Can I start by thanking you, Paul for that introduction, thanking you all here for that warm welcome, and especially acknowledging The Australian and The Wall Street Journal for putting this event together. The rise of China, and especially the stupendous growth in its middle class, sits alongside the Global Financial Crisis as one of the two defining economic events of our lifetimes. Both are transforming the world. Indeed, China's return to pre-eminence in the global economy is the most momentous development since the industrial revolution re-shaped the Western world over 200 years ago. So what China's rise means for our place in the global superstructure is certainly a big enough topic to warrant this high-quality gathering today. I'm thankful for the opportunity to offer some thoughts and then to discuss them with my distinguished colleagues on this panel. I know that by this stage you don't want me to go over too much of the same ground or recite the same stats. Instead, I want to offer the personal perspective of an Australian Treasurer whose seven trips to China mean I've probably visited there more times than all my predecessors since federation combined. That's not a perfect statistic, but it does illustrate the shifting focus of Treasurers since the second world war, from markets in London, New York and Tokyo towards Shanghai and Hong Kong today.
The way I see it there's no more important job for a modern Australian Treasurer than to work out how to capitalise on Asian growth to lift the living standards of more Australians. And so I really want to focus my remarks on why this particular moment in time is so important to our thinking on China. Then I want to give a bit of a sense of where the Asian Century White Paper is heading. And then I'll go on to make a few arguments about the relative contributions the public and private sectors can make to maximising the opportunities afforded by China's rise.
My first point is that 2012 could be the most important year for China and the Sino-Australian economic relationship since 1972. Of course, this is partly because of the wholesale changes at the very top of the Chinese leadership, a fascinating process that Richard McGregor has described in his book. There's no point me adding to the speculation about what the upcoming Communist Party Congress will deliver, though from an Australian point of view, we do take confidence from the fact that we have built strong relationships with China's current and future leaders. For example, I've personally spent a great deal of time with Vice Premier Li Keqiang, meeting numerous times since my earliest days as Treasurer in 2008, both here and in China. Just as I've sat with their senior colleagues at G20 meetings, with their finance ministers and the People's Bank governor, chairmen of the NDRC, and at meetings on the edges of leader's summits. So, as China's new leaders take their places by year's end, we already have a good relationship with them, and a firm foundation for strengthening that relationship further. But the year 2012 carries great significance for our bilateral economic relationship beyond the Chinese leadership transition. This year really needs to mark a turning point in how we see our economy and its interactions with China's. The way I see it, this is the year where Australians are beginning to understand that the easy yards have already been made.
Gone are the days when a passive Australia could hang its shingle out, then sit back and watch the easy money roll in from China. Gone are the days when our economic relationship with China could be viewed through the prism of rapidly rising coal and iron ore prices. Because it now seems likely that 2011 marked the peak of Australia's commodity price boom – as the Budget forecast. This commodity price boom ran for nearly a decade, with the profound intervention of the GFC along the way. Now, I don't say all this because of the recent commentary about commodity prices or more moderate growth out of China. Some of this commentary is overstated.
I say this because demand from China was never going to sustain rapidly rising commodity prices forever, or supply an ever-lasting source of income growth. But while this transition will be difficult for some, we also need to understand that the resources boom will endure well beyond the boom in prices alone. The resources boom is better understood as a series of booms. First in prices. Then investment, and then in export volumes. And while prices have surpassed their peak, we do expect them to remain at a high level over the medium term, notwithstanding some cyclical volatility. It's because of this that we have an unprecedented investment boom underway in our economy. Many of these projects are locked in and built on investment horizons that span several decades. So not only does the investment phase still have some way to run, but we are also beginning to see its lasting benefits – greater economic capacity that will continue to boost our export volumes in coming years. This is often misunderstood because of a tendency to ignore the nuances and push the commentary into black and white absolutes.
But as we move beyond the first phase of the resources boom, I am confident that we can collectively develop a better understanding of our strengths and of the opportunities ahead of us. Because as Asia's middle class swells in size, we will see an evolution of opportunities – as this middle class demands more of our food, our services and our skill sets. And because we begin the Asian century with tremendous advantages, we are in a prime position to capture these possibilities. We have an open, flexible and resilient economy – one of the strongest in the world – built on hard work and a series of good decisions and tough reforms. We have a highly skilled, creative and multicultural population, world-class institutions, and a high level of productivity. And we are no longer encumbered by geography. For the first time in our history, geography is an advantage – and no longer described as a ‘tyranny'. Just think: in the last half-century, the share of global output within 10,000km of Australia has more than doubled – from around15 per cent to around one third. And by 2025, this share should surge further, with one half of global output expected to be within 10,000km of our shores. So we're in the right place at the right time, but the benefits will no longer just fall in our lap. We've got to sprint to keep up with such rapid change. We've got to diversify – so that we're doing as well in services and tourism and other exports as we have traditionally done in resources. And we've got to cooperate – so that we all pull in the same direction and coordinate our efforts.
That's precisely why the Asian Century White Paper, which we plan to release shortly, will be so valuable as a planning and policy tool. I want to give you a sense of where it's headed. The White Paper will lay down a roadmap for Australia to become a more dynamic, resilient and prosperous nation, fully connected with the region and open to the world. It will cast a long-term vision for our country, and will outline a set of ambitious national objectives for Australia to achieve by 2025. Not for the next 12 months but for the next 12 years. These objectives will help focus government, business and the broader community on the major tasks ahead if we are to truly prosper in the Asian Century. It will set our sights far and wide. In doing this, the White Paper will identify key pathways that our nation should take if we want to achieve these objectives, both to unlock the opportunities and manage possible challenges as they emerge. Some of these pathways can be taken immediately, and some will already be underway, but for the most part they are pathways that we will need to travel over many years. After all, we're talking about a century-long transition in our region – it is far bigger than one Budget or one business strategy alone. It is far greater than one Government – it is a journey over generations. The White Paper will canvass the key policy directions that will allow Australia to successfully navigate our way through this century. This will involve honing our resilience and lifting our productivity at home through five key policy pillars –education and skills, innovation, infrastructure, tax reform and regulatory reform. It will mean finding new ways to operate and connect with growing Asian markets, and to contribute to a more secure and sustainable region. And it will require Australians to forge deeper and broader relationships with our neighbours at all levels – not only through economic and political links, but through social and cultural links as well. All of this will require leadership, collaboration, foresight and policy innovation as the century unfolds.
Some of the broad directions I've just summarised go to the core of what government can do to get the overall settings right in this relationship. As a long-term believer in the powerful and positive force of government action, I know how important this is. But as much as government can get the settings right, we can't guarantee the outcomes. If I could distil what I've learned in my half-decade as Treasurer, it would be that making the most of the Asian century will depend as much on what the private sector does as what governments do. It will depend on the willingness of our people – across business, academia, the arts, across every field of endeavour – to accept change and adapt to it. To harness it to their individual causes, and in doing so, to our national cause. In short, it will depend on the progressiveness and the energy of our citizens. Even if the foundations are properly laid, so much remains in the hands of individual businesses, universities and the like. As in any enterprise, we will need inspiration to succeed. But we will also need an enormous amount of perspiration, to borrow from one of history's greatest innovators. That's why I think it's crucial to explore this more fully in the time remaining today.
My argument is basically this:
We don't just need flexible, dynamic markets – as important as they are – we need flexible, dynamic people. We need Asia-focused people as well as Asia-focused policies– this is the way for us to succeed in an Asian Century supercharged by China's rise. Neither our luck nor our location will deliver prosperity into our laps. It will be our willingness and capacity to establish the enduring people-to-people and business-to-business links that increasingly determine our fate. This means more Australians being "Asia-literate" - a phrase coined by Australia's first Ambassador to Beijing, Gough Whitlam's China adviser Dr Stephen Fitzgerald. He described it as having a "populace in which knowledge of an Asian language is commonplace and knowledge about Asian customs, economies and societies [is] very widespread." "Such knowledge," he added, "will not help our performance just at the margins. It will be central to our ability to perform."
That imperative is what the White Paper is all about. Going beyond some of the well-canvassed areas of economic policy to explore the richer, more human dimensions of cultural literacy. As Dr Fitzgerald said, being Asia-literate is broader than knowing an Asian language alone, although this is certainly important. It also requires our country to develop broader capabilities and understanding that will allow Australia to succeed in Asia. This begins in our schools, universities, workplaces and institutions. Because we need to inspire and develop a generation of students, workers, thinkers and policymakers that are more in touch with our region, and have a greater hunger to participate in its evolution. So we need to think very explicitly about the real advantages we can give our younger generations. Whether that's by providing education and training systems that are among the world's best.
Whether that's by encouraging them to take up opportunities to engage with and understand the region. Part of the conversation around the Gonski review of education funding is about how we keep up with our Asian neighbours, who are committed to putting their kids way out in front. But more broadly still, we need to ask how we see ourselves in the Asian century.
How do we shape our identity as a developed nation facing East? Are we at home in Asia, as a great Prime Minister once declared we should be? Within our lifetimes, for the first time in our modern economic history, Australia will not share a political system, a cultural heritage, or language, nor a similar level of development to the world's largest economy. And our success will be in part shaped by our capacity as a nation to eschew and denounce the types of xenophobic claptrap we've heard from various very prominent public figures lately. It will be shaped by the strength of our leadership figures – both in government and civil society, including the media – to bring the weight of reason and progress to bear on this regressive fear-mongering. We need to be frank with ourselves about the magnitude of that challenge, but we can also view it as a vast and fascinating set of opportunities – truly unprecedented in Australia's modern history. This is not to perpetuate an image of China as unknowable or inscrutable. I believe there are no differences that can't be bridged by inquisitiveness and human empathy. By a willingness on our part to talk with Asia, not at Asia. To have honest, respectful, and sophisticated dialogue. Nor is it to undervalue the links we've already built: in tourism, education, and immigration. For example, last year we welcomed over half a million Chinese tourists. At the same time over 350,000 Australian residents went to see China for themselves. Even more significantly, there were over 130,000 enrolments in our universities, TAFEs and schools by Chinese students over the past year; making China the single largest source of our international students. This, too, goes both ways.
Just last month, my colleague Senator Chris Evans launched a great initiative to encourage Australian students to ‘Add-China' to their degrees. This paves the way for them to do part of a university degree in China, whether in Chinese or in English. The program is not about breeding sinologists, but fostering the kind of Asia-literacy I've been talking about. And we mustn't forget the heritage, and the skills of those who are already here. According to last year's census, Mandarin has overtaken Italian since 2006 as the most common non-English language spoken at home in Australia, and Cantonese has passed Greek. This is an important head-start in making knowledge about Asia, and interaction with Asia, part of broader Australian culture. This kind of knowledge, of intimacy, gives us the best chance of getting to the front of the pack in what will be a very competitive race through the course of the 21st century. Because building our human capital and strengthening our links at all levels will ultimately give us a bigger voice and place in the region and in the global economy. This will give us the most control over Australia's economic performance, over our evolving role and influence in the region. Once again, that's not something government alone can determine. It will depend on the willingness, capacity and, above all, the open minds of all Australians.
So let me thank you again for the chance to flesh out some of this thinking, in our White Paper but also based on my own experiences. I know there's a lot of chatter right now about China slowing, or the resources boom ending, and that some people are pessimistic. For my part, I remain as optimistic as ever about the capacity of China's rise to help lift the living standards of current and future generations of Australians. This is a story of a hundred years and not of any hundred-day period. If we diversify. If we speak to Asia rather than at it. If we recognise that a lot of the heavy lifting will need to be done by individual businesses, institutions and people. If we think deeply and coordinate our thoughts and our efforts, just as we're doing today, in conferences like these. If we embrace the opportunities in Asia, we can make this the Australian century as well. So thanks again and I look forward to your questions and also to the panel discussion with my colleagues up here.