Introductory remarks
Good evening ladies and gentlemen, and thank you David for that kind introduction.
It's a pleasure to be here in South Australia and having the opportunity to talk to all of you at the Australian Institute of Company Directors (AICD) Annual Dinner.
The AICD has for over 20 years, been working with businesses across the country in pursuit of excellence in directorship.
In particular, I welcome AICD's continuing efforts to improve corporate governance and board diversity across Australian businesses.
The South Australian Story
And it is fitting we are together tonight in this great state of South Australia. After all this State was not only a free colony but it was built on the foundation stones of philanthropy and opportunity.
Back in the 1830's it was a banker, come property developer, named George Fife Angas who saw opportunity where government had failed.
The savvy Englishman and a few of his friends took advantage of the failure of the British Government to sell land here to free settlers and in one of our original public/private partnerships formed a joint venture with the British Government to truly develop South Australia.
He became the state's first property developer and indeed one of your first directors. And, like many of you here tonight, he worked hard to capitalise on opportunities and deliver good returns to the shareholders of his South Australian Company.
It paid off for everyone in this room.
I understand that property prices are still doing well in Adelaide – rising around 60 per cent in the past decade. That's faster than in my home city of Sydney!
But Angas and his fellow directors helped build the foundations of Adelaide and the regions that surround it – as well as the industries that sustain it today. He had a plan for the State.
Future Fit Australia
Tonight, I want to share with you the Government's economic action strategy for Australia. I want to share with you our goal for a diverse, contemporary, innovative and competitive economy.
We need an Australia that is future fit.
We need to be ready to grasp opportunities at a time when technology is levelling the playing field.
I still marvel at the thought that we now live in a world where a small business start-up, with a name like Alibaba, can newly list on global stock exchanges for over $200 billion, on the basis that it is facilitating enterprise and commerce for small and medium sized businesses in a communist country.
Alibaba could have started in Adelaide.
That may sound strange but, after all, this city was the maternity ward for News Limited, the world's largest media organisation.
We can be our best if we are positive and bold.
As I said, we can only do this if we are future fit.
Rise of Asia
The opportunities for Australia, living on the doorstep of Asia, are enormous.
According to a recent report by Ernst & Young, two-thirds of the global middle class will be residents of the Asia-Pacific region by 2030.
China's middle-class of around 150 million people is expected to reach 1 billion in just 16 years.
Over 30 per cent of India's population will also lift into the middle class at around the same time! That, in particular, is an amazing transformation given that two thirds of India's population currently has no access to basic services.
This rising middle class of Asia wants what comes from Australia's farms and our gas fields. They want to come here as tourists, attend our universities and they need our financial sector to manage their wealth and plan their retirement. They want our quality of life with good housing, roads and transport, clean air and excellent quality health services.
Their elderly want quality aged care services and their youth want hope that they can forge an even better quality of life.
We start from a good position and we have a lot to offer.
Seven of the top ten markets for Australian exports are already in Asia and it's not just a story of our iron ore going to Chinese steel mills.
The appetite for our services, like education and travel, is growing.
For example, China is our largest tourism market by expenditure and second largest by arrivals, but we are the destination for less than one per cent of Chinese tourists.
As the Chinese middle class develops, they will increasingly want to visit our iconic tourist destinations, including South Australia's wine regions.
The Chinese population is also ageing, with the pension industry expected to make a third of the country's GDP in 2050.
That means an extra 330 million people could use our professional health services, fund managers, accountants and our insurance and superannuation industries.
We need to be ready to service this huge growth opportunity through digital technology, software innovation and flexible but trustworthy regulation.
We must continue to smash the distance barrier.
Service industries that represent 70 per cent of Australia's economy but just 17 per cent of our exports. We must become more forward leaning across Asia.
If we continue with a mindset that Asia is too far away for commerce then we will be left behind.
After all, when South Australia was settled in the 1830's Peking was closer to Berlin than it was to Adelaide. Here's a revelation, it is the same distance today.
Asia is not waiting for us. The entire region is opening up its services sector to a global market place.
That is why the Abbott Government is working hard towards a free trade deal with China, as we have done with Korea and Japan, and hopefully we can announce some positive outcomes by the end of the year.
Again to understand the dynamism in the region we should look no further than Alibaba.
Just fifteen years ago a 35-year-old former English teacher from Hangzhou, and 17 colleagues founded Alibaba in a one bedroom apartment.
I wonder how Jack Ma and his colleagues all fit in!
But with a sense of purpose the impossible is deliverable in the 21st century!
As founder Jack Ma has said, "Alibaba opens sesame for small-to medium-sized companies".
Who would have thought that China could produce one of the largest e-commerce companies in the world today, with a market capitalisation today of over a quarter of a trillion dollars. As of today Alibaba is bigger than Walmart.
All on this on the back of a small start-up in a one bedroom apartment.
The speed of growth and the cycle of prosperity is now faster than ever. It is based on ambition and innovation.
There are few technology constraints.
There are few capital constraints.
There are certainly no ideological constraints even though Mao Zedong's portrait still sits above the gate of Tiananmen Square.
So while the economics of Asia is moving towards the west, Australia needs to be ready to tap into these opportunities.
Australian Opportunities
So what does Government need to do to help?
Just like the private sector, we need to be lean and efficient.
Government needs to get out of the way, and not burden companies with bureaucracy and red-tape across varying levels of government.
So far we have reduced the red tape burden by $2.1 billion this year for business but there is more to do.
The Government's White Paper on the Reform of Federation will look at how the 114 year old structure of our Federation is working.
We have to remove overlap and duplication.
But this is a process South Australian Premier Jay Weatherill has decided he doesn't want to take part in. It is a short sighted and damaging attitude.
I ask the Premier to change his attitude and to work with us, and all other state and territory governments, to make sure that the Federation is ready for the future.
Mr Wetherill, you can lead a loud protest movement or you can lead a state, but you can't do both! South Australians and all other Australians expect more of an experienced Premier.
Through the Federation White Paper we will work with the States and Territories to try to redefine the responsibilities of governments.
The changes might mean the Commonwealth will totally withdraw from areas that might be better delivered by the States and Territories or the private sector.
Regardless of where we end up, having access to revenue to deliver expenditure responsibilities will be an important part of the debate for all levels of Government.
That is why the Government's Tax and Federation White Papers are being run side by side.
Taxation Reform
Reforms to the federation are unlikely to be effective or enduring unless we also consider how government services are to be funded from the division of revenue raising responsibilities within the federation.
That is why the Prime Minister has described the parallel processes of the federation and tax white papers as a 'once-in-a-generation opportunity'.
Tax reform provides an opportunity for sustainable economic growth, which will boost living standards. In fact, some argue that comprehensive tax reform could provide a bigger lift to GDP than that available from reform in any other area of government policy.
Let me make it clear: we want taxes that are lower, simpler and fairer.
We have already abolished the carbon and mining taxes and delivered on our commitment to deal with the large backlog of announced but un-enacted tax measures, ending this uncertainty on Australian taxpayers.
And through our presidency of the G20, we are modernising international tax rules to address tax avoidance by multinational companies.
The tax white paper provides the next step to reform and create a more competitive tax system. Input from the community and from the business sector is essential.
We approach this process with an important goal that tax reform is not about increasing the overall tax burden.
Instead, it is about rethinking how and where we raise revenue to reduce the drag it has on the economy. We want tax reform to reduce the compliance burden for business and individuals and we want to provide improved incentives to work and save.
Keeping our current taxation and compliance settings in a world of mobile capital is clearly unsustainable.
The Government has taken firm steps to manage this by further strengthening our corporate tax integrity rules, including by passing legislation to tighten our thin capitalisation laws.
We are also taking a lead role in the G20/OECD two-year 15-point Base Erosion and Profit Shifting Action Plan to ensure that international tax rules keep up with advances in changing business models.
Industry Innovation and Competitiveness Agenda
We also want an Australia that is innovative.
We have just released our Industry Innovation and Competitiveness Agenda. Its guiding principle is to focus on Australia's strengths, not subsidise our comparative weaknesses.
Australia has many impressive new businesses.
Look at the recent BRW Fast 100 list. It contains firms that have been in existence for less than ten years, with millions of dollars of turnover, across the whole spectrum of industries – education, health care, construction, engineering, advertising, information technology, and more.
The entrepreneurial spirit is definitely alive in Australia!
One such example is Scott Farquhar, co-founder and co-CEO of Atlassian, an Australian software firm, who gave Government some advice in a recent speech on how changing Employee Share Schemes can attract and retain talent.
Well the Abbott government is doing something about this.
Changes to the tax treatment of Employee Share Schemes that were introduced by the former Government in 2009 have effectively brought to a halt the use of such schemes for start-up companies in Australia.
As announced recently, the Government will wind back those restrictive changes.
The Government will go further for start-ups by allowing Employee Share Scheme options or shares that are provided at a small discount by eligible start-up companies to be excluded from up-front taxation, so long as the shares or options are held by the employee for at least three years. This is a globally competitive initiative.
Furthermore, to give start-ups more time to be competitive and succeed, the Government will extend the maximum time for tax deferral from seven years to 15 years.
This will help start-ups and encourage greater entrepreneurship so that good ideas can be commercialised in Australia.
Conclusion
I think we all want an Australia that is diverse, contemporary, innovative and competitive.
Many of us hold great hope for a prosperous future.
Yes, there could be some bumps along the way, but that is to be expected. The world economy is changing and so must we.
But that represents an opportunity rather than a threat.
I can say with great confidence that Australia is on the threshold of its greatest ever era.
The government has a plan that helps deliver economic prosperity. We want South Australia to join the conversation.
We want you to be a key part of the journey.
Thank you for letting me share my optimism for Australia and our future with you tonight.