Good afternoon ladies and gentlemen and thank you for inviting me to speak about "The Way Ahead in Australian Financial Markets".
It is a hugely appropriate topic and one I am sure is occupying the best minds of the organisations that are represented here today.
I am not telling this audience anything new when I say that today we live in a world of borderless financial markets that allow transactions between parties who might be across the street, or might be across the globe.
These are transactions that can bypass customs and immigration in a split second, making the participant's location almost totally irrelevant.
And these sorts of transactions show the speed at which technology and convergence are affecting the financial service industry.
The pace of change is nothing short of astounding.
Put simply, technology is changing the way the world does business.
In fact, within the next 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, electronic payment and communication systems.
According to BRW the number of Australian Internet users is expected to treble to 11 million in the next 3 years.
In the 3 months to February 1999 the number of people using the Internet to pay bills or transfer funds doubled from the same period last year.
This is a major paradigm shift that has been fuelled by globalisation and fuelled by technology. And it offers unparalleled opportunities for Australia.
Opportunities to bring business and capital together regardless of either party's flag of origin.
And it also presents some serious challenges.
The challenge of preserving the stability of our financial system in this maelstrom of change.
And during this change, we remain committed to keeping pace with global developments and committed to incorporate this change into our regulatory framework when and as necessary.
Today I would like to focus on some of the trends emerging in financial services over the coming years and on the Government's role in managing these issues.
Ladies and gentlemen, as I have clearly shown, new technologies and globalisation are driving most of the change in financial markets.
In many ways the latter is influenced by the former.
Technology is providing more efficient methods of service delivery, and the developments seem limitless.
For instance, how long before your television is a platform for you to do on-line banking or shopping, not to mention access to more mundane products like music or movies on demand?
Look at how the Internet is giving consumers access to a greater range of products and a greater range of product providers from right across the globe.
These developments enable consumers to find the most suitable products from a wider range of markets, much more quickly and much more efficiently.
And, if not embracing, then many Australian consumers are becoming a lot more comfortable with this change.
In fact I believe that customers today are highly responsive to product choice and product pricing, irrespective of who is the provider or irrespective of the way the service is delivered.
For example, some customers are now considering non-bank financial institutions as their preferred source of loans, rather than traditional banks.
Borrowers who would previously have automatically gone to a bank now at least consider mortgage originators and finance companies. Increasingly they are using the Internet to access these services.
And to meet this challenge, banks are also offering a much wider range of products and a wider range of ways to access these products.
Today, banks not only offer a huge range of deposits and credit facilities, but also products and services that were previously unheard of managed funds, superannuation, insurance, financial planning advice and stock broking.
In short, banks are becoming one-stop cyber shops for financial services.
And it won't just be the traditional banks or financial institutions becoming one-stop cyber shops.
We are already seeing in other parts of the world as well as in Australia supermarkets, pharmacies and the like selling financial services alongside their own traditional goods.
I'm sure many of you are aware of the consequences these sorts of developments will have for your industry.
I'm not sure anyone in this room could accurately predict the financial services landscape 2 years from now, but I think we can identify some powerful trends that are at work today, and that are reshaping this sector.
The Government is listening and is watching as these trends emerge.
We are determined to proactively maintain a regulatory framework that delivers market integrity - a feature I firmly believe represents a competitive advantage for us in this time-zone and globally.
The trends that I see emerging are:
Globalisation: for years we've heard talk about globalisation without any real understanding of what it is or what it means.
I'm not sure I can tell you yet what it means exactly, but I can tell you what consequences it is having right now.
Today's global communication networks provide the platform for worldwide access to products and services, whether its Mick's Whips in the Northern Territory or a massive mutual fund in Boston.
The access is right here, right now.
This year Australian investors, as a result of Government initiatives, will be able to consider whether to invest in US style investment products which will facilitate direct comparison between Australian and US fund managers.
I have no doubt that our funds will be able to go head to head with the US funds and retain and win business because for a long time they've known they live in a world where their performance is measured on a global basis.
Commoditisation: In the financial service sector the last few years have seen consumers realise what the business sector has known for a long time, that many of the financial sectors traditional products are fungible, that they are commodities to be bought and sold.
A 25-year floating rate mortgage is essentially the same product whether it's sold by a bank, a building society or a web-based mortgage broker. In this world, cost and scale are the drivers.
The market segment of one: the Internet through products like "my excite" and "my yahoo" is fast showing sellers that they had better start thinking about their customers on an individual basis or they will be left behind.
The development of Internet based personalised search engines are a powerful example of this.
For the financial services industry - and Government - these trends present enormous challenges.
Organisations that we traditionally called banks have moved into areas such as stockbroking and superannuation, even setting up alliances with telecoms companies, supermarkets and fast food restaurants.
Organisations that we traditionally called insurers have moved into banking.
Delineation along traditional lines is becoming blurry and in fact, no longer appropriate.
The financial service sector is, as I have outlined, in the throes of a revolution that will rival the introduction of the steam engine.
A revolution that is primarily technology driven and affects all of us here today.
And while we are listening and watching as these trends emerge, the Governement has also made major reforms to ensure our financial institutions in fact all our corporations - are better able to keep up.
These reforms have been in taxation, industrial relations and corporations law- particularly through our corporate law economic reform program, or CLERP.
Already, extensive progress has been made in the area of corporate law reform. We currently have the CLERP Bill in the Senate, which will effect changes to four key areas of the Corporations Law: fundraising, takeovers, directors' duties and corporate governance, and accounting standards.
And in March this year, I released a consultation paper which aims to build a new regulatory framework for the financial services industry.
All these reforms are aimed at putting in place a regulatory framework which will build on Australia's already sound and secure foundations.
Importantly, we are seeking to set up a legislative framework which is technology neutral and which caters for future product development and future product delivery methods.
We want our framework to promote innovation in the financial services industry while at the same time equipping consumers with the capacity to assess products and to make informed choices.
We are also making it easier for our companies to comply with the Corporations law. CLERP 7 aims to cut the paper burden on business by allowing documents to be lodged electronically. I hope to release a discussion paper on this in the near future.
One final part of the Corporations Law to be reviewed is the insolvency provisions. Already, a lot of work has been done in this area including reports into voluntary administration, cross-border insolvency and corporate insolvency practitioners.
I am keen to take a closer at look at this work and I am considering a broader review of insolvency generally.
I expect to be able to make an announcement on this topic in the near future.
Ladies and gentlemen, the relentless march of technology offers financial institutions the chance to harness a potent force that can provide real competitive advantage and allow Australian industries to shrug off the historic disadvantage of our geography.
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.
Our financial institutions have the opportunity, not only to overcome the challenges that I have discussed, but also to take full advantage of the opportunities they represent.
Australia has the people; it has the skills and it has the dynamic institutions represented here tonight to join the exciting journey that we see before us.
The Government is determined to watch and listen to industry, to embrace these challenges and to work with you to build a world-class regulatory environment so you can maximise the these factors that will put the Australian financial service sector firmly in first class on this global journey.
And that will ultimately benefit all Australians.