Thank you very much and thank you to my friend and colleague Martin Ferguson for his invitation to address you this morning.
And I know from having dealt with Martin now for many, many, many years that he is a passionate advocate for the industry not just in what he says but in what Martin does and I'd like to acknowledge that here this morning.
If I could also acknowledge those who are here from Tourism Australia, also from the Department of Resources, Energy and Tourism, also I believe we have with us this morning Geoff Raby our former Ambassador to China who I'd like to acknowledge as well, given the work he has done in Australia's name in our largest growing market in recent years and also representatives from industry and government.
Well, the industry has had a few challenges since we last spoke. You will talk about them in depth today and how we respond to those challenges will determine the future shape of the industry.
What's remarkable is the industry's resilience despite these challenges.
We've had to wrestle with a dollar which has reached the highest levels it's had since we floated the currency in 1983.
We've had to wrestle with ongoing global economic uncertainty in North America and in Western Europe and the impact which that in turn has had on consumer sentiment in those markets and a preparedness to use discretionary income for travel and of course those challenges in Europe continue.
And if that wasn't enough, as we have said here before, in Australia and particularly my home state of Queensland, we had the rolling challenge of natural disasters — far north Queensland but also in the last months' south-east Queensland as well. And what's remarkable is that despite all of that, we have still seen an increase in international visitor numbers to Australia.
This is no small achievement for the industry and it demonstrates a resilience in the industry of which you, as its participants, should be collectively proud.
If you look to the future, however, I would say a couple of things before addressing some specific remarks to China.
The first is to state again that fundamental reality, that your sector and its performance is critical to the future trajectory of the Australian economy. You represent some 5.5 per cent of GDP. You employ just shy of a million people in this country, directly and indirectly.
Therefore, as I've said before and I'll say again, as a matter of fundamental principle and reality, the health of your sector is critical to the health of the Australian economy and the health of the Australian employment market.
You simply need to know that we get that.
We understand it and particularly where I come from in Queensland, it's part of our DNA.
And so what of the future? Let's think for a moment about the stats on China itself.
In recent times some of you may have been inflicted with a presentation of mine called China 2.0. Anyone put their hand up who's heard this so far?
Okay, Martin has 14 times; a few folks up the back there; you've been spared it over in that corner.
It's a little long for the allocated time this morning, but China 2.0 is our way, as the Australian Government, of trying to reframe the way in which the Australian business community conceives of the future of the China-Australia economic relationship, and that in turn China 2.0 reflects the changing structure of the Chinese economy itself.
A few basic points — when the Chinese brought down their last five year plan, the 12th five year plan, it elaborates for the first time since 1978 when they began their policy of opening to the outside world, a new growth model, a new economic growth model for the future.
And the essential characteristics of that model is no longer a primary dependence on labour-intensive manufacturing exports as the drivers of economic growth but instead, secondly, an increasing orientation towards service-based industries based in China's emerging cities and resting, in turn, on burgeoning consumer effort within the economy whereby domestic consumption becomes a much larger driver of growth over time than in fact does labour-intensive manufactured exports.
This is a fundamental shift in economic policy direction. And it's very important that the industry understands that this is not just happening accidentally around China, it is actually being driven from the centre.
So what does it mean in practice? The numbers I think you would probably be familiar with, but if we look, for example, at the emerging size of China's urbanisation, I believe it was last year that for the first time in Chinese history, which goes back a fair old time, the first time in 5000 years that more people live in cities in China than live in the countryside; in urban concentrations rather than the countryside.
This is a fundamental shift in China's demography, and a fundamental shift therefore in the future income profile of Chinese consumers and therefore the sorts of services which they will wish to consume in the future.
China's urban population has increased by 446 million people over the last 30 years.
Its urban population now dwarfs that of both the United States and Europe combined. It's worth thinking about that.
The gap will continue to grow. Thirty years ago China's per capita income was among the poorest in the world at $280 per annum. Now in 2010 it is $4382 per annum.
And so what you are seeing is a move, an historic shift from the countryside to the cities, and you are seeing an historic increase in China's per capita income and that average per capita income that I just referred to applies to the nation at large. Of course it is much larger when you reach the largest cities.
As China increasingly urbanised the relative demand for the range of services grows and grows, creating unique opportunities for Australia.
Related to this is a phenomenon which I believe our tourism industry and all Australian service industries need to grasp, and that is the rise of what I'm sure former Ambassador Raby will speak to in a minute when he addresses this conference, and that is the rise of what's called China's second tier cities.
Often when we have looked abroad at the Chinese market we think of Shanghai, we think of Beijing and, on a good day, we think of Guangzhou. The truth is these are China's megacities but only a few.
Right across China we now have 93 Chinese cities with a population in excess of five million — 93 Chinese cities with a population in excess of five million — eight Chinese cities with a population in excess of 10 million.
So, we have something like 93, or for that matter, 101 cities in China, each of which is larger than our largest city, Sydney.
It's worth reflecting on that, because an historical model which has in any way seen — whatever part of the Australian services industry you represent, China as some nationally homogeneous market, frankly, has long passed us by. Each of these are discreet regional and sub-regional markets.
Now, what is pleasing to see in the presentation just made before was, in fact, the significant growth across China's principal airlines: China Eastern, China Southern, the national carrier and others. But therein lies the potential to grow the tourism market from China even further.
My word of encouragement to this industry — this important industry for Australia — is to focus further and further on each of the markets which each of those principal cities represents, many of which you will never have heard of, but each of which is larger than the city of Sydney.
And it's critical that, for the success of marketing the services industry from this country to that growing market, that we do so.
Let's also put some other aggregate statistics in mind. The Chinese economy today, in terms of its gross size, is about the size of Europe. We need to begin to think of each of the provinces in China as, in fact, equal to one of the countries of Europe.
If you were to project out ahead for the next 10 years and look at China's 30-plus provinces and actually merge that with a map of each of the countries of Europe against their aggregate economic size, it is a fascinating map to observe. Roll it out to 2050, it gets bigger and bigger again.
So that regional economies, for example, that of Zhejiang immediately south of Shanghai, whose provincial centre is Hangzhou. That regional economy will be within 10 years the size of a middle-sized regional econ… national economy in Europe. That's just one of them.
And as you travel across China's hinterland provinces, but increasingly the inland provinces, not to forget Sichuan and Chongqing in the west, it's important that we change the way in which we view this country and the markets contained within it: the sub-national markets and the individual urban markets.
Six of Chinese provinces currently have a GDP in excess of $1 trillion. We in Australia run a GDP of 1.3 trillion-plus. Six of China's provinces have a larger or have a comparable economic footprint as does the national economy of Australia.
So, the reason I say these things is that we in Australia focus, therefore, on what I've called China 2.0. This is a changing economic model with huge implications for the Australian services industry. Huge implications for the sale of engineering services, for education services, for health services right across the spectrum as income levels rise in these 101 Chinese cities and the demands and expectations of local consumers commensurately rise.
And within that, their aspiration and interest in tourism grows as well, but on an order of magnitude that we have not seen anywhere else in the world, simply because of the base size of the Chinese population.
I would commend this gathering's attention, therefore, to what we in Australia have described as China 2.0.
A couple of months ago we announced that we were taking a delegation to China, the Trade Minister and myself, on a China 2.0 mission, and we chose five cities rarely visited before by Australian Government ministers or government-led trade delegations.
We went to Chongqing in the west. We also went to Changsha. We also went to, obviously, Guangzhou because it often falls off the map, and a couple of other centres as well.
In the end, I had an encounter with a cardiac surgeon, so I didn't go. But I survived, that's why I'm still here. The Trade Minister Emerson went, together with Parliamentary Secretary, Richard Marles.
We took about 100 representatives of the Australian services industry. And the feedback from those who participated, I think, was generally eye-popping and mind-boggling as they encountered the sheer size of just one of these emerging 101 Chinese cities and the five that they visited.
Now, each of them is different, the markets are different, the income profiles will be higher or lower, but let me tell you, these are markets worth pursuing in their own right.
If you sit back and apply a whole new conceptual framework to them, which has in your mind the template of European national markets or even the aggregate market of the United States, or even our principal source of international tourists, our friends across the Tasman, my final remark to the gathering this morning is that this cannot be to the exclusion of other emerging markets across Asia.
China is one part of the phenomenon, but this is the Asia-Pacific century; you've heard it a thousand times. And it's true, that's why we talk about it. And China is very much the engine room of regional growth right across the Asia-Pacific.
And therefore, as a consequence, we see positive income profiles, disposable income profiles for most of the economies of East Asia, and it's why, for example, Australia welcomed visitors from other parts of Asia in high volumes over the last year. Malaysia up by 14 per cent, India by 11 per cent, Hong Kong by 10 per cent, Singapore by nine, Korea up by four.
These are encouraging signs and they are reflections of the reality that I've described earlier in terms of China itself. So, friends, colleagues, representatives of this important industry for Australia, if I have one message for you today, it's let's open our thinking about China to an entirely new paradigm. That is, newly emerging urban China across 101 centres each representing a dynamic market in itself. And that, in turn, fuelling individual consumer demand for tourism services across wider East Asia.
Our Australian national branding in China and elsewhere in Asia remains good. Within China, it is very good, but much more still needs to be done.
Don't assume that people sitting out in a city of five million people in the middle of Hunan Province know a whole lot about what this country has to offer. But the classical advantages, which you've referred to before, and we all know to be true — the time zones, the welcoming mat extended to visitors from China and the wider region, and the absolute imperative of quality services in this country dealing with the obvious linguistic divide and the need for Chinese language services across the tourism industry and wider Asia languages, language capabilities across the tourism industry, speak for themselves.
So, I'd encourage you to adopt and to engage in that new paradigm as the Australian Government is doing.
And secondly, together with Martin and Craig Emerson the Trade Minister, and myself, know that when it comes to selling the Australian services industry to each of these sub-markets within China, we're up for the task, we're up for the challenge and we'll work with you.
I thank you for your time.
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