
Ultimately, transparency enhances the stability of financial markets by making sure there is no build-up in financial and economic imbalances.
Senior Australian government officials recently prepared the first 'self assessment' transparency report on Australia.
That report noted that Australia performs well against particular international disclosure standards and sound practice principles, including standards and principles of the IMF and OECD.
In addition, the Government's Charter of Budget Honesty requires the Government to release an annual fiscal strategy statement, and sets out its fiscal reporting requirements.
The Statement on the Conduct of Monetary Policy, between the Treasurer and the Governor of the Reserve Bank, formalises the Bank's objective of keeping inflation between 2 and 3 per cent, on average, over the cycle.
Similarly, Australia's financial sector, corporate governance and financial reporting frameworks also promote transparency of information.
And while Australia's performance and procedures have protected the country, we are more than happy to share our experiences and spread the reform message.
Last year we hosted an APEC symposium on corporate governance and we have offered to host a joint APEC-OECD symposium this year on effective insolvency regimes.
At the recent meeting of APEC Finance Ministers in Malaysia, we announced a range of Australian training initiatives in the corporate governance area, including an offer by the Australian Securities and Investment Commission to conduct 'walk through' training tours of the institutions that constitute the Australian corporate governance system.
Australia has also offered help to build institutional capacity among countries in the region to strengthen their financial systems, and so increase growth and help raise living standards.
With the recovery in Korea already well under way, and as the immediacy of crisis recedes, it will be important for policy makers to remain committed to the reform agenda agreed with the IMF.
The growth potential for Korea remains high.
However, this potential will not be realised unless the underlying causes of the crisis are addressed and sound economic policies are adopted.
Ladies and gentlemen, the reforms we have undertaken have insulated us to external economic shocks. But reform is an ongoing process.
It is important that macroeconomic policy maintain a consistent forward-looking focus on medium-term objectives.
But as this audience well knows, policy credibility is won by discipline over many years. But the gains can easily be put at risk by relatively short periods of neglect.
Policy should aim to maximise growth, while at the same time maintaining the medium-term inflation and fiscal objectives.
And any discussion of ongoing reform would be incomplete without including taxation.
Taxation reform is a high priority for Australia. The ANTS package that will officially pass through the Senate today goes a long way to replacing our current antiquated system.
Our package includes changes to personal income tax rates and family and social security payments that will significantly lower effective marginal income tax rates in fact, 80% of Australians will pay no more than 30% income tax.
Introduction of a broad-based GST, to replace the present wholesale sales tax and a range of inefficient State taxes, will result in an indirect tax system that has lower costs, that is less distorting to consumer decisions, and that avoids taxing business inputs.
But the reform does not stop there.
The current Review of Business Taxation is intended to minimise distortions to business decisions and cut compliance costs, as well as providing a competitive regime for attracting international capital and securing our place as a centre for global financial services.
More labour market reform is required to reduce unemployment in a sustained way. The Government aims to boost productivity and streamline enterprise bargaining, cut the role of third parties in the agreement-making process and ensure union membership is voluntary.
And in the financial sector, the Government remains committed to completing the Wallis reforms by bringing the State and Territory regulated financial institutions under the supervision of the Australian Prudential Regulatory Authority on July1, this year.
Ladies and gentlemen, the lesson from Australia's outstanding economic performance is simple: sound domestic policy is essential to survive and thrive in a world of large and mobile private capital flows.
The challenge of economic reform in a globalised economy never disappears.
And as Australia will tell anyone who will listen, where we are now, and the strength we have today, is the product of yesterday's reform.
And as we move forward, as we move toward the new millennium, the strength of tomorrow will be the product of today's changes.
And I am certain that our reforms are building that strength.
Thank you.