Introduction

Thank you Geoff. Excellencies, distinguished guests, ladies and gentlemen.

It's a real pleasure to speak to you tonight at the NSW branch annual dinner. Good food, good wine and good company are always conducive to good conversation.

The NSW branch has a strong record of contributing to public debate of international issues. Under the leadership of your President, Geoff Miller - an able and highly experienced former Australian diplomat - I am sure the branch will go from strength to strength.

I've been asked to come here tonight and speak about the Government's Asia policy.

First, I want to outline to you some of the dynamics of a region that has changed enormously since we came to office. I want to sketch out the parameters of that change - and the new regional setting in which we find ourselves.

Second, I want to demonstrate that Australia, too, has changed. I want to outline the benefits of our reform program and how our domestic strength - in particular a resilient, reformed economy - has strengthened our hand internationally.

Third, I want to explain how we have enhanced our reputation and position in the Asian region, and now are better able to address the opportunities and challenges before us - as a responsible, principled and pragmatic country, in Asia and beyond.

The setting

When we came to government, we said we were committed to Asia. After all, modern Australian governments had a long history of involvement in, and commitment to, the region - stretching back well over 50 years.

We also said that our commitment to Asia, however, would not be at the expense of our other, key, relationships in Europe and North America. Indeed, we said our relations with other regions were as important to Australia as were our relations with Asia.

We said we would reinvigorate relations with key partners. Not at the expense of regional and multilateral endeavours, but with an eye to the opportunities strong bilateral ties present. For business and people-to-people links, as much as traditional economic and political concerns.

We said we should be confident about our ability to shape our future. We said that our foreign and trade policies could only ever be underpinned by our economic and political strengths at home. We needed to get our own house in order before we could expand and diversify abroad.

Above all, we said our policy in Asia would be pragmatic, and that we believed in ourselves as Australians, not as anybody else. We had to get away from the hackneyed debate about whether or not we were part of Asia, and the falsehood of thinking that we had to somehow - indeed, anyhow - latch ourselves onto, and into, Asia in order to survive.

Thank goodness we escaped this mindset of defeatism and dependence - a reliance on the progress of others for the sake of ours - before the events of the latter part of the 1990s.

Asia - then and now

The world, not the least Asia - and Australia, is a different place to what it was five and half years ago. The Asian region is marked both by rapid change and continuity - and it poses for Australia challenges, and opportunities.

Power relativities have changed. There are new challenges to sovereign states. New regional uncertainties in the face of economic and sometimes political crises. New pressures from the impacts of globalisation. New and emerging trans-boundary issues - movements of people (including, of course, asylum seekers), the environment, public health. And the increased expectations of rapidly growing Asian middle classes for good governance and accountability.

For the government, there have been some pivotal - and ongoing - developments in Asia. The East Asian financial crisis. The crisis in East Timor. The fundamental transition in Indonesia, in particular its democratisation. These have consumed much of our attention.

But there has also been a wider trend of change in Asia which underlines my general theme.

Japan remains a regional and global economic powerhouse. But no one can ignore the impacts of recession for ten years now. Nor can we ignore the major long-term challenges demographic and other changes pose for Japan.

China is an emerging regional and global power, undergoing rapid and fundamental social and economic change. On the threshold of WTO membership, and now as host of the 2008 Olympics, China is engaging the world - and the world is engaging China.

The Korean peninsula - for so long a global hotspot of superpower tensions - has started a long, painstaking process of reconciliation and perhaps, one day, reunification.

South East Asia continues to suffer the residual effects of the financial crisis. A crisis of self-confidence, political upheaval and the need for continued structural reform has generated - in some cases tragically - great pressure on governments.

So-called 'trans-boundary' issues affecting basic good governance - haze, narcotics, people smuggling and HIV/AIDS, for example - have become established items for the regional agenda. They demand more than simply a sovereign response. The expectations of a burgeoning Asian middle class will only increase the demands on governments to address them - at a time when they are less able or willing to do so then a decade or less ago.

I firmly believe Australia and Asia have benefited enormously from globalisation. Revolutions in communication and production have brought us closer to established markets in Japan, Europe and North America. New markets have flourished. The tyranny of distance, so long a dominant theme economically, politically and culturally, is disappearing.

Yet apprehension about the impact of globalisation remains real, immediate and potent. Change brings with it costs, and the adjustments can be painful. None of us have been immune from these pressures. Perhaps no where has this been felt more than in East Asian economies.

Before we came to government, Asia, and in particular East Asia, was outward-oriented, assertive, even exuberant - confident about its role and future. Now it is a region that is fluid and uncertain - hit hard by economic and political crises - with all the attendant pressures to turn inward, to revert to protectionism, to nationalism, even authoritarianism. These pressures have in the main been resisted.

The central point is this: Asia has changed in the past five and a half years. The region our predecessors faced when they left office is not the region of today. That change has revealed, as the Prime Minister recently said, the risks of adhering to a static framework, and the folly of rigidly defining the focus of the nation's international attention.

Change at home .

Of course, it is not just Asia which has changed. Australia, too, has changed - for the better.

Our international standing is not just because of what we do abroad. It is also because of what we do - and are - at home. It highlights the link between our strengths at home, and our place in the region, and globally. They are strengths about which we can be forthright, and unashamed. They are strengths that have afforded us greater respect and standing in Asia.

Australia is not a small country. We are the fourteenth largest economy in the world -alongside South Korea in being second only to Japan and China in the Asian region.

We have a diverse, modern industrial economy, with advanced physical infrastructure. We are world leaders in resources and agriculture. We are a sophisticated manufacturer and provider of services. We have high-quality education and training institutions. We are voracious users of information technology.

Our people are linguistically, culturally and ethnically diverse, with strong ties all over the world. Our national institutions are strong and mature. The rule of law is firmly established, and our courts uphold and protect private property rights.

Since coming to office, the government has embarked on wide-ranging and thorough reform. We've restructured our tax system. We've reformed industrial relations, particularly on the waterfront. We've reformed the labour market, including introduction of the job network system. We've stripped away red tape regulation of business. We've reformed our social security and public health systems. And we've reinvigorated regional Australia.

Low interest rates, low inflation and a flexible exchange rate - the trappings of sound economic management and bold reform have prepared the ground for a successful and dynamic Australia. No-one can deny that the results have been impressive.

We have had annual growth of 4 per cent or above for 14 consecutive quarters - the longest on record. Our monthly exports have nearly returned to the record level achieved last year when we hosted the Olympics. The trade surplus in the June quarter was the highest, at $1.6 billion, since mid-1997. Our current account deficit has almost halved over the past year, and was the lowest for four years. Our debt servicing to exports ratio stands at 9.6 per cent, down from over 20 percent a decade ago.

In Asia, our export performance has remained very strong, despite a sharp slowing in regional economies. Australia's exports to East Asia grew 23 per cent in value in the year to July. Exports to China grew particularly strongly, up 41 per cent in the same period. Exports to Japan also performed well, despite difficulties in its economy. Australia's export growth to East Asia in fact held up better than export growth to the United States and Europe.

What this has meant is a renewed sense of purpose for Australians, free of the shackles of uncertainty. It means that now we can be confident about our place in the region. It means that now we can project - pragmatically, realistically - our strengths in Asia and beyond.

Opportunities and challenges ..

As the Prime Minister reaffirmed on 22 August, Asia lies at the forefront of our policy focus.

The challenges and opportunities before us in Asia are numerous. Overwhelmingly, our interests lie in a prosperous and stable region, more open to our goods, services and people, and with reduced regional uncertainties and tensions.

I don't need to go over the East Asian financial crisis or the events in East Timor in detail for an audience such as you. Suffice to say, our response and role demonstrated the soundness of our civil institutions, the strength of our economy, the effectiveness of our military and foreign and aid services, and the value of our assistance to neighbours in need.

Along with Japan, Australia committed funds to all three regional IMF programs - some three billion dollars - in responding to the financial crisis. We have led the drive in APEC to focus on technical assistance - backing up our words with $45 million to support trade-related capacity building over the past three years. And this year our aid program in East Asia, targeting better governance and economic management (as well as health, education, rural development and infrastructure), will total A$551 million, up 50 per cent from A$369 million two years ago.

It is not aid alone, however, which demonstrates our contribution. Our trade and investment performance in South East Asia tells a remarkable story of Australia's engagement in the region. Despite the financial and economic crisis there, between 1996 and 2000, total trade in goods between Australia and ASEAN grew by 62% - to A$32 billion - and that's not counting A$8.9 billion worth of trade in services in 2000. Our exports increased by 31 per cent.

And we have been an important market for ASEAN, contributing markedly to its economic recovery. From 1996 to 2000, ASEAN's exports to Australia jumped by a total of 110% to A$16.5 billion. By 2000, ASEAN had tipped a A$3.7 billion trade deficit into A$1.3 billion surplus. ASEAN's surging exports to Australia include computers, furniture and telecommunications equipment.

Australian investment in ASEAN countries has shown a strong recovery from the uncertain climate after the 1997 regional financial crisis. Australian entities invested A$1.4 billion in ASEAN countries in 1998/99, a strong signal of renewed preparedness to invest in Singapore, Indonesia and Malaysia, in particular. Indeed, over the five years to 1998/99 - in other words, even over the period of the crisis - Australian stock investment in ASEAN countries grew 56 per cent, to over A$9.1 billion.

Our people-to-people links have also been strengthened through difficult times. Over 68,000 students from South-East Asia were studying at Australian educational institutions last year, up 26% from 54,000 in 1996. In 2000, nearly 20,000 of these came from Singapore alone, up from 15,600 in 1998. Indeed, Singaporeans visit Australia in huge numbers. Last year over 300,000 - out of a population of 2.3 million - visited. Similarly, more than 17,000 Hong Kong students are studying in Australia.

Australians, too, are living in, and visiting, Asian countries in record numbers. At least 6,000 Australians live in Singapore - half a million Australians visited Singapore for an average of two days each last year. And an Australian school in Singapore - teaching an Australian curriculum - now has over 1,000 students. 45,000 Australians live and work in Hong Kong, and just today our Consul-General in Hong Kong signed a working holiday maker agreement to enable visiting Australians to work.

What these figures do is prove a point we often make: Australia's engagement with Asia has grown substantially over the past five and a half years. We have been able to build these links without the embarrassing posturing of earlier years.

In East Timor, as you all know, we led the world in restoring peace and security after the East Timorese vote for independence led to so much devastation. Now we are following up on that initial commitment of resources, people and ideas. We are unstinting in our support for an orderly process of transition to independence. We participate actively in UNTAET. Our aid program is now valued at $150 million over four years. And we have negotiated a new Timor Gap treaty, laying the basis for a truly sustainable and self-sufficient East Timor.

After thirty years of centralised and autocratic rule, Indonesia is undergoing transition to a modern, inclusive, decentralised democracy. It is not an easy path. There are real concerns - Aceh and Irian Jaya among them. But there is also cause for great optimism. The recent peaceful transfer of power to President Megawati Soekarno-putri is one such example.

For Indonesia, the path to a modern democracy is historic. Our intent is to develop a mature relationship based on permanent, institutionalised ties that help cement that transition - a relationship based on "positive realism".

Before we came to office, the bilateral relationship was such that, despite the patina of close personal ties between leaders, there was no possibility of the Indonesian leader visiting Australia. Just two months ago - and despite the acknowledged difficulties of the past four years - then Indonesian President Wahid visited Australia.

A few weeks later, the Prime Minister was invited to, and visited Jakarta, as the first foreign leader to call on new Indonesian President Megawati Soekarno-putri and key Ministers, some hours after her cabinet was announced. And, of course, I have just returned from Jakarta where I discussed the issue of people smuggling with the Indonesian leadership.

I think there is cause for great optimism about the future of our relations with Indonesia.

We have proposed a Trade and Investment Framework Agreement with Japan. I believe it would provide major investment and export opportunities. It would also provide regional leadership for continuing to liberalise trade and investment. We will continue to explore the possibility of such an agreement with the Japanese over the coming months.

Of course, we also look to closer dialogue with Japan not only on bilateral economic and political issues but also on wider issues such as regional security and trans-boundary problems.

China is a nation with a great heritage, and a great future. China's entry to the WTO can only fuel growth in trade and investment, including vis-à-vis the economies of South East Asia. China's hosting of the Olympics will focus the world's attention on Beijing. And the role China plays in Asia will help shape the regional strategic environment.

China's integration into the region, and globally, is important to Australia. We have developed durable and friendly relations with China, based on cooperation in a broad and increasing range of areas. Last year China became Australia's 3rd largest trading partner and 5th largest export market - representing a nearly 50 per cent increase over the previous year.

We have achieved this by focussing on shared interests and managing our differences in a spirit of mutual respect, and with an eye to the broader relationship.

We will be keeping a weather eye on the Korean peninsula. Reconciliation between the two Korea's will be a defining process in the region's development. We look to the DPRK to renew and reinforce its first, tentative, steps forward into the community of nations. And we stand ready to reciprocate in kind with further assistance and recognition of those steps.

Of course, the United States remains a crucial force for regional stability and prosperity. The web of bilateral alliances - of which we are an important part - and the US role in regional security dialogues, remain vital. Of course, the United States - as the world's largest market - is a force for restructuring economies and liberalising global trade and investment.

Our other relationships in the region - premised on pragmatic and realistic assessment of opportunities - have flourished. We are well down the track in negotiating a free trade agreement with Singapore. Our human rights dialogue with Burma is a small but positive effort to raise awareness of international humans rights norms amongst officials. Our decision to re-establish diplomatic relations with the DPRK reflects that regime's positive, though tentative, moves to re-join the world order.

There are those who claim that our emphasis on bilateral relations has been to the detriment of our regional and multilateral efforts in Asia. And then there are those who go on to suggest that because we are not a member of every institution in the region, then we are somehow not engaged, and that we are therefore disqualified from the region.

Let me make a few points in response.

• First, ignoring bilateral relations when the region has been buffeted by change - and less able to respond, as a region, to that change - would have been irresponsible and foolhardy.
• Second, our emphasis on bilateral relations does not mean that we have ignored our regional and multilateral responsibilities and opportunities.
• Third, we do not see regional institutions as a test of whether or not we are somehow an accepted 'part' of the region. Bodies such as the ASEAN plus 3 do not pose a problem or threat to Australia. Indeed, we welcome them as they encourage and foster regional dialogue.
• Fourth, the naysayers conveniently ignore the fact that we are an active and constructive player in established regional bodies - APEC, the ASEAN PMC, the ASEAN Regional Forum, the Asian Development Bank, the Manila Framework, to name some.

Our approach to regional issues is based firmly on where Australian national interests, and the interests of the region, intersect.

I believe the region needs to focus on building a consensus for continued structural reform - economically and politically. It is vital that a regional appetite for market opening and good governance is renewed. Only then can the true will and capacity to address not only sovereign but also regional concerns, be developed.

We have played a leadership role in this respect in the region. We have pushed hard, for example, to create a free trade agreement between ASEAN countries and Australia and New Zealand. That ASEAN failed to reach consensus on the desirability of such an arrangement reflects the loss of self-confidence that has beset parts of the region.

For our part, we will continue to sell the clear benefits of a regional free trade agreement. And we will press ahead with individual arrangements with countries that want to run with us. We are well advanced with Singapore, and we are exploring an arrangement with Thailand.

APEC has attracted some undue criticism from those who look at tariff levels alone. But this ignores the fact that average tariffs in APEC economies have declined by one third in the last five years. Fully two thirds of APEC economy imports attract tariffs of five percent or less.

And we are leading APEC in doing a raft of important "nuts and bolts" work that produces real savings for Australian business: simplifying and harmonising customs regimes; mutually recognising standards; and enhancing business mobility. APEC also is helping build good corporate, financial and public governance, thus strengthening markets and institutions.

APEC therefore remains an important part of our strategy for maximising the benefits of globalisation and trade liberalisation, for Australia, and for the region.

Clearly we are now faced with the challenge of building a regional consensus for addressing other regional governance issues - chief among them, of course, people smuggling.

The recent problem of the MV Tampa and its human cargo illustrates the very real challenge facing countries in our region. People smuggling is not just a problem to be faced by Australia as the target of such activity. It is also a problem for those countries used as transit points by the people traffickers. It is an issue which if not handled carefully and cooperatively could become the cause of new tensions among countries in our region. Australia is ready to commit ideas, people and resources to working with our neighbours to address this complex and pressing issue.

If anything, the Tampa situation has helped to focus regional and international attention on the problem of people smuggling, and demonstrated the importance of coordinated and cooperative responses among countries. Together with my colleagues the Minister for Defence, and the Minister for Immigration, we held productive discussions with Indonesian ministers and officials in Jakarta last week. We have together identified ways to work more closely to combat the people traffickers.

I was impressed and encouraged that Indonesia is prepared to work with others and us in developing such a response. I think it again reflects our standing and reputation in the region, despite the obvious difficulties of the issue for all.

Conclusion

Today I have set about leaving you with some key messages about Australia and Asia.

Asia has changed. It is not the same region as when we came to government five and a half years ago. And with the transitions under way in the region, I expect it will have changed still more in another five and a half years.

Australia has changed - for the better. We are recognised in the region, and beyond, for our vibrant economy, our relevance and our strategic value. Most of all, we recognise ourselves, and others recognise us, for what we are - Australia - rather than what we are not.

Our approach will remain pragmatic, flexible and realistic - this has been the big lesson of our time in government - responding to the challenges of a fast changing region. We want an Asia that is outward looking and prosperous. We want an Asia that can tackle regional issues in a bold and integrated fashion. We want a confident Asia where suspicions and tensions are reduced.

I am confident that Asia will bounce back as dynamic, fast-paced, and vital region of the world. I believe strongly that we are well placed to take advantage of the opportunities - and to address the challenges - before us in the region.

I look forward to continuing our part in assuring the future of Australia, and Australians, in Asia.