I would like to congratulate the FIA for the outstanding success of this conference. I understand that there are 1000 people who have registered for it, so unless you're giving away rugby jerseys it sounds as though it's a very interesting and rewarding conference for many of the participants.
Ladies and Gentleman, Australia has enjoyed 3 golden economic periods over the last 200 hundred years. The first golden economic period was in the 1860's when gold was discovered in Australia. A large number of Chinese moved to Australia to become prospectors and the agricultural lands of Australia were first tilled with a result that by 1900, Australia had the highest standard of living in the world. Unfortunately, as a young nation we failed to take advantage of the growing industrial revolution in the US and in Europe and the opportunities for us as a nation to continue to grow passed us by.
The second great golden era for Australia was after the second world war in the 1950's. Again our resources and our agricultural products delivered - to developing Japan and a rebuilding Europe - opportunities to grow as part of the new industrialized world. During that time it was remarked that around the world Australia was riding on the sheep's back. Unfortunately that opportunity once again passed us by, and by 1975 it become clear that we had not taken full advantage of the new globalization and industrial environment that had come to pass.
During the 1990's Australia enjoyed and has enjoyed and continues to enjoy, it's third golden economic era. At a time when seven out of our top ten trading partners were in recession or depression, Australia had the strongest and fastest growing economy in the developed world. We have had nine consecutive quarters of more than 4 per cent annualized growth, and we have done it at a time when we have been under considerable pressure.
And we have done it for a number of reasons. We have done it because we have taken some hard yards in terms of economic reform in Australia. We've had structural reform in Australia, particularly in industrial relations and taxation reform, and we've also had significant reform of our financial system. So we were able to withstand the volatility of our Asian region.
And on this occasion, the third opportunity of Australia enjoying a golden economic era, we are not going to let the opportunity pass the way we have previously. And that is because for the first time in our history we are entering an age where our distance from the world no longer matters.
The age of information technology and telecommunications (IT&T) has the capacity to deliver for Australia, the opportunities to tap a market of 3 billion people on our doorstep, and at the same time compete in global markets in a way that we never had the opportunity in the 1860's or in the 1950's.
The Australian government riding on the back of an economy that has changed markedly over the last few years is very determined to take advantage of the new IT&T age. What few people realize is some basic statistics about IT&T in Australia. Today agriculture represents just 3 per cent of the Australian economy. Services represent around 80 per cent of Australian GDP. That's a GDP that's larger than the combined economies of Malaysia, Singapore and Hong Kong. Financial services represents 7 per cent of the Australian economy and IT&T represents around 11 per cent of the Australian economy about the same size as our mining and resources sector.
Today Australia has an IT&T industry which is second only in size to Japan in the Asia region. We have more computers per capita than any other country in the world bar the US, and more than 25 per cent of all Australian households have an internet connection that is used. And that came up 37 per cent in one year.
By 2002, six million Australian's will be using the internet on a regular basis. That sort of structural change in the Australian economy is backed up by our determination as a Government to put in place a regulatory regime that is able to deliver the most reliable, the safest, the most transparent and the most efficient regulatory infrastructure in global markets.
And we are doing that in a number of areas.
There is a perception at times that Australia has a high taxation regime. We are one of the lowest taxing nations in the OECD. At the moment Australia is undergoing significant taxation reform involving the abolition of the financial services taxes, such as stamp duty on the transfer of shares, financial institutions duty as well as the abolition of wholesale sales taxes of 12 per cent, 22 per cent, 32 per cent and so on. We're abolishing a range of other taxes and we are introducing a goods and services tax of 10 per cent which at the same time treats financial services in the most beneficial way possible.
We are reducing personal income tax in Australia so that 80 per cent of Australians are paying no more than 30 cents in the dollar in income tax. We are halving capital gains tax so that 80 per cent of Australians are paying no more than 15 per cent in capital gains tax, and we are undertaking significant reform of our business taxation system with huge incentives for venture capital with a reduction in the company tax rate of 36 per cent to 30 per cent. The net result is that Australia will continue to be one of the lowest taxing developed nations in the world.
Secondly, we have already undertaken massive reform of our financial system. We have implemented the recommendations of the Wallis report, which was an Australian report commissioned in 1996 dealing with the issues of globalization and conglomeritization in relation to financial services. The Wallis report was the blueprint we adopted in full.
It has been followed by the UK with the development of the Financial Services Authority, and a number of other jurisdictions are following, if not in whole, certainly in part.
The third area that we're undertaking significant reforms is industrial relations. Over the last 10 years the Australian workforce has changed significantly. Fewer than 26 per cent of the Australian workforce is a member of a union. And, in fact, Australia last year enjoyed it's lowest level of industrial disputation in more than 70 years. Productivity continues to grow markedly in Australia as a result of our industrial relations reform. And the Government remains committed to further reform.
And the fourth area of reform, of course, is in the financial services area. As you heard just in the presentation before me, the Australian Stock Exchange is the first major stock exchange in the world to have fully demutalised and listed on its own exchange. And the Sydney Futures Exchange, which is the largest financial futures exchange in Asia, is also going through a similar process. Both Exchanges are now fully electronic. We are looking for harmonization and aggregation of Australia's clearing and settling houses so that we, in turn, can develop Australia as a clearing and settlement centre for Asia. Combine that with our IT skills which are obviously very significant; combine that with a regulatory infrastructure we have put in place; and combine that with our significant taxation reform and you are looking at a nation that is very different to the perception held by some.
The reality is there. We are walking the walk, we are not just talking the talk. And that is very important in a volatile global market. It's very important in volatile global economic environment. People will start to look for safe havens and they will also look for innovation.
Accordingly, it is very important that Australia take advantage of it's new economy credentials, and that we start to tell the world about the significant opportunities for investment in the new economy.
As a nation we see ourselves as having an opportunity to provide the 3 billion people on our doorstep with opportunities that they had never envisaged. Of course the consumer market in Asia is far larger than that of just one country whether it be Australia, Singapore or even China.
The real opportunities are in B2B commerce, and in B2B commerce we rely significantly on the quality of infrastructure and regulatory environment that governs it, and the certainty that transactions are going to be honoured and fulfilled.
That is an opportunity for Australia; that is the opportunity we have to provide services to the rest of Asia.
As a country of 19 million people, where 800,000 Australian's speak the Chinese language at home everynight and more than 2 million Australian's speak a language other than English at home everynight. And with a diverse and important educational role where we export educational services not just to Asia, but to the rest of the world. In fact 15,000 Singaporean students are currently studying in Australia.
Then when it's combined with IT&T, and when it's combined with the services structure and a committed Government, and a developed market, there is no reason why in a partnership with others in the Asian region we cannot develop into a more significant Asian economy to compete with the likes of Europe and the US.
Thank you very much Michael for the opportunity to come along. I congratulate all of you for participating in this very important conference. I wish you well for the rest of the conference, and I warmly welcome any opportunity you might have to come and visit in Australia including the Olympics in Sydney at the end of the year. Some of you in fact might even be participating in that, and I wish you good luck and thank you very much and I'm happy to take questions.
QUESTION AND ANSWER SESSIONQuestion:
Twelve months ago you opened the Australian Centre for Global Finance and I wondered over the last months just how much business had come into Australia?
Answer:
Australia has brought in a range of new businesses and attracted a range of new businesses. I emphasise at this point we're not talking about deliberately taking business from Singapore, Hong Kong or Tokyo for that matter. We are talking about how we can create an environment to grow the region. The fact that players such as Deutsche Bank have relocated their Asian funds management to Sydney, or that Citigroup has relocated its Asian Research for funds management to Sydney, or that the Royal Bank of Canada has moved its foreign exchange to Sydney, or Vanguard is using Melbourne as a base to launch it's operations in Asia, or that JP Morgan is setting up its private equity regional headquarters in Melbourne, or Citibank is moving call centres to Brisbane, or a range of others which I won't remind you of. The fact is that we are delivering on what we are talking about. It's not good enough in this world to come and talk about something. You have to deliver it with action. And the development of Australia as a global financial centre - and we have been talking about a global financial centre for 18 months - recognises that we are trading in a global environment. It is no longer a regional environment we live in. It is a global environment. So we see opportunities for business to grow to service Asia from Sydney or Australia, and that business can come not just from within the Asian region but perhaps more importantly from Europe and America. Europe and America are particularly expensive places to run global operations at the moment. So there are wonderful opportunities for us in Asia to be able to grasp those sort of businesses from Europe and America.
Question:
Given that Australia's is so much further south than central Asia as opposed to a place like Hong Kong or Singapore, does that pose a problem for Australia to become a regional financial centre?
Answer:
That's a good question, and I would have said to you 5 or 10 years ago that, yes, the tyranny of distance is there. In fact, unless we grab a whole lot of ships out of Singapore Harbour and tie them to Darwin and pull the whole continent north, there's not a lot we can do about that, other than hope the Boeing or Airbus can create a faster jet. But what we can do is use our technology to make us a smarter and closer part of the Asian financial centre.
Technology delivers for us, as I said, the opportunity that we as a nation have never had. And it's a very big nation. It's virtually 4,000 km from one end of the continent to the other, and just as the tyranny of distance between Australia and perhaps northern Asia has been significant in the past, so has been the tyranny of distance in Australia. Yet we find that companies such as Mick's Whips, which makes whips based near Alice Springs in the Northern Territory, is able to start up an internet site and begin exporting whips around the world because of the opportunity provided by the internet. Or a piston factory in Adelaide which previously might have been fighting the tyranny of distance, can manufacture specialised pistons for 1950's cars, open up an internet site and start exporting to the world. And those sort of opportunities exist for Australia that we have never previously had, and it's the IT opportunities that are significant.
And when some misinformed analysts run around and say 1 per cent of the Australian stock exchange is IT stock, what they fail to understand is that the old economy stocks in Australia are preparing for the internet age.
On-line banking is a part of everyday life for many Australians. As is internet trading and shares. All the major Australian banks have now set up stock-broker services, where you have players such as Commonwealth Securities advertising for $A14.95 share trade. The interesting part about internet trading with Australia, is that Australia has just become the largest share owning nation in the world. More than 53 per cent of most Australians directly or indirectly own shares, and we have created a class of equities traders who never previously thought about equity trading.
We've got wonderful opportunities to participate. The new Hong Kong and Shanghai Bank/Merrill Lynch partnership announced that one of the first centres that they're opening up their operations outside the US is Australia. TD Waterhouse has one of their most significant markets for internet trading in Australia.
And the great thing about it is that in Australia farmers are coming off the land at 11:00am after tending the sheep or milking the cows, trading on the internet, buying and selling shares and going back out at 3:00pm in the afternoon. And you know, we never knew it until internet trading started. We never knew that that had happened. And that's a great story about how the tyranny of distance is being overcome by new technology.
Australia is at the forefront of some of the developments of M commerce. Mobile commerce is going to provide us with opportunities we never knew previously existed.
So they're the sorts of opportunities that exist for us, but as a nation we have to take advantage of them, particularly to help to export them into other countries in the Asia region.