To my colleague and friend, Mark Vaile, Ministry for Trade, and to all of you, Ladies and Gentlemen, thank you very much for coming along this afternoon. It's a great pleasure to be in Tokyo for the first time in my capacity as Minister for Financial Services.
The Minister for Trade talked about the performance of the Australian economy. It is a performance that has been lauded around the world, not by so‑called Australian representatives praising the performance of the Australian economy, but by such independent people as Paul Krugman, from the Massachusetts Institute of Technology, who described the Australian economy as the outstanding economy of the Asia/Pacific region. A number of others have described the Australian economy as outstanding and from my perspective the performance of the Australian economy is our 'truth test'. It is the test of how serious we are about real reform. The benefits of the Australian economy performance today are a result of yesterday's reforms. It is worth reminding you briefly about the sort of structural reforms we have undertaken in Australia over the last few years.
As my colleague, Mr Vaile, pointed out the first and most significant reform was to run sustainable budget surpluses, that was important if we were to overcome one of our difficulties which is a current account deficit. The surplus is important to continue to repay our debt. In fact we anticipate that by the early part of next century, around 2003‑2004 the Australian government could have paid out its current net debt through asset sales programs and consistent budget surpluses. Part of that is our anticipating continued strong growth and low inflation in the Australian economy.
The second major part of our reform was industrial relations reform. Now for some time it's been seen that Australian has industrial relations problems. The previous government undertook some reform to their credit of industrial relations but we undertook the first major wave of reform in 1996/97 with the result that in the last calendar year, Australia lost fewer working days to industrial disputation than at any time since 1913. We have low levels of union membership in Australia and they are falling - below thirty percent of the work force - and we continue our industrial relations reform agenda and at the same time maintain strong industrial harmony in the workplace.
But the reforms must continue because the benefits of tomorrow are going to be a result of the reform that we are undertaking today. The first major reform is in taxation. The government has introduced a ten percent goods and services tax and at the same time abolished an old and outdated wholesale sales tax regime. We have completely restructured the financial relationship between the Federal Government and the State Governments and at the same time we have significantly reduced personal income tax for Australians so that 80 percent of the population is paying no more than thirty cents in the dollar in personal income tax. At the same time from 1 July 2001 we are abolishing Financial Institutions Duty and other financial services taxes, we are abolishing stamp duty on the transfer of marketable securities including the transfer of equities. So the only cost associated with the transfer of equities and marketable securities will of course be the commission that you pay to your broker.
The second wave of reform which we have recently announced is business tax reform and the key parts about business tax reform are simplification, setting down a framework that is more business user friendly in relations with our taxation office and, of course, the headline changes, which are reducing company tax rate from 36 percent to 30 percent over the next two years. So that companies, in fact we are looking at all entities, paying a maximum rate of 30 cents in the dollar. We are also halving capital gains tax rate in Australia so that there is no more that an individual will pay in capital gains tax than 24.25 cents in the dollar. We have also significantly increased the opportunity for venture capital to come to Australia, either through US mutuals or other mutual funds that will get significant benefits through the taxation regime or perhaps just as importantly the development of venture capital in its own form and its own right from domestic avenues.
'Of course, the regulatory reform that we have undertaken and continue to undertake separates us out from the rest of the world', and they are the words of Alan Greenspan, not the words of Joe Hockey. Alan Greenspan, in addressing the IMF and World Bank conference last week in Washington said that what separated Australia out from the contagion in the region was our regulatory framework, and that regulatory framework has occurred in a number of areas.
Firstly in 1996 we undertook a significant review of the financial services industry in Australia. Now we have two regulators of all financial institutions and markets in Australia - it's called the Twin Peaks Policy - and the blueprint for our reform which was known as the Wallis Report has been used as the blueprint for the reform of the financial services industry in the United Kingdom and has been used by a number of other jurisdictions. Under that reform process we have one prudential regulator, the Australian Prudential Regulation Authority, which will prudentially supervise on the basis of products rather than on the basis of entities, and by supervising on the basis of products it allows us to have a number of different entities providing different services with greater competition and greater benefit to consumers. The second regulator is the Australian Securities and Investments Commission and that is the corporate regulator of Australia and is responsible for the supervision of our markets as well.
At the same time we are undertaking significant market reform. The Australian Stock Exchange, which is the second‑largest equities market in the Asia/Pacific region after Tokyo, has already demutualised and listed on its own stock market. That has been an unqualified success. It is fully computerised and it is meeting the challenges through global alliances and developing global alliances that are going to be proposed by global markets into the future. The Sydney Futures Exchange is following a similar path, it aims to demutualise in the near future and has also moved towards full computerisation in trading. The Sydney Futures Exchange is the largest financial futures market in the Asia/Pacific region.
The third area of significant reform is in corporate law. We recognise that corporate law reform is going to lead to significant challenges for individual governments over the next few years as markets become more global. With corporate law reform we are looking at a whole wholesale change with the regulation of financial services for consumers so that there is adequate potential in place for consumers, but at the same time we are undertaking very significant reform of the regulatory process for corporates, including simplified prospectus and fundraising provisions, simpler and readily flexible directors' duties and a range of other initiatives that will in the long term make the Australian financial services industry highly competitive.
Finally, Ladies and Gentlemen, we are very determined as a government, in partnership with the private sector of Australia, to develop the Global Financial Services Centre in Sydney. We are doing that because for 211 years, the entire history of modern Australia, we have lived with the burden of distance. In the new global market era distance does not matter. You can be sitting next to the party on the other side of the transaction or that party can be on the other side of the world and the trade will be instantaneous. We see the Internet as providing a unique window of opportunity for the development of a 'New Australia' and that Australia needs to develop in partnership with the Asia/Pacific region. We need strategic alliances and we need Australian financial institutions more pro‑active in the Asia/Pacific region and, importantly, we need to develop our own understanding of how the Asian markets work.
Australia has a significant pool of investment, we have the six largest funds under management in the world. We expect it to grow to one trillion US dollars by 2005, and with that sum - albeit small by comparison with Japan, of course - we look to expand and develop relationships in the Asia/Pacific region, stretching from India to the Philippines and the unique opportunity for Australia is motivated by our desire to access the smartest minds and the smartest people and the most bountiful capital to develop not only our natural resources but perhaps our most important resource, which is our people
And so it particularly pleases me that I join with my colleague, the Minister, today in welcoming all of you and thanking you for your attention. We are very supportive of the efforts of Macquarie Bank and AMP and the Financial Network Services because they are Australian institutions looking to expand beyond the borders of our domestic market.
In fact in each of these institutions you can see the benefits of some of our reforms. For example AMP has demutualised as a large life insurance company and general insurance company and it is now diversifying its operations, particularly into Internet banking and a range of other financial services. That is a direct result of some of the regulatory reforms we have undertaken which allows the traditional banking and financial services products companies to expand beyond their usual predictable lines of business.
Macquarie Bank, a home‑grown investment bank that is developing some of the most sophisticated products in the world in the investment banking industry, has developed a strategic alliance with IBJ here and a number of strategic alliances around the Asia/Pacific region. It also recently purchased the Bankers Trust Investment Bank in Australia from DeutschBank.
The Financial Network Services; our retail banking services and banking industry, is very sophisticated in Australia. It is highly competitive and very sophisticated and Australian consumers have therefore benefited significantly from that. Much of the software was provided by Financial Network Services and I'm very pleased that they are a great example of an Australian financial institution, Australian company, that is expanding beyond the borders so much so that over 90 percent of its revenue comes from outside Australia. And the same can be said of AMP where over 50 percent of its revenue comes from outside Australia's borders.
Ladies and Gentlemen, we're all part of the new Internet wave; I urge you to continue to update yourselves on the developments in Australia by looking at my website which is www.minfsr.treasury.gov.au. - and if you ever need any information please do not hesitate to contact us.
Thank you very much.