REPORTER: So how many times have you visited Japan?
JOE HOCKEY: This is my first trip.
REPORTER: But apparently your stay here in Japan at this time is not very long.
JOE HOCKEY: We're here for four days and perhaps I could give you a bit of a background, if that's okay, about what we do. Australia has undertaken some massive structural reform over the last three years, we've completely revamped our budget so that we are running fiscal surpluses, we have had the first wave of major industrial relations reform that has resulted in fewer days lost through industrial disputes than at any time in Australia's history since 1913.
We've also now undertaken massive structural reform of our taxation system, introducing a ten percent GST and reducing personal income tax so that eighty percent of Australians pay no more than thirty cents in the dollar in personal income tax. And we have just announced massive changes in business tax reform that bring the company tax rate down to thirty percent and halve capital gains tax to no more than 25.24 percent.
What has had a very real impact on Australia's economic success and development, as Alan Greenspan said last week, is our regulatory reform which was a total revamp of the financial services industry and by way of corporate law reform.
My job as Financial Services Minister is to tell the world that story and also to explain our role as a developing global financial centre to the Asia time zone outside of Japan and in many ways we want the world to look at Hong Kong, Singapore and Sydney. I'm traveling the world explaining that.
REPORTER: In May Prime Minister Howard announced that he would implement a two-year project to develop Sydney into a global financial centre. However, we Japanese are not very well versed with concept of this project so I'd very much appreciate it if you can briefly explain to them the project.
JOE HOCKEY: Well, Sydney already has the largest financial futures exchange in the Asian time zone and it has the second-largest equities market in the time zone outside of Tokyo so when you combine that with the six-largest (amount of) funds under management in the world, then we have a very sophisticated and very structured market. What I'm doing is helping to put in place a strategy that will start to develop policy, more policy, and promotional activities and information services about our development as a financial centre.
REPORTER: When you talk about the financial services it is very extensive in scope because it could cover securities, bonds, futures, as you mentioned, and banking services could be included in the context of the financial services. So do you have any idea as to which particular area of financial services you would place emphasis on.
JOE HOCKEY: Well, financial services covers everything from insurance in my view to capital markets, retail banking, information services such as news services, business news services and also information technology. We are not targeting any particular area other than to start building a centre and letting the market determine what area of operations is best served by Sydney. For example, if we target capital markets then people who want to provide insurance services for the Asian region from Sydney may feel that we are precluding them from discussions, so what we have found is that the financial services industry generally is growing very significantly in Australia. Already Morgan Stanley and Goldman Sachs and AXA and a range of others are rapidly expanding their business operations.
We have most international financial institutions with staff and offices in Australia, what we want is for them to expand their product range not just for the domestic market, which outside of Japan is quite a large market for the Asian region, it's the second-largest outside after Japan in the Asian region, but we want them to start to launch products for the Asian region from Australia. In that sense, we want Australia to become more integrated in the markets and in communications and trading with the rest of the region.
REPORTER: Yes, you're going to launch this project proposed by Prime Minister Howard, and I heard that in July you have established a special task force that is going to be co-ordinated by Treasury to promote this idea of a centre for global financial services, so what kind of discussions are beginning?
JOE HOCKEY: All right, well we've already set it up, it's called the Australian Centre for Global Finance, it has offices Sydney with an acting chief executive and about going up to twenty staff and it is a partnership between the public sector and the private sector and the private sector will help to supply services information, the Chief Executive will be a person from the private sector, and the unit has already started work, will be launching its website in the next two months which will provide a vast amount of information about what it's doing with the financial services industry to the world, and it is already facilitating policy development, promotional information and importantly it's following through on the relationships that we are building when we're on the road.
REPORTER: Well, I return to an earlier Reporter concerning the target period for securities and bonds, if there is no particular area that you are targeting I would be interested in your explanation about what kind of reasonable means, for instance deregulatory measures or provincial tax you would intend to use in specific terms to promote this end.
JOE HOCKEY: Well we are not in the business of running a caravan park. People who provide, pay real incentives are engaging in short-term programs. We are building Sydney for the long term and what we are trying to do is to remove individual impediments to the development of new products and new markets. For example, we removed interest withholding tax on bonds to try and stimulate the paper market in Australia and in the last six months there has been more corporate paper issued than in the whole of last year combined. And, for example in our markets, the Australian Stock Exchange has demutualised and listed on itself and it is fully computerised which is probably the most advanced stock exchange development process in the world at the moment and the Sydney Futures Exchange is following a similar path and by mid-next year will be privately owned and fully computerised.
REPORTER: Well I think in your explanation so far you are mainly commenting on the rest of Asia and it seems that you are trying to be very considerate to us here in Japan, but what we Japanese have in mind upon hearing your plans about developing Sydney as a global financial centre is then what will become of Tokyo so may I invite some thoughts on that.
JOE HOCKEY: Tokyo and Japan are obviously huge. I am essentially talking about activity outside of Japan and there may well develop four centres - London, New York, Tokyo and then another centre to service the rest of the Asian region outside of Japan, and to be honest it's because within Japan there is not much activity to service the rest of the Asian region for a number of regions. Japan is seen as a domestic market and global players have obviously a huge presence in Japan but they don't use Japan as a launching pad into China or India or Indonesia or other places because costs in Japan are very high and it is far easier to launch out of another area where you can get the diverse language skills and, you know, the local workforce is not expensive and telecommunications is very good. So what you can do is you can service the Asian region outside of Japan at much lower cost with the same skills.
REPORTER: As you have correctly pointed out, many people say that from the international perspective the market here in Tokyo is difficult to use. It is not very convenient and despite the fact that many people have pointed this out there has not been much progress achieved in terms of reforming the Tokyo market but seen from an objective perspective from outside, these problems with the Tokyo market are quite clear in evidence?
JOE HOCKEY: Well it's not for me to comment on the internal workings of the Japanese regulatory system. It would be best to ask someone who regularly uses the markets. But I can say this, we welcome initiatives that help to open up the Japanese market to international financial institutions and a number of Australia's best financial institutions, such as AMP and Macquarie Bank, are very involved with new market activity here.
REPORTER: Since this project to develop Sydney into an international financial centre has been given a time period of two years it means that it will be completed by the year 2001?
JOE HOCKEY: No, this is the first part, two years is just the first part of our program. We see it as a long-term development, it's a brick-by-brick construction job, and as the rest of the Asian region remains volatile and as distance becomes less important in global markets Sydney will emerge. I might say for all of our history Australia's greatest disadvantage, and yet it's great advantage, has been its distance from the rest of the world. With new technology and with development of the Internet we are as close to the rest of the world as the person sitting next to you.
REPORTER: Well, Minister, would you tend to agree to this kind of image of the future that I can develop in mind upon hearing your explanations, if Sydney does indeed succeed in becoming an international financial centre then in the world there will be three major international financial centres - London, New York and Sydney - and the one major domestic financial market would be just Tokyo, would you tend to agree with this?
JOE HOCKEY: Well that seems to be a trend that is emerging, the Japanese market has found it very difficult to branch out into the rest of the Asian region so at the moment you would put New York, London, Tokyo, Hong Kong, Singapore and Sydney. There may well be for certain products three centres, there may be five centres, but certainly we are not taking anything away from Tokyo, that's not our goal. We want to grow the Asian pie.
REPORTER: Well in Japan we meet ministers - they're usually over the age of sixty - and, for instance, during your stay here as counterparts you will be meeting with the rather elderly, but even for Australia would you consider yourself, Mr Hockey, to be relatively young for a minister?
JOE HOCKEY: Yes, I'm 34. I have great respect for people who have been serving their nation in politics for a number of years. The Prime Minister gave me this job because he thinks I can get it done, not because he thinks I'm young or old or whatever the case might be, and I have a history of getting tough jobs done and we are very determined to build Sydney's local credentials. I wish I had the wisdom and knowledge of a Miyazawa (laughter).
REPORTER: Thank you very much.