Since the end of the Cold War nearly 20 years ago, the world has entered a new era of economic globalisation.
This new era of economic globalisation has also unfolded at the dawn of the Asia-Pacific century.
The facts speak for themselves: the global centre of geo-economic and geo-strategic gravity is shifting to the Asia-Pacific region.
Our century has come but with it comes grave responsibilities:
* to preserve peace;
* to build security;
* to widen prosperity; and
* to act on climate change.
We have entered a new age of global and regional interdependence.
This age has brought great opportunities.
Capital, ideas, technology, services and products flow around the world creating jobs and delivering better prices to consumers.
But this age of interdependence also brings great challenges.
If one part of the global system experiences difficulty, it quickly flows to other parts.
That's why we need to make sure that the global financial and economic system is sustainable - through good times and bad.
In our region we need stability between nations.
We also need economic stability.
And we need long-term sustainable development.
These are all interconnected.
Sustainable political and economic structures require a sustainable environment.
All of this can only be achieved if governments in our region work together with a degree of cooperation and coordination unprecedented in our history.
And in doing so, we need to partner with the business community to develop our policy responses - both short and long term - to the great challenges that lie ahead.
The global financial crisis is now having a clear and immediate effect on real economies, real growth and real jobs around the world.
Already, in little more than a year, the financial crisis has caused the loss of nearly half of the wealth held on global stock markets.
And is expected to lead to a loss of 3 per cent of global GDP next year - that is $1.8 trillion.
For families it means lower living standards and frustrated ambitions.
It means the erosion of financial security for older people as their savings shrink.
It means a new generation of young people will find it more difficult to find their first job.
The ILO estimates that the numbers of jobless will rise to 210 million next year.
The impact will be felt in all nations - developed and developing.
A one percent decline in developing country growth rates will push an additional 20 million people into poverty.
The IMF is currently forecasting developing countries to grow at just over 5 per cent in 2009, down from 8 per cent in 2007.
That decline - of some 3 per cent - will condemn 60 million people to poverty.
As confidence across the world falls it begins a vicious cycle that leads to further caution on the part of households; leading to further falls in consumer spending; leading to further falls in business investment; leading to lower growth, and fewer new jobs generated.
But the test of political leadership is not simply to describe political events.
It is not to talk about them.
It is to act on them.
To act on them decisively.
And, where possible, to act ahead of the curve.
In other words, to make a difference.
This must be done nationally to support growth and jobs.
It must be done internationally.
The world must now act decisively to deal with the crisis we face.
The strength of open markets lies in its marriage of freedom and responsibility.
Freedom means that we are able to make economic decisions in our own interests unencumbered by excessive government restrictions.
Responsibility means ensuring that markets are properly regulated and that market participants support rather than undermine the integrity of the system.
But the origins of the current crisis lie in the largely unregulated sectors of our financial markets that brought out the absolute worst in the most extreme forms of capitalism.
And the consequences have not just been borne by those who abused the system.
It has been borne by the system itself, the real economy, and those whose jobs and standards of living depend on the orderly functioning of both for their livelihood.
As private demand falls, governments must step in to take up the slack.
This will require further monetary action.
And it will require fiscal action.
Nationally.
Internationally.
Coordinated.
And with urgency.
Many APEC members have already moved to boost their economies.
China has injected a massive 586 billion US dollars into its economy and that is a significant boost to the global economy.
Japan has announced a package of 68 billion US dollars.
The Korean Government has announced an 11 billion US dollar fiscal stimulus package of public expenditures and 3 trillion Won of tax cuts.
Indonesia has taken decisive action through both fiscal and monetary policy.
Australia has implemented a 7.7 billion US dollar Economic Security Strategy - equal to one per cent of GDP.
But more can be done.
Globally and regionally, more must be done.
Governments acting in isolation from one another cannot deal with all of the consequences of the crisis.
Nor can they hope to prevent such a crisis from happening again.
No country's economy is immune from the impact.
No country's labour force is immune from the impact.
This crisis will only be overcome by coordinated action.
President Bush's initiative in calling a Summit meeting of the Group of Twenty nations was the right response to the crisis.
The Group of Twenty - the G20 - brings together the major economies in the world and the countries that have the greatest interest in and impact on the stability of the global financial system.
The members account for:
* 80 per cent of world trade;
* 85 per cent of the world's banking system; and
* 85 per cent of global gross national product.
But the importance of this group is about more than the statistics.
It brings together developed and emerging economies.
It brings together five nations from the Americas, five from Europe, five from Asia and five from the rest of the world.
And while being a representative global body, it also reflects the increased economic might of the Asia-Pacific in the global deliberations of the 21st century.
In responding to the financial crisis and its effects, the G20 is also the most appropriate mechanism for the future.
And last weekend in Washington, we began to take some coordinated action.
We agreed on the need for countries to stabilise their financial systems.
We agreed that all countries would use fiscal measures to stimulate domestic demand.
More than the short term, we also agreed on the need for long-term changes to strengthen transparency, accountability and therefore the stability of the financial system.
* Financial firms should be fully and accurately disclosing the level of risk in their products.
* Capital adequacy regimes should be adequate to cope with the range of market fluctuations.
* Financial executives should not be rewarded in the short term for excessive risk taking.
* Incentive structures for financial firms should reward the building of sustainable business.
To make this effective and to prevent similar crises erupting in the future, we need national and regional regulators to implement consistent rules and regulations for the future.
The G20 meeting made a good start.
And it tasked ministers to develop a timeline to implement these commitments.
Leaders will meet again early next year to confirm implementation.
In the face of these challenges, the Australian economy remains strong.
Our financial sector is robust.
* Australia has four out of the world's 12 remaining AA rated banks.
* A recent World Economic Forum analysis listed Australia as the equal second highest of 144 countries in terms of the soundness of our banking institutions.
* And since the government moved to guarantee deposits and wholesale funding, we have seen a material improvement in liquidity and narrowing of spreads.
Australia's real economy is currently holding up well.
* Australia is one of the few advanced economies for which the IMF is forecasting positive growth in 2009.
* Unemployment is near historic lows at 4.3 per cent.
* And have continued to maintain a forecast budget surplus even after implementing our Economic Security Strategy.
Through the crisis, the Australian Government remains committed to our long term reform agenda.
We are continuing to invest in boosting Australia's long term productivity.
* We are working to ensure that Australia has the best-skilled and best-educated workforce in the world.
* We are lifting the administrative burdens on business through a deregulation program.
* We are investing in building our infrastructure.
* And we are working to realise the APEC goal of structural reform by tackling behind the border measures including trade facilitation, customs reform and harmonisation of product standards.
We are resolved through this agenda - to not only get through this crisis - but to emerge stronger for the future.
This provides a rational basis for optimism for the future rather than simply contributing to the now thriving boutique industry of doom and gloom - in turn becoming a self-fulfilling prophesy.
Throughout all of this, we are also committed to remaining one of the most open economies in the world.
We already have free trade agreements with the United States, New Zealand, Thailand and Singapore.
We signed a free trade agreement with Chile in July this year.
We have finalised an ASEAN-Australia-New Zealand Free Trade Agreement.
We are actively negotiating FTAs with Japan and China.
Yesterday we announced our decision to join the United States, New Zealand, Brunei, Singapore, Chile and Peru in negotiations for a Trans-Pacific Partnership Agreement.
This agreement could lay the foundation for our long-term goal of a Free Trade Area of the Asia Pacific.
If we succeed in concluding all these agreements we will have linked ourselves to markets that represent over 45 per cent of global GDP.
Of course the continuation of global trade flows is critical now - not just for the future.
World Bank president Robert Zoellick said recently at the G20 Finance Ministers meeting in Brazil that world trade could decline in 2009 - the first fall for 27 years.
Part of the reason for the disruption in trade is the dislocation of credit markets which has denied shippers access to short-term credit.
The World Trade Organization has estimated that up to 90 per cent of trade shipments use some form of trade finance - the WTO estimates that the current liquidity gap in trade finance is 25 billion dollars.
As the G20 Leaders noted last weekend, all nations need to do more to ensure credit is available to finance trade.
In this context the recent introduction of a new trade finance facility by the World Bank is particularly welcome.
There has been conjecture - in Australia and internationally - about the implications of the global financial crisis for another crucial global challenge - the challenge of climate change.
Some have said that the financial crisis means that governments should postpone acting on climate change.
The Australian Government does not share that view.
Climate change presents a very real threat to global economic growth, jobs and prosperity.
But we can significantly reduce the impact with ambitious global action to reduce emissions.
Taking strong and urgent action will help safeguard economic and environmental stability.
It will insure us against severe and possibly catastrophic consequences for our material wellbeing.
The Australian Government recently completed a major economic study of the costs of taking action on climate change.
This study shows that Australia and the world will continue to grow strongly while taking the action required to avert dangerous climate change.
The study also shows that earlier action pays dividends.
Countries that begin structural change earlier will have a head start.
They will have more time to adjust their infrastructure and industrial structure smoothly to a carbon constrained world, avoiding more disruptive change later.
Australia - and other countries that take early action to reduce emissions - will capture the emerging growth opportunities in new low emission technologies, products and services.
This is turn will generate new jobs in cleaner, greener economies of the future.
The alternative is inertia - and the real economic and environmental costs of inertia are incalculable.
The Australian Government's emission reduction policies will promote clarity and certainty for industry, and provide a firm foundation for investment and job creation in the future.
Action to reduce Australia's emissions is a necessary part of our response to climate change.
It is necessary, but not sufficient.
Action by all major emitters is required to avert dangerous impacts of climate change.
Even if developed countries reduce their emissions to zero, current trends in developing countries could see greenhouse gases in the atmosphere rise to 650 parts per million by 2050, and further after that.
As a result, global average temperatures would likely rise more than three degrees above pre-industrial levels.
This change would bring high risks of adverse and potentially massive consequences for the global environment and the global economy.
This highlights the need for an ambitious, broadly-based global agreement that includes all sources of emissions from all countries.
As a developed country, Australia is prepared to accept its responsibility.
We respect the aspiration of developing nations to secure their economic development and deliver rising living standards for their people.
For this reason, we need to move away from the developed versus developing country divide that characterises current approaches to climate change.
We are all in this together.
Australia is working in partnership with its developing country neighbours to support action on climate change and action on development in tandem.
Building on our long-standing and close relationship, Australia and Indonesia have forged an innovative climate change partnership that can be a model for others.
It is a model which takes a practical approach to reducing emissions from deforestation.
Under the Indonesia-Australia Forest Carbon Partnership, we are working together on practical on-the-ground activities that support Indonesia in developing policies and systems, including in carbon monitoring and assessment, to reduce emissions from deforestation.
Emissions from deforestation represent about 20 per cent of total global emissions - more than all emissions from the transport sector.
Market-based approaches are at the centre of this partnership.
Market-based approaches set a real dollar value on the carbon stored in forests.
As a result, they provide opportunities for economic development.
Sustainable forest management provides a path to a better economic future for people in many developing countries.
Australia and Indonesia will also work together in multilateral negotiations to support a market-based approach for deforestation under the United Nations Framework on Climate Change.
Cooperation between developing and developed countries, which involves concrete and decisive action to reduce emissions, can provide confidence that all countries will benefit from an effective global response to the challenge of climate change.
This must also occur between the world's largest emitters - China and the United States.
Any global agreement on climate change without their participation will be inadequate against the real task of reducing significantly global greenhouse gas emissions.
Australia, with a close relationship with both countries, intends to work closely with both Beijing and Washington to try to fashion the ingredients of a long-term agreed solution - incorporating US and Chinese actions consistent with the principle of common but differentiated responsibilities.
Governments and businesses in our region face short and long-term challenges.
We face challenges ahead in responding to the financial crisis and preventing such crises from occurring again.
We face challenges like climate change.
To respond to these challenges effectively in our fast changing region we need political stability.
We have come a long way since APEC was first established 20 years ago.
And the business community has been at the forefront of the evolving architecture of our region.
APEC has been successful in addressing economic and other challenges because it has had the business sector as a partner.
APEC has helped to build support for open trade and investment.
And it is these flows that have made our region the most dynamic in the world today.
But we also need to be thinking today about the shape of our region tomorrow.
We also need to shape the evolution of our regional institutions to meet the needs of tomorrow.
This is necessary because of the emerging economic integration of our region and the complexity and inter-connectedness of economic, political and strategic agendas we confront.
The region is already home to the world's two biggest economies - the United States and Japan.
The region is also home to the world's two biggest emerging economies - China and India.
Businesses on both sides of the Pacific now consider the region the primary sphere of interest.
To achieve ongoing growth, we have to have the right structures in place - not just for now, but also for the future.
APEC has helped to build support for economic and trade liberalisation and has built a strong sense of economic community across the Asia-Pacific region.
In addition, ASEAN has built a sense of community in South East Asia - a community that consults on the shared challenges and consults to manage emerging problems.
And bodies such as the East Asia Summit, the Six-Party Talks and the ASEAN Regional Forum are contributing to regional cooperation in a range of areas.
But we need to now think about the next 20 years and beyond.
The rapid changes taking place in our region are certain to throw up a myriad of economic, political and security and environmental challenges.
And we need to position the region to respond effectively to all of these challenges through a single forum that brings together regional countries such as the United States, China, India, Indonesia and Japan.
We need a forum that builds habits of cooperation and dialogue across the full range of regional challenges.
No current regional body fills that role fully.
In Australia's proposal for an Asia Pacific Community by 2020, we have sought to start a constructive dialogue on regional architecture to address future challenges.
I have appointed a Special Envoy, Dick Woolcott, to consult with governments, academics and the business community in the region about the future of this concept.
Mr Woolcott has already held many discussions and has presented me with an interim report.
And his report has made two things clear.
First, there is great interest in the region about the sort of institutions we need for the future.
We have for the last six months been engaging in a regional conversation with our friends and partners and inevitably there will be different perspectives along the way.
Second, thinking about the detail of how our region might evolve will continue to develop.
This conversation about the future of our region will take some time.
But it is an important conversation because in the future we will face a stark choice.
We can either let our region simply drift along.
Or we can choose to shape our region.
I believe we must choose actively to shape our region.
The habits of cooperation cannot simply be assumed.
They have to be crafted, encouraged and institutionalised across the full spectrum of our regional agenda.
The alternative is to allow things to slip - and to default into the familiar pattern of conflict that we have seen in centuries past.
It is not beyond our collective wisdom to craft something different.
And the first step in shaping our region's future is discussing where we are now and where as a region we want to be in little more than a decade's time.
This global financial crisis caused the world to deploy a new structure to deliberate and determine causes of action needed to stabilise global financial markets and to underpin the recovery of the real global economy.
Similarly, here in the Asia-Pacific region, we must begin our discussion on the new structure our region needs to deal with the challenges of the future.
Structures which bring together the major powers and major economies with smaller powers and smaller economies.
Structures also that have a capacity for flexibility to deal with the vast new and interconnected agenda we must all confront for the 21st century.
An agenda in which there is new and increasingly seamless connection between political relations, economic relations, strategic stability, human security, climate change.
The challenge for governments - like corporations - is to be thinking, planning and acting ahead of the curve.
If we do that in a cooperative, coordinated and decisive way, there is a rational basis for optimism.
We have shown that we can work together to achieve real results.
We now have to intensify that cooperation.
That for us at the dawn of this Pacific century represents a particular imperative for us all.