Good afternoon.
Ladies and Gentleman, I am delighted to have the opportunity to speak here today at the Swiss‑Australian chamber of commerce, an organisation that provides valuable economic links between our two countries.
Switzerland provides a significant contribution to the Australian economy. It has been in the top ten direct foreign investors in Australia for many years.
There are a number of Swiss companies operating in Australia across a diverse range of industries, offering globally recognized products and services to the consumers of Australia.
In the financial services industry, I need only mention the names UBS and the Credit Suisse Group, internationally recognised as world class banking institutions. Similarly large Swiss insurers located in Australia — The Zurich, Winterthur International Insurance Company and Swiss Re.
As the Minister for Financial Services & Regulation, I am delighted to tell you how pleased I am that some of Switzerland's most successful financial services providers are so well represented in Australia.
That in a nutshell, is what Australia's goal of becoming a centre for global financial services is all about — to gain a greater share of world financial services business.
Today I would like to speak about the progress we have made in achieving that goal.
Recently, in my role as Australia's 'Financial Services Ambassador', I have traveled to Asia, Europe and North America. The purpose of these trips was to explore the steps that we need to take to secure Australia's position as a centre for global financial services in the Asia‑Pacific time zone.
What was clear, wherever I visited, was the speed at which technology and convergence are affecting the financial services industry.
Put simply, technology is changing the way the world does business.
In fact, within the next 12—18 months I predict that it will be almost impossible to do business with any of the world's major corporations financial or otherwise - without using electronic orders, payment and communication systems.
This is a major paradigm shift that has been fuelled by globalisation and technological innovation and is of great consequence to Australia. For over 200 years we have lived with the tyranny of distance, a real monkey on our backs. Now, with the advent of the internet and Email, we are just a click away from the world. And I'm sure many of you here can stay in regular touch with Business associates back in Switzerland in this way.
These developments offer unparalleled opportunities for Australia.
For example, an Australian software company, Mincom, has exported its Enterprise Asset Management (EAM) software to North America and Europe. This software enables businesses to track and manage vast and complex inventories. Clients include The British Navy, Boeing and Scottish Power, all of whom require sophisticated systems to manage their inventories of mission critical Assets. This software has been especially useful to Scottish Power whose tariffs are linked to a performance based statutory formula. Mincom software has delivered efficiencies that enable the utility to extract maximum performance from their assets, which in turn helps maintain service levels and preserve pricing structures.
Technology provides opportunities to bring business and capital together regardless of either party's flag of origin.
The Internet gives cost effective channels of communication with existing customers and the chance to market to new ones.
In this burgeoning new paradigm, size matters.
People - both staff and customers - matter.
Technology expertise matters.
Provision of superior products matters.
But above all, the ability to successfully bring these elements together will decide who are the winners and who are the losers.
The Government believes Australian financial institutions can be amongst the biggest winners in the "new economy" of post‑industrialism.
Establishing Australia as a centre for global financial services in the Asia‑Pacific time zone is a high priority of the Government. I believe that we have the credentials to substantiate our ambitions. Today I would like to highlight four of the cornerstones that we have built our approach on.
Firstly, Australia's financial markets have developed naturally, providing a secure basis for investor opportunities. The markets are liquid, transparent and well run, and offer a wide range of sophisticated products. Whether it is in equities, bonds, synthetics, or managed funds, trading volumes are of world standard.
For example, in 1998 the Sydney Future Exchange's three and ten year bond futures and options were among the 15 most heavily traded contracts of their type in the world. The All Ordinaries Share Price Index futures and options contracts traded at similar volumes.
The importance of the markets for index derivatives is gaining stature. Finance theory and research point to their rising prominence, as markets become more efficient, and it becomes harder for stock picking fund managers to "beat the index".
Australia's significance as a financial market in its own right, and as a global financial centre, has been recognised by our invitation to participate on the Financial Stability Forum established by the G7. Lately, noted MIT economist Paul Krugman commented on the resilience of the Australian economy during the recent Asian economic crisis.
We have the best set of economic statistics in the developed World:
- The fastest growing economy in the world.
- The lowest levels of inflation since man walked on the moon.
- High levels of job creation, that show tangible results.
In summary Australia offers business capital access to Asia, but without the risks so prominent in the region.
Secondly , we have a well‑educated, multi‑skilled and multi‑lingual workforce.
One in 20 inhabitants is Asian‑born with more than 2.4 million Australians speaking a language other than English at home. Over 800,000 Australians speak an Asian language. Australian cities are fast becoming the location for companies requiring a range of language skills.
Australia can cover most of the dialects of the region. If Citi group require English/Bhasi gold traders, or back office staff who can settle transactions that are made anywhere in the time zone they will more than likely find these sorts of people in Australia.
If you can develop that reputation with the world's biggest bank, then other organisations will soon hear of it.
Education itself is of world standard. Each year thousands of students travel from all over the region to study at undergraduate and post graduate levels. The qualifications they achieve are recognised by the worlds best organisations.
Thirdly, we provide a secure business environment — offering political stability, a sound and effectively regulated financial sector, and world‑class commercial infrastructure.
Australia has built a world‑class financial sector regulatory regime. It provides security and integrity, two ingredients vital to investor confidence. The International Monetary Fund has hailed recent changes, such as the Wallis reforms, as 'pathbreaking reforms which put Australia at the forefront of international practice'. Our regulatory approach has become the blueprint for governments not only in our region but in Europe as well.
And finally, the Australian Government is facing the challenges of the new millennium head on, with resulting benefits for the financial sector. Australia can boast it is better prepared than most for the challenges of 1 January 2000. For example, on Y2K compliance, the Gartner Group continues to rank Australia among the most prepared countries in the world, along with the USA, the UK and Canada. This is a credible achievement and reinforces the importance of a safe harbour in a volatile region.
Of course, we should not discuss our domestic advantages without mentioning the Australian taxation system.
The Government has essentially undertaken a total overhaul of Australia's tax system. While the spearhead of these reforms is a broad‑based goods and services tax — which will mean 80 per cent of Australians will pay income tax of no more than 30 per cent — other changes will go a long way to making Australia an even more attractive financial centre.
For instance, the reforms abolish a range of inefficient financial services taxes including Financial Institutions Duty and stamp duty on marketable securities, saving investors an expected 8 billion dollars over the next 6 years.
The Government has also widened the exemption from interest withholding tax on corporate bonds, which will underpin an increase in liquidity in this fast developing market. Already this year, Morgan Stanley have managed over $800 million worth of corporate bond issues.
We have also extended the eligibility for institutions wishing to become an Offshore Banking Unit — an essential ingredient to be a financial centre. Following these changes, funds managers, life insurance companies and providers of custodial services are now eligible to apply for offshore banking unit status.
Foreign Investment Fund rules have also been relaxed to exempt certain investments located in the United States from this tax, such as regulated investment companies, certain real estate investment trusts and some partnerships. This will allow US mutual funds to compete on a level playing field with Australian superannuation funds. Further to this I understand our superannuation "choice of fund"legislation will pass through the senate in the next session of parliament. This will allow Australians far more flexibility with their retirement savings, stimulating competition and its resultant efficiencies.
As I am sure you are aware the governments current focus is on business taxation. At the end of July, the Government received the report of the Review of Business Taxation, chaired by John Ralph. The Review dealt with the design of the business taxation system, the processes of ongoing policy making, drafting of legislation and the administration of business taxation. Not only a mouthful to say, but let me tell you, it is an exhaustively complex and thorough document. Today all I can tell you is that the report is with cabinet and we expect to make an announcement in the near future. But just to whet your appetite I can say that those who know of these things predict that the current tax act will be halved in size.
The Government is acutely aware of the role of business tax reform in achieving our goal of establishing Australia as a financial centre. We want tax reform to assist in building enduring relationships with financial institutions that have a long‑term commitment to Australia. Right now there is a alarming trend of global organisations looking for regulatory arbitrage opportunities, which may offer little more than short‑term benefits to the host country. I can tell you we are not looking for this style of investment. We offer all the benefits I have been discussing but as we all know, there is no such thing as a free lunch. We look to encourage viable long‑term investment and will support this activity wherever possible.
The Government is committed to promoting Australia's financial services in such a way that ensures we participate fully in the benefits from the growth in global financial services.
The establishment of my own Ministry to oversee this goal and as Australia's Financial Services Ambassador was a first step.
We have created an office to co‑ordinate the promotion of Australia as a global Financial centre.
I can proudly announce that this office, The Australian Centre for Global Finance, has just recently opened its doors for business.
The Task Force will work closely with the financial services industry. Key activities will include
- promotional and marketing activities
- policy development
- information gathering
- educational and training initiatives.
Ladies and Gentlemen I have spoken today about many of the governments specific efforts to support and encourage the Australian financial services industry.
We have put the building blocks in place to cement Australia's position as a financial centre. We are now in position to provide the world capital with access to the Asia pacific area, but without the risks inherant in many parts of the region.
In particular, our robust economy should enhance our our position as an investment destination, improving the liquidity of our financial markets. This will ensure that Australian business continues to have access to the best, most cost effective finance and advice.
Thank you.