Thank you for the opportunity to address this Credit Suisse First Boston Asian Investment Conference.
Over the past few days, you have covered important developments relating to investment in the Asia Pacific region.
I come here today to remind you of the success of the Australian economy through the financial crisis and to stake our claim as a time zone centre for global financial services.
And as such, I come here to begin our international push for Australia to be the first point of access for the world's wealth into the Asian region.
But I am also here to outline Australia's commitment to this region and the steps we are taking to help our regional neighbours during this period.
Because at the end of the day, our interests are best served if the Asia regional chain is strong, not just individual links of it.
The Howard Government came to office three years ago with a determination to turn Australia into a centre for global financial services.
Today, we have a strong case to argue.
Our performance during the financial crisis is proof we have come of age as an investment destination.
In a weak world economy, we have just achieved our fifth consecutive quarter of growth of 1 per cent or more. Our economy grew by 1.1 per cent in the December quarter and 4.7 per cent for the 1998 calendar year.
Putting that in context, Australia is growing faster than the G7, faster than the OECD average and faster than the much-lauded US economy.
And I am not the only one spruiking Australia's record.
Our performance has grabbed the world's attention. Last December, the respected US economist Paul Krugman, writing in Fortune Magazine, said: "Australia, in case you didn't know, is the miracle economy of the world financial crisis."
The International Monetary Fund recently acknowledged our achievements in this area, saying our reforms had "built the foundation for Australia's impressive record of strong growth and low inflation in recent years."
Our strong performance is no accident.
In the past three years, we have pursued a credible, transparent and forward-looking framework for macroeconomic policy.
In short, without the reforms of the last few years, Australia would not be in the commanding economic position it is today.
It is our strongest advertisement as we pursue international investment.
We recognise that you cannot, with any credibility, promote yourself as a centre for global financial services unless you have the domestic economic foundations right.
In Australia, we lay claim to four key foundations in putting our case as an investment location.
- One, we offer deep and liquid financial markets.
- Two, we have a well-educated, multi-skilled, multi-lingual workforce.
- Three, we provide a secure business environment -- offering political stability, a sound financial sector and world-class commercial infrastructure.
- And finally, we have an eye to the future, with an ongoing reform process to prepare Australia for the new millennium and beyond.
Turning to the first point, Australia has financial markets, which are liquid, transparent and well run.
In addition, they offer investors a range of sophisticated products, often at the cutting edge of innovation.
We are particularly competitive in areas such as financial futures and options.
But in just about every area -- whether it's equities, bonds, synthetics or managed funds -- we continue to punch well above our weight.
For example, the Morgan, Stanley International Market Capitalisation Index puts the capitalisation of the Australian Stock Exchange ahead of Hong Kong and four times the size of the market capitalisation of Singapore.
According to this index, Australia is the only market in the Pacific region - including Japan - to have a positive annual compound rate of return over the past 5 years.
What is more, the 1998 Australian Financial Markets Association survey confirms the depth and liquidity of our markets.
In the 12 months to July last year, total turnover in Australian financial markets rose 13 per cent to more than $24,000 billion.
The survey found a 21.6 per cent increase in sharemarket volumes, a 70 per cent rise in currency and options turnover and a 29 per cent increase in repo turnover.
Australian dollar basis swaps almost tripled and there was a 34 per cent increase in spot Australian dollar transactions.
Determined to meet the increasing demands of investors, our markets are always looking for new opportunities.
We have led the debate on the trading of Greenhouse Gas Emissions, for example, which should lead to new markets in tradable products.
In addition, the Sydney Futures Exchange and Dow Jones are about to launch new Asian sharemarket indexes -- called the Asia Pacific Extra Liquid Series, or APELS.
Australia also capitalises on a time zone advantage, which enables us to span the close of business in the United States and the opening of Europe's trading day.
This was demonstrated perfectly with the launch in January of the Euro, where our time zone advantage meant Australian forex dealers were among the first to actively trade the new world currency in a liquid market.
Of course, the quality of our financial markets would be irrelevant in our quest to attract global investment without a skilled workforce.
Our workforce is highly educated, with 45 per cent -- almost half -- holding university, trade or diploma qualifications. That is double the rate in Singapore. In addition, 30 per cent of Australians with tertiary degrees also have post-graduate qualifications.
Our workforce is multi-lingual, the product of a multicultural community that has benefited from more than two centuries of immigration.
Ladies and gentleman, more than 2.4 million Australians (15% of the population) speak a language other than English at home, of these more than 800,000 speak Asian languages at home.
This ensures companies can draw on skilled managerial and technical staff, who also happen to be fluent in regional tongues.
On top of that, our workforce is very affordable by international standards. Salaries for middle, senior and top management are much lower in Australia than Hong Kong, the United States, Japan, Germany, the United Kingdom and Singapore.
The third major foundation in securing Australia's place as a centre for global financial services is providing a secure business environment.
This is the area of greatest Government reform.
We have not been content merely to cash in on Australia's reputation for political stability, which already makes us one of the world's most robust and stable democracies.
On that rock of political stability, we have built a world-class regulatory regime, which has shielded us from the financial crisis of our region.
This regime underpins our financial system with security and certainty, two ingredients vital to investor confidence.
It means we can provide the world with access to the Asia region without the risks of the region.
Ladies and gentleman, nine months ago, we introduced an improved regime for financial system regulation.
This followed the most fundamental stocktake of the Australian financial system and its regulatory framework in almost 20 years.
The reforms flowing from it have achieved the seemingly impossible -- they allow the financial sector to operate more freely and efficiently but at the same time tighten the safety net for consumers.
In this way, the financial sector is given the flexibility to innovate and adapt, without in any way undermining its stability or the strength of consumer protection.
We have achieved this by streamlining our regulatory bodies, giving them clearly defined responsibilities and ensuring they co-operate with each other to prevent any regulatory gaps.
The International Monetary Fund has hailed these changes as "pathbreaking reforms which put Australia at the forefront of international practice".
We are now embarking on the second part of our regulatory framework, which relates to corporate law reform, a subject close to the hearts of the IMF and the OECD.
Our Corporate Law Economic Reform Program has the same goals in mind, streamlining regulations, while maintaining consumer protection and more importantly, market integrity.
Legislation is now before Parliament, which will give our accounting standards a more commercial and international focus, streamline fundraising regulation, clarify directors' duties and facilitate a more competitive takeover market.
The next round of reforms in this area will simplify regulations relating to the provision of financial products.
I would be remiss if, in talking about our business environment, I didn't mention the Australian taxation system.
I believe many investors, in deciding where to do business, overplay the impact of tax when assessing our ability to operate as a centre for global financial services.
After all, you can hardly describe Boston, New York, London or Frankfurt as low tax financial centres.
That said, we do recognise the need for an attractive taxation regime in this highly competitive global environment.
But where we offer tax concessions and investment incentives, it is with a view to building sustained and meaningful investment relationships.
We do not offer the baubles and trinkets on which fleeting investment relationships are built, that shine all too briefly and quickly lose their lustre.
We want investors with a long-term commitment to Australia and a long-term commitment to the Asia region.
To that end, we have introduced legislation to increase the attractiveness of the tax regime for Offshore Banking Units, by extending the tax concessions, which exempt some offshore parties from Australian tax.
This will increase the mobility of funds and lead to greater competition for offshore business.
We have also taken steps to open up the corporate debt market to international investors.
Legislation is now before Parliament to widen the exemption from the 10 per cent withholding tax on Australian-sourced interest paid to offshore investors.
This reform will encourage greater liquidity in the Australian corporate debt market and, indeed, we expect it will double the size of the market over the next few years.
We also encourage international investment through specific programs aimed at attracting investment in modern, high growth industries.
The national agency Invest Australia facilitates major investment projects and provides a range of services to companies seeking to establish operations in Australia.
Incentives under the Regional Headquarters Program encourage companies to make Australia their servicing base for the Asia-Pacific region. These include tax incentives and help with other matters, such as immigration for executives.
Many companies in this region have already recognised the benefits we have to offer and made substantial investments in Australia.
Another attraction of our business environment is the excellent cost-effective commercial infrastructure.
In other countries, legal, accounting, actuarial and insurance services are either very expensive or require imported expertise. By comparison, our business service industries are recognised globally as innovative, and as competitive.
Similarly superannuation and other mandatory employee benefits can dramatically increase the total cost of employment. By international standards, Australia's on-costs are relatively low.
Finally, our prime CBD office space costs are a fraction of those levied in Tokyo, Hong Kong, and Singapore.
In Sydney, for instance you will pay a median price per square metre of $US299. This compares with $US431 in Singapore, $US630 in Tokyo and a massive $US723 here in Hong Kong.
All of these factors influence where foreign nationals want to do business.
But, despite our economic success, we are not resting on our laurels.
This brings me to the fourth investment foundation -- future preparedness.
And as we head to the new Millennium, Australia can boast it is better prepared than most for the challenges of 1 January 2000.
In terms of Y2K compliance Australia is ranked second in the world only to the USA, according to the respected Gartner Group. This is a credible achievement.
In other words, future preparedness might mean not getting complacent.
The Australian Government recognises the need for structural reform of the taxation system.
That is why the Howard Government is building a taxation system fit for the new millennium.
We currently have before the Parliament a taxation package that replaces nine inefficient and different taxes with a single consumption tax of 10%.
Importantly in financial services we are abolishing $3 billion a year in financial services taxes including stamp duty on transfer of shares which the University of Sydney estimates will add more than 10% to the market capitalisation of the ASX over the next ten years.
This represents the single most significant change to our international competitiveness in 100 years.
In addition to significant reductions in personal income tax we are undertaking a full review of business taxation covering issues such as corportae tax, capital gains tax and tax disincentives that may effect our attractiveness as a key financial centre.
It means that by the end of next year, Australia will have the most modern and progressive tax system in the OECD.
But we don't have an eye just to our future.
We are also taking an active role in the reform and recovery process now under way in the Asia-Pacific region.
For instance, Australia is one of only two nations to contribute to all three IMF assistance packages for Korea, Thailand and Indonesia.
We want to be a good friend, a good neighbour and a loyal partner in the region.
So we are playing a significant role in supporting many of the region's economies through these difficult adjustments and providing support to encourage them to fully implement the necessary structural reforms and Australian Government agencies are actively involved in the rebuilding of Government regulatory institutions across Asia.
We do all this in recognition of the fact that while our link in the regional chain may be strong, it can be further strengthened by reinforcing the entire chain.
In conclusion, Australia is in an excellent position to stake its claim as a quality investment destination and a centre for global financial services.
We have the strongest economy in the Asia region. We have a stable political climate, a large international financial services sector, excellent commercial infrastructure and a very affordable skilled workforce.
We have embarked on a reform process, which has opened up the financial sector and captured the world's imagination.
We have demonstrated our commitment to the region by sharing this expertise with our closest neighbours, to strengthen the regional family.
And we have demonstrated we are prepared for the future, keeping a close eye on international trends and pressing on with an agenda, which will bring more sweeping reform.
We have proved our right to claim Australia as a centre for global financial services and a AAA investment destination for the world.
Ladies and gentleman Australia is very determined to be the bridge between Asia and the world. We are partners and we are friends, and we will continue to work towards our vision of becoming a AAA investment centre for global financial services.