8 December 2016
Speech - #2016018, 2016

In the role of: Minister for Revenue and Financial Services [19 July 2016 - 28 August 2018]

Address at the Boao Forum for Asia, Melbourne

Check against delivery

Thank you, everyone, for that very warm welcome.

It's great to be with you today for the Boao Forum in Melbourne – my home city. I am delighted that we can host such an event here and I know that it is the third time that this event has been hosted here in Australia.

Let me begin by acknowledging the Secretary-General of the Boao Forum, Zhou Wenzhong. He has of course been a driving force for this conference and we thank him for his hard work.

Australia's relationship with the Asian region is, of course, critically important, and it will only become more so in the years to come.

Today's forum — with its impressive turnout of leaders from business, government and academia — reflects that importance. In this room we see representatives from 26 nations, and you all share a common aim: to strengthen the economic relationship between our nations.

And I should say that the Australian Government shares that aim.

We believe in globalisation; of building closer ties between our nations. We want to remove barriers, not build them.

This can pose challenges. But the opportunities, as you all know, are enormous.

That is why we all need to do our bit; to not only enjoy the benefits of globalisation, but to share those benefits and ensure that everyone understands them — whether they're from Maoming in China, Matsuyama in Japan, or Melbourne in Australia.

Importance of trade

This is particularly so when it comes to trade. Because, let me be honest, it is not in vogue.

To all of us here, trade means growth. But across the globe, we are seeing the rise of anti-trade sentiment.

That is something we must push against hard, and the Australian Government has been vocal in its support for trade.

As the Treasurer said recently, Australia can't afford not to trade. The same can equally be said of our neighbours.

In our case, trade improves Australia's standard of living through access to cheaper consumer goods.

Businesses are strengthened through access to cheaper production inputs.

Service providers and investors enjoy more open treatment, and greater regulatory certainty.

And perhaps the most important thing to mention is that a free and open global trading system exposes our businesses to world-class competitors.

This kind of competition gives us the incentives and opportunities to apply Australian ingenuity — to make our businesses more innovative and more productive.

China–Australia Free Trade Agreement

So it is little wonder that the Government has pursued trade deals as a high priority.

Since 2014, Australia has secured free trade agreements with three of the powerhouse economies of North Asia — Japan, South Korea and China.

They're transformative agreements, particularly the China–Australia Free Trade Agreement, or ChAFTA.

Let me explain.

As most of you know, Australia's economy is in transition; from the strength of a mining boom to broader-based growth driven by other sectors, such as services.

That transition, of course, is echoing China's transformation to a more consumer-driven growth model.

Our past trade with China has mainly been focused on demand for our commodities; however, as China transitions, trade will become more focused on demand for services.

And that makes ChAFTA incredibly timely.

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.

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.

Financial services

At the same time, the story for financial services is also one of huge opportunity and given that it is within my responsibilities it is something that I am very excited about.

For a long time, Australia has had a small presence in China's financial services industry. It hasn't been easy for these providers — particularly given the unfamiliar regulatory environment.

But this will change following ChAFTA. China has made several unprecedented financial commitments — ones that, I believe, bode well for both countries.

Broadly, they create new commercial opportunities for Australian banks, insurers and securities firms, and deepen participation by Australian financial institutions in China.

This will, undoubtedly, strengthen financial service trade and investment in both directions, and enable future growth in the bilateral economic relationship as a whole.

For the banking sector, China is reducing the waiting period for Australian banks to engage in local currency business from three years to one, and removing the two-year profit-making requirement as a precondition for the provision of local currency services.

Additionally, China will remove the minimum 100 million renminbi working capital requirements for branches of Australian banks operating as subsidiaries in China — a move that will allow faster growth and create new business opportunities.

For Australian insurers, they will be able to access China's sizeable statutory third-party liability motor vehicle insurance market — free of establishment or equity restrictions.

Meanwhile, China will guarantee Australian securities brokerage and advisory firms with access to provide cross-border securities trading accounts, custody, advice and portfolio management services to Chinese offshore investors.

And, finally, the Australian Securities and Investments Commission and the China Securities Regulatory Commission have agreed to strengthen cooperation and improve mutual understanding of the two nations' regulatory frameworks.

Asia Region Funds Passport

Now that said, it is not only trade agreements that can create closer ties between nations. And I want to finish by highlighting another example: the Asia Region Funds Passport.

Australia has one of the world's largest funds management industries. Right now, however, only about 4 per cent of funds under management are invested by people outside Australia.

The Passport, which Australia signed in June, gives this industry access to a single large managed funds market in the Asian region — a market with strong performance and protection standards.

The opportunities that will flow from this financial market integration, for both Australia and other members in the region, are manifold.

The Passport will deepen the region's capital markets to attract finance for economic growth.

It will strengthen the capacity and expertise of the region's funds management industry — expertise that can then be exported outside the region — at the same time as lowering costs through economies of scale.

It will help channel savings into productive investment, and ensure consistency of regulatory standards for the region's managed funds.

What's more, APEC estimates the Passport could create more than 170,000 jobs over the next five years.

At the moment, fund managers will have access to five markets, including three of the biggest: Australia, Japan and Korea. And there will be opportunities for other countries to join later — opportunities I'd encourage all of you to champion.

Because the more nations that participate, the more successful the Passport will be — and so, too, the funds management industry.

Concluding remarks

That is a good sentiment to close on.

I believe nations are stronger if they work side by side; recognising common goals and aims, and committing to the good of the global community.

It is undeniable that the idea of globalisation is being challenged — as you will discuss throughout this conference.

This is an unfortunate reality; one we must all grapple with. But I would say: the principles underpinning globalisation are sound. The benefits are good.

That is why we must double-down on our commitment to globalisation — especially trade — which is what the Australian Government has done particularly in relation to our trade agreements.

However, we also cannot assume that everyone is as convinced of the benefits as we are. They are not. And it is our job — governments, business leaders and academics — to make sure the benefits are shared, and the opportunities highlighted.

I wish you all the very best for the remainder of your conference. Thank you very much for your attention today.