Introduction
Good afternoon, ladies and gentlemen — it is delightful to be with you today.
Let me begin by extending my warm thanks to AustCham Shanghai for inviting me to speak, as well as CEO Udo Doring and the extremely talented Board of Directors.
The work that AustCham does in this most remarkable city — and even more remarkable country — to promote Australian business as a stronghold of ideas and innovation should be celebrated.
It should be said that the many opportunities Australian businesses can now experience are in no small part due to your enthusiasm, your dedication and your advocacy for more than 20 years, and I thank you for that.
The world economy and China
Of course, it is important that we build these relationships as the Australian and Chinese economies are more closely linked than ever before.
It is that relationship, that synchronicity, I would like to expand on in my brief time with you now, and how we can continue to build upon the strong foundations we have to benefit both great countries.
But to begin, let me provide a broad overview of where I see the world economy, and China’s current position in it.
The world economy, as you are all aware, is dealing with some strong headwinds.
Low inflation.
Low interest rates.
Heightened volatility and uncertainty.
There has also been eight years of quantitative easing, and its resultant impact.
That said, while global growth slowed in 2015, it is expected to pick up over the coming years.
While near-term growth remains uneven — with particular concerns about slowing activity in emerging market economies — the broader outlook is still encouraging, if rather subdued.
For instance, this year global growth is forecast to be 3-and-a-half per cent, and a higher 3-and-three-quarter per cent in 2017.
That is up from an estimated 3 per cent last year.
What we can draw from this is that the world’s economy is in transition. And China is at the centre of this.
The traditional driver of growth in China is shifting from investment-led growth to a greater reliance on consumption and services.
This structural change is expected to reduce the contribution of investment and energy-intensive industry to China’s economy — and this will have implications for global trade, particularly commodities.
China’s transitioning economy
Now, that is a very sweeping overview of what continues to be a challenging time for the world’s economy.
However, the manner in which China is dealing with its own transition — or, as I see it, the evolution of its economy — should be of comfort to those in the room, in China, and back home in Australia.
At the moment it is in our interests that the Chinese economy is rebalancing towards more sustainable consumption and services-led growth and that this continues.
There will be great pressure and temptation to revert to more traditional methods of promoting growth in China.
Just like in our own economy, it is important that we back the transition that is necessary. It will be good for growth globally, as well as for us in Australia.
To underline that point, consumption has been growing in line with household income, which has been supported by a robust labour market. The services sector now accounts for more than 50 per cent of total GDP.
It is in this environment that authorities have pursued financial sector liberalisation with an aim to improve the efficiency of capital allocation across the economy.
We can rely on China wanting to achieve growth and that's good news for every Australian, because every Australian will share in the continued growth of the Chinese economy.
China needs to deal with their challenges as they see them in the way that they think is appropriate.
Like ours, their challenges are multiple and complex. And as always there is the risk when dealing with such complex challenges that our responses can sometimes work against each other because of their complexity and the need to balance short term and long term objectives.
This is as true for us as it is for China.
China’s economic and financial institutions, as well as their regulatory frameworks are evolving, maturing and adapting.
We can't expect all of the central institutions of economies like China to respond in exactly the same way as they would in western countries. They are going on a different path but they are still trying to get to the same place.
Their system will respond differently to the measures that are common place in more traditional economies but they will and do have many other options and more room to move than many of the economies that will sit round the G20 table this weekend.
This means they are in a position to deal with things in their own unique way.
For example, they have a government-backed banking system built on $20 trillion US dollars of domestic deposits with relatively minimal offshore liabilities.
Their ability to influence banking behaviour is far more extensive and often informal but gets similar results.
Recently, for example, they reduced the minimum deposit requirement for home loans from 40 per cent to 25 per cent.
Our job as a good partner of China is to support them in the evolution of their institutions and their regulatory processes and to work with them patiently and respectfully because we have the same objective in mind and that is to bring stability to our markets as Governments wherever we can.
AustCham White Paper
The moves by China are positive, pointing to a desire to better integrate its economy with the global financial system.
Of course, it also makes it an ideal time for AustCham’s third white paper on the Chinese financial services sector, the work on which I would like to recognise.
The financial sector reform being undertaken by China, and its shift to consumption and services-led growth, provide significant opportunities for both Chinese and Australian financial services business and investors.
AustCham’s white paper is a valuable contribution to the development of Shanghai as a financial centre, and gives an insight into the experience of Australian institutions investing and operating in China more broadly.
The Australian Government believes a well-functioning and prosperous Chinese financial system is in Australia’s interest, and the AustCham white paper is a strong basis for ongoing discussions between Chinese and Australian policy makers, regulators and market participants.
So I must thank you, once again, for your enthusiasm and dedication in putting the paper together.
Synchronised economies
Such attempts to better understand and enhance the relationship between China and Australia are invaluable at this time.
That is because, and I have said, the synchronisation of our economies is undeniable.
The expanding parts of the Chinese economy are, today, the expanding parts of the Australian economy; the new and growing parts of Australia’s economy are linked to the new and growing parts of the Chinese economy.
Let me unpack that with some numbers.
Right now, the softening demand for Australian commodities can, the Government believes, be offset by opportunities flowing from China’s emerging consumption and services-led economy.
For Australia, China is already Australia’s largest services market, with exports in services valued at $8.8 billion in 2014–15. Furthermore, it is Australia’s second-largest source of tourists, with more than one million visitors arriving in 2015.
And with China’s middle-class estimated to grow to around 1 billion people by 2030, demand will only increase.
On financial services, the Turnbull Government is delivering support to further back Australia’s efforts in financial services technology – FinTech – in the burgeoning market here in China.
The Turnbull Government will provide $150,000 for the not-for-profit Fintech hub Stone & Chalk’s Shanghai-based Fintech Asia program, with the bulk of the funding for the full program provided by the NSW State Government.
This follows the inaugural meeting in Canberra on Wednesday of the Turnbull Government’s expert-led FinTech advisory group chaired by Craig Dunn, Chairman of Stone & Chalk and Director of Westpac Bank.
I can also announce today that Shanghai is the Turnbull Government’s intended choice for one of our five landing pads to help Australian innovators access entrepreneurial talent and global opportunities.
Our government’s National Innovation and Science Agenda is creating five landing pads in global innovation hotspots to help Australian entrepreneurs take their ideas to market and build high-growth and high-return enterprises.
The Australian Government will consult with the Chinese Government and other local stakeholders on the shape and location of a landing pad here in Shanghai.
Shanghai is being positioned by the Chinese Government as a global centre for technology, innovation and entrepreneurship and Shanghai’s history of commerce and entrepreneurship makes it a good entry point to the huge Chinese market.
Growing economic links with China
That is why the Australian Government is has been doing all in its power to grow the economic links between our countries.
The best example of this, of course, is the transformative China–Australia Free Trade Agreement, or ChAFTA.
This agreement will provide Australian businesses — particularly our all-important services sectors — with the opportunity to expand their operations into the Chinese market — free of high tariffs and other barriers.
Banks, insurers, law firms, health and aged care providers — all of these and more will enjoy greater access to the Chinese market than ever before.
It will also boost the prospect of increased two-way investment flows. This will provide much-needed capital for Australian business to expand at home and overseas, while lower import prices on consumer goods and business inputs will increase Australians’ purchasing power.
But it isn’t just the services industry that will benefit. Australia’s primary industries will see tariffs reduced dramatically — or, in many cases, abolished.
To give you just one example, beef will enter China duty-free over the coming years, axing tariffs of up to 25 per cent.
This is a huge win for an industry that in 2015 exported about 150,000 tonnes of beef to China, valued at just over $1 billion.
ChAFTA also secures a range of financial services commitments from China that will facilitate engagement between governments and regulators. This includes provisions on transparency, regulatory decision-making and streamlining of financial services licence applications.
The agreement will also see the establishment of a financial services committee — providing a formal mechanism for engagement between Chinese and Australian financial regulators on issues of mutual interest.
The establishment of a financial services committee under ChAFTA is a key priority for the Australian Government.
This will be a key driver of an innovative, invigorated, interconnected and inclusive relationship between our countries.
The ChAFTA bodes well for both China and Australia.
G20 2016
Before I finish, let me mention the upcoming G20 Finance Ministers and Central Bank Governors meeting commencing tonight in Shanghai.
This year, China is the host of the G20, adopting as its theme building an ‘innovative, invigorated, interconnected and inclusive’ world economy.
It is an ambitious agenda, and it is pleasing to see that China will continue the G20’s strong focus on growth and jobs pursued by Australia during our 2014 Presidency.
The global marketplace relies on innovation. Economic success is and growth is, increasingly, determined by a willingness to run with ideas and compete in this space.
This is why the Australian Government has placed such a strong policy focus on creating a more innovative economy that plays to our intellectual and creative strengths.
So I look forward to working closely with China and all other G20 members in these challenging, but also promising, times.
Conclusion
Let me finish by again thanking AustCham for the remarkable work you do for Australian business here in Shanghai.
It is important work that has sustained you for two decades. Now, as our economies find themselves in synch, the importance and value of your work only increases.
So, too, do the rewards.
There are, undoubtedly, challenges for the global economy. But there are also enormous opportunities for Australian businesses with the self-belief to have a go at something new.
After all, a good idea is worth fighting for — as all of you in this room can attest.
Thank you.