The Hon. Alexander Downer, MP
The Hon. Alexander Downer, MP
 FORMER MINISTER FOR FOREIGN AFFAIRS, AUSTRALIA

Speech

The Milken Institute Santa Monica
20 January 2004

Speech to the Milken Institute

Thank you [Robert Hunt from Invest Australia, and John Olsen, Consul-General] for your kind words of welcome.

Ladies and gentlemen, I am pleased to have this opportunity to address the Milken Institute.

The Institute has a thoroughly deserved reputation as a forum for debating public policy and for presenting innovative ideas for creating broad-based prosperity.

In the twenty minutes or so I have this morning I want to leave you with, essentially, one idea:

Australia has the right business environment and offers the right location for your companies to prosper in the Asia-Pacific region.

Australia has what companies need to do well - productivity, innovation and amenity.

Australia is one of a handful of nations along with the United States to be a democracy throughout its modern life.

Our standard of governance is high, decision making transparent and our legal system just and fair.

In the right sectors, the strategic fit works for American companies in Australia.

Just look at the experiences of IBM, Unisys, American Express, Citbank, Coca Cola, GM, and Ford, to name but a handful.

Dealing with change in the Asia-Pacific region

I will shortly say more on Australia and what we've done to become one of the most competitive economies in the world.

But it is only natural for me as Foreign Minister to also speak on some of the trends occurring in the Asia-Pacific and the strategic advantage Australia offers.

There is no doubt that China's growing strategic and economic involvement and influence in regional affairs is the most significant long-term development in the Asia-Pacific.

Henry Kissinger's observation that the emergence of China as a major economy and power will have as large an impact in Asia as the emergence of the united Germany did in nineteenth century Europe carries more than a ring of truth.

China has made a welcome choice to open its economy and participate as a constructive member of Asia's regional community.

This is a trend that Australia welcomes and encourages.

Economic growth within the region remains largely dependent on export led growth, primarily to the United States.

But we are beginning to see signs of broader based economic growth in several economies.

This trend will only continue as the region grows and explores deeper economic integration, albeit cautiously.

Most economies have moved successfully beyond the financial crisis, although the task of economic reform must continue.

Terrorism is a significant threat to regional economic prosperity - and security - particularly in South-East Asia.

No-one should underestimate the scale of the challenge we face.

Disrupting the activities of terrorist groups like al-Qaeda and Jema'ah Islamiyah will be a long and hard fight - although we have won some crucial victories.

Australia's cooperation with its neighbours has seen terror attacks prevented, terror networks disrupted and terrorists arrested and convicted.

Next month in Bali, I will co-host with my Indonesian counterpart, Hassan Wirajuda, a regional ministerial conference on counter-terrorism.

Australia may not have suffered a terrorist attack on its soil as the United States has.

But we share your anguish over the loss of loved ones in the evil terrorist attacks of September 11 and Bali.

Our efforts in South East Asia are just one measure of the determination we have to eradicate this pernicious threat.

The Australian economy

The Australian economy is a great success story.

We are enjoying the longest unbroken economic boom since the 1960s.

The Australian economy is forecast to grow by 3.75 per cent in 2003-2004 and faster than the OECD average in 2003, 2004 and 2005.

And despite strong economic growth and falling unemployment, both wages growth and inflation remain moderate.

Our current growth is soundly based and sustainable because we no longer endure the inefficiencies associated with high tariffs, fixed exchange rates and financial sector over-regulation.

The Government has repaid A$66.6 billion worth of debt since 1996, thereby reducing our national debt-to-GDP ratio to 3 per cent.

The OECD average is 49 per cent.

We have run a succession of budget surpluses that have enabled us to reduce taxes while maintaining strong service levels to the community.

And Australia's interest rates are around their lowest level for 30 years.

These achievements have only been possible because the Government's prudent management of fiscal policy has eliminated the squeeze on monetary policy.

But fiscal policy is not the end of the Government's work.

We have undertaken significant labour market reform.

We have reformed business taxes and indirect taxes to give Australia a modern, internationally competitive taxation system.

The corporate tax rate is down from 36 per cent to 30 per cent and we halved the capital gains tax under specific conditions.

Australia's system of corporate governance has been modernised, in particular by strengthening the role of the independent accounting standard setter.

Our efforts are clearly paying off.

In its latest annual assessment of Australia, the IMF notes that the Australian economy has outperformed most other advanced countries in recent years.

In the IMF's view, this reflects adherence to a credible macroeconomic policy framework and continuing progress in implementing structural reforms.

Strong productivity growth - one of the best in the industrialised world - has been a hallmark of the Australian economy over the past decade.

And a further dividend from shrewd economic management and reform has been improved international competitiveness.

Australia's growth competitiveness ranking was seventh out of the 80 countries assessed as part of the World Economic Forum's 2002-2003 World Competitiveness Report.

And a recent report by the World Bank, Doing Business in 2004, ranked Australia first out of 133 countries for best practice in business regulation.

Australia: a good place to do business

This strong economic track record has helped create and maintain an attractive business and investment environment.

But the Government recognises that companies need more than a strong economy to want to invest somewhere.

So the Government has ensured a prosperous environment for foreign direct investment through a liberal and transparent foreign investment regime and a commitment to continuous intellectual property reform.

There are no restrictions on capital flows, profit remittances, capital repatriation, transfer of royalties or trade-related payments.

And the Government has set-up an investment agency, Invest Australia, to provide information and assistance to foreign investors.

Total foreign direct investment inflows to Australia increased by nearly 250 per cent in 2002 against a 22 per cent decline in OECD countries overall.

The United States is Australia's biggest source of investment, and US investment in Australia has been growing at 15 per cent per annum over the past 10 years, compared to 10 per cent for investment from all sources.

All told, US firms employ nearly 300,000 Australians.

As good as economic conditions are in Australia, these are often not the only reason for which companies invest and do business there.

Australia is an ideal location to base operations serving the Asia Pacific region - if your plans for Asia are long term, you need to be in the region.

And it makes sense to consider consolidating your key regional functions in a location you know offers resilience.

Living where we do, and with strong people links into Asia, Australians are highly attuned to the region.

The various dialects of Chinese are the second most spoken language in Australian homes after English.

And Asian countries were the source of 51 per cent of Australia's skilled migrant intake in 2002-2003.

So it is no surprise that we have developed strong trading relationships with most economies in Asia, particularly those in the North.

The Government is deepening these relationships through the most ambitious program of free trade agreement negotiations ever undertaken by an Australian government.

In the past two years we have concluded FTAs with Thailand and Singapore.

We are undertaking with China a joint feasibility study into a bilateral free trade agreement.

And we are taking steps to enhance the economic relationship with Japan, our largest export market.

Our actions should help firms follow the lead of well-known Australia-based companies like Lend Lease, National Australia Bank, Qantas, Blue Scope Steel and QBE Insurance that have established a strong presence in Asian markets.

These closer ties stand to benefit the many US-based companies - household names here in California - that have based their headquarters for regional operations in Australia.

At the end of the day, the benefits to companies of Australia's close ties with Asia are likely to be measured in the bottom line.

Importantly, however, American companies also find Australia an easy place to do business because we share similar commitment to individual worth and expression tempered by responsibility to family, community and country.

Put simply, Australia is an easy and safe place to live and work.

AUSFTA

Many of you know about the free trade negotiations between Australia and the United States. This week, in Washington, our negotiators are locked down in what may be the final phase.

Our trade minister, Mark Vaile, will join them next week.

For the United States, this free trade agreement will be its most important concluded since the negotiation of NAFTA.

Of all the countries with which the United States could realistically negotiate a trade agreement, Australia is the largest, fastest growing, most open - and the most similar in its goals for the WTO Doha trade round.

There is no doubt the negotiations are tough.

We are both committed to achieving a genuinely liberalising agreement that will benefit our businesses.

Australia, for example, is committed to achieving better access for our sugar, beef and dairy exports to the United States.

A successful agreement will generate new investment, new trade and new jobs that would otherwise not exist.

It gives us both opportunities we cannot find elsewhere.

The FTA will send a message to business communities in both our countries that our governments regard the other country as a preferred partners - a place where it is safe to do business, and a place where the government is committed to maximising fair business opportunities.

The economic relationship between Australia and the United States has already been transformed almost without our noticing.

We are only just beginning to appreciate the stake we have in each other's economy.

The FTA is the next logical step in building an even closer economic relationship.

Conclusion

Ladies and gentlemen,

While only a small percentage of Americans actually travel to Australia, many more say they want to visit.

So many people never get beyond the image of Australia as a great lifestyle.

Australia is of course much more than a lifestyle. It is the right place to base your business interests in Asia.

Australia is a politically stable, technologically advanced, financial and legally dependable entry point and base for business growth in Asia.

Australia's strengthening of its trading ties with Asia, through free trade agreements, is broadening the opportunities for business.

And I am confident that the successful conclusion of the FTA will add a further dimension not only to your business interests in Australia, but also to the exceptionally strong relationship that exists between our two countries.