Your Excellencies, Ambassadors and High Commissioners, regulators from the Asia-Pacific region, distinguished guests:
It gives me great pleasure to address you this evening.
The Commonwealth Government of Australia is delighted to participate in this initiative along with representatives of the Australian life insurance industry, Colonial and AXA, supported by IFSA and other associations, to discuss ways to enhance life insurance regulatory regimes in Asia and the Pacific.
I am very pleased that so many countries in our region are represented at this symposium – 9 in all, including Australia. I welcome our visitors from Fiji, Hong Kong, India, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Australia wishes to further develop our relationships in the Asia-Pacific, not only through increased trade and investment, but also through initiatives, like this Symposium, to foster the sharing of information, knowledge and experience.
It is appropriate that a symposium on life insurance, an industry that has such a lengthy history, should be held at the Windsor, a hotel which in many ways represents the changes which have taken place in Australian society over more than a century.
When this hotel opened in 1883, appropriately as the Grand, it represented the confidence of the booming Australian economy of the 1880's. Later in the decade, it was bought by leading temperance politician James Munro, who in a precursor of the 1890's economic depression, flamboyantly burnt the hotel's liquor license and turned it into the Grand Coffee Palace.
I'm not sure if it was the presence of the Federal Parliament in the building opposite from 1901 onwards, but by 1927 when the Parliament was handed back to the State Government, the Windsor, as it was by now called, had its liquor licence back. I'm sure this was a decision which has greatly pleased successive generations of State politicians.
The past two decades have seen a signifcant increase in overseas investment in Australia and the Windsor is an example of that. In 1980 Oberoi Hotels International took over the hotel and embarked on a $21 million investment program which restored the building magnificently, as I'm sure all of you would attest.
Like the Windsor life insurers have had a long and proud history in Australia. The first insurance company to have an agent in Australia was the Eagle Assurance Office, a British company, around 1827.
However, the company usually credited with being the first life insurance company founded in Australia was the Australian Fire and General and Life Assurance Company, established in Sydney in 1836.
Two of the sponsors of this Symposium likewise have long histories in Australia – Colonial was established in 1873, and AXA Australia began as National Mutual a 130 years ago.
From humble beginnings, life insurers in Australia have risen to become some of the biggest corporate enterprises.
In fact, the assets of life offices have grown dramatically in Australia. In 1960, the total assets of life insurers in Australia were $2 billion. By 1980, assets totalled a little less than $14 billion. By June 1999, the total assets of life insurers had grown to a massive $168.5 billion.
It is not just in Australia that life insurers have enjoyed strong growth: growth has been rapid in many of the countries of our region.
For example, in Singapore, the life insurance industry has grown faster than GDP over the last 15 years. Since 1983, total assets of the industry in Singapore have increased 22 times to S$22 billion. In Hong Kong, life insurance business (known as Long Term business) grew by 11.5 per cent in 1998.
The life insurance industry has not only grown in our respective countries, but the links between our domestic markets has also grown.
Life insurers have invested funds offshore to diversify and achieve higher returns for their members, and insurers have also set up operations in new markets, particularly in the rapidly growing Asia Pacific.
This brings me to the subject of globalisation.
There is no doubt that the opening up of the Australian economy, through economic reform and more efficient transport and communication services, has been a catalyst for increased productivity, a stronger business sector and higher living standards, both through more jobs and higher real wages, but also increased consumer choice.
In short, the gains from freer trade and investment flows for Australia have been very real and very substantial.
As our trade and investment linkages grow, our economies have tended towards interdependence – a fact amply demonstrated by the large attendance at this Symposium.
Globalisation means that the health of our economies can be affected by the health of the economies of other nations.
This has been evident not only in the recent Asian crisis, but in the very rapid growth in the Asian economies in the period prior to the crisis and the impressive rebound that many of those economies have made following the crisis.
It is particularly pleasing that no Asian country has turned its back on commitments previously given to further the processes of liberalisation made in APEC and in other regional forums, despite the crisis.
This strong public policy stance will reap handsome rewards for the countries of the Asian region.
Australia, for its part, had a clear interest in working with those countries affected most by the recent Asian crisis.
Our concern was expressed in our financial assistance to countries in the region and through our efforts in various international and regional agencies to ensure that those agencies responded promptly and in appropriate ways to affected Asian economies.
Also, Australia has taken a major role in encouraging efforts to improve the so-called international financial architecture through forums like the IMF. The better the system of international surveillance, support and co-operation, the better will be the prospects for all our economies.
So I certainly encourage the regulatory agencies from around our region represented tonight to continue to engage in active dialogue, to share their experiences and to learn from each other.
While international co-operation is important, it remains critical that the right domestic economic policies are pursued if our citizens are to be able to make the most of the opportunities in this new, globalised economy.
Ensuring that policies are clearly stated and consistently applied improve the business environment and contribute to strong and sustained growth.
This is particularly important for improving the international reputation of our domestic economies.
The reform program in Australia over the past 3 years has been major. To summarise briefly:
The Government budget has been turned from significant deficit to significant surplus and the transparency of fiscal policy improved through a Charter of Budget Honesty.
The independence of Australia's central bank has been strengthened, improving our low inflation credentials and contributing to reducing Australia's risk premium in bond markets. Inflation has been maintained at world-class levels and interest rates are at near record lows.
Australia's tax system, presently uncompetitive because of the burden it places on business, is also being substantially reformed. Key planks include the largest personal income tax cuts in Australian history, abolition of our inefficient wholesale sales tax (to be replaced with a broad-based consumption tax) and an overhaul of our business tax system, including reforms to make our capital gains tax world-competitive.
Our previously rigid and outdated workplace relations system has been reformed to encourage more decentralised arrangements to foster workplace agreements that are more tailored for circumstances of individual workplaces. The Government's success in this area is underscored by the strong record of productivity growth and continuing record low rates of industrial disputation.
These reforms have helped lift Australia's productivity performance to new highs and to make our growth over this decade, relative to that of the OECD, the bestover the last four decades.
It also means we are confident we can grow at strong rates between 3 and 4 per cent on average in the early years of the next decade.
Two other sets of reforms are of particular interest to tonight's audience. These are reform of prudential regulation and regulation of market integrity and investor and consumer protection.
An essential role of the regulator is to provide and maintain a framework of prudential rules to ensure a solid foundation from which industry can compete to gain consumer endorsement. As you have no doubt heard today, in Australia, this regulatory role is undertaken by APRA.
On the other side of the coin, it is also necessary that consumers receive adequate information on which to base their investment decisions, and ensuring this occurs is a task carried out in Australia by ASIC.
A final task, ensuring the systemic soundness of the financial system, is the responsibility of the Reserve Bank of Australia.
Of course, given the inter-related nature of these tasks, it is vital that good working relationships are maintained between the various regulators.
The changes to Australia's arrangements for regulating the financial system are certainly major. However, we also see them as having been necessary and timely.
The Government has also appointed a special Minister for Financial Services and Regulation, the Hon Joe Hockey, in recognition of the importance of the financial sector as a dynamic element of the Australian economy. Mr Hockey is unfortunately not able to be here tonight.
Two key drivers for change in the life insurance industry have been the increasing convergence of products and product providers (coupled with technological advancement) and the rise of consumer sovereignty.
Not all that long ago, there were clear delineations between products and product providers.
Life insurance companies did not provide banking services and banks did not sell life insurance.
Nowadays, life insurance companies can hold banking licences, banks can sell life insurance, and both can provide other services like stockbroking.
New products, like allocated pensions and annuities, are taking market share from traditional "guaranteed" products.
These changes are to be expected and encouraged. Evolution, when asked if he would provide consumers with a choice of colours for his Model T Ford.
He replied: "Any colour, so long as it's black."
Firms which have Henry Ford's attitude today towards choice will simply not survive. Consumers are simply too sophisticated and too demanding.
On the subject of choice, the Australians here tonight will be aware of my own commitment to delivering the Government's promise to give consumers choice of superannuation fund. This is another important step in giving consumers control over their own financial destinies.
With superannuation balances growing rapidly in Australia, like they are in other Asia-Pacific nations, it is simply untenable for consumers to be denied choice on such a key matter as who is managing their future retirement nest egg.
Another major world-wide development that has major implications for the life insurance industry is the ageing of the population.
Across the Asia-Pacific, our populations are ageing. This has important implications for public policy, particularly in the areas of health, aged care and retirement incomes.
Life insurers can play an important role in these areas, particularly in assisting individuals to save for their retirement.
In Australia, our retirement income system is still maturing, with the compulsory element not being fully implemented until 2002-03.
Other countries in the region are similarly faced with major challenges in the area of pensions and retirement income which will invariably involve the life insurance industry.
In concluding, this is an exciting time to be involved in the life insurance sector, whether as a regulator or as a business.
There are great challenges for governments, regulators and the industry, and great opportunities for societies. The forces of globalisation, integration, consumer empowerment, technological innovation, as well as the ageing of our populations, will be key factors in driving change in the years to come.
It is also important that governments maintain a good overall business environment for life offices to flourish.
I am sure we can still learn from each other's experiences in how to develop prudentially sound regulatory systems which promote financial security, allow for product innovation, and which meet the expectations of consumers.
This sharing of knowledge and experience is in my view the essence of an interdependent region.
I sincerely hope that this symposium will contribute to the noble objective of improving public policies in the region. I believe that an open and participatory dialogue between friends can lay the basis for productive on-going work between governments and industry for the enhancement of life insurance regulatory regimes in the Asia-Pacific region.
I am also confident that the workshop which is being arranged in March next year will further contribute to that objective.
That these events are in Melbourne, my home town, gives me particular pleasure.
Thank you, and I hope you enjoy the remainder of the Symposium.