Shanghai, People's Republic of China
PM: I'm absolutely delighted to be here in Shanghai and as you can see I'm joined by two of our banking chiefs, by Gail Kelly from Westpac, by Mike Smith from ANZ, and I'm also joined by my ministerial colleagues Dr Emerson, the Minister for Trade, and Bill Shorten who is here in his capacity as Minister for Superannuation and Financial Services.
We've already had the opportunity this morning to speak to a number of Australians who live and work here in Shanghai in this amazing city, in this huge financial centre.
People who are doing all sorts of business in China; they're in resources, they're in agri-business, they're in legal services, in architectural services, they are in financial services too.
And what they see and what we see as a nation is huge prospects ahead for us working with China.
As China's middle class rises, as its wealth continues to grow, then it will want to have a variety of financial products for its citizens.
It will be able to want to offer them financial services in the way in which Australians are offered financial services.
We have some of the world's strongest banks and we have a great deal of expertise in managing pools of superannuation funds. These are comparative advantages that we can take into China to spell an era of opportunity for Australia here in China.
At the end of the day all of this is about growing our economic exchange between Australia and China. That's good for Australian jobs, good for Australian growth but also good for China that is seeking that expertise as it moves to a new era and a new way of offering financial products to its citizens.
So I'm absolutely delighted to be here. And I am also delighted to be able to foreshadow the next step in our economic cooperation with China, the next important step.
Tomorrow there will be a formal announcement that Australian dollars can be directly traded into renminbi, into the Chinese currency RMB, here in China; the third currency in the world to do so after the US dollar and the Japanese yen.
This is a huge advantage for Australia, not only for our big businesses but also for our small and medium enterprises that want to do business here.
What it means is we can cut out the two steps that have to happen now where Australian dollars are traded into US dollars in order to be traded into RMB, instead of doing that there can be one step: one step for the trading and one step for the trading back again.
I'm very pleased to be able to foreshadow this announcement which will be formally made tomorrow.
That's an important step forward. You need to get agreement for that to happen and we have secured the agreement which will be formally announced tomorrow.
This has been worked on over many months now, a process started when the Deputy Prime Minister visited here in the middle of last year.
It's one thing to get the authority, then you've got to get people out there making the market, making it all happen, and I'm delighted to be able to tell you that the People's Bank of China has approved licenses for two Australian banks, ANZ and Westpac, to act as market makers for direct trading on the Chinese foreign exchange system.
Step number three, having got the approval to do it, having created the market makers, is of course to see trading happen and to create a deep and liquid market.
In order to do that we've got to get the message out that this is newly available for Australian businesses, newly available for businesses here in China, and part of being here with my business community colleagues today is to send that message loud and clear.
This is a big step forward, a good step forward for Australia. It's a strategic step forward for Australia as we add to our economic engagement with China.
I'll turn now to Gail and then to Mike for some comments.
GAIL KELLY, WESTPAC: Thank you Prime Minister and good morning everyone. Let me say right up front how much we welcome, how much Westpac welcomes, this new initiative led by the Australian Government and the Chinese Government, and really to thank the two governments for the hard work that's gone into today's announcement, or the foreshadowing of tomorrow's announcement.
This is a strategic development and really does signal a deepening of relationships between China and between Australia. It signals deepening of trade connections and great opportunities for future growth.
So Westpac really welcomes the opportunity to be part of this process, this process that will be formally announced tomorrow.
And we really look forward to being in a position where we can support our customers, both large and small customers, and as you know Westpac is a very large trading bank across Australia and New Zealand and has significant strength and customer base in the corporate, institutional and business banking sectors.
And for us and for our customers this is a great opportunity. It certainly improves a convenience for our customers and takes cost out for our customers to have the direct convertibility between the Australian dollar and the Chinese renminbi.
Whereas up to now of course as you know it has been several steps to convert first into the US dollar the usual route being into the Australian dollar or the reverse. So this takes cost out and makes it a whole lot more convenient.
So we welcome this opportunity, it's a significant step forward for Westpac and our development as well. We've been proudly operating in China for a little over 40 years, opened our first operation in Beijing in 1982.
We have a full branch in Shanghai and a full branch in Beijing and with this new development continuing to step up our engagement in the region.
So thank you very much Prime Minister, it truly is a strategic development for our country.
MIKE SMITH, ANZ: Thank you Prime Minister. On behalf of ANZ I would also like to acknowledge the help of the Australian Government and indeed the assistance of the Government of China in this important development.
As the Prime Minister and Gail mentioned this really is for the benefit of our customers and particularly the small and medium customers that we have in Australia, but also here in China where again it's another step in the progress towards deeper ties between both countries in terms of the economic and business development.
So I'm delighted to be here to witness this, as Gail said, and I think we are pre-empting the official announcement tomorrow, but also on behalf of ANZ as Australia's largest bank in China we are delighted with this development and certainly will do everything we can to improve the services to our customer base.
Thank you very much.
PM: Thank you very much - a healthy spirit of competition on display. Can I also acknowledge the Foreign Minister Bob Carr.
What we'll do is we will take questions on this announcement and then subsequent to that we'll take questions on any other issues associated with the trip.
JOURNALIST: Prime Minister can you give us a simple cents in the dollar indication of what this means for every exchange, what the savings are?
PM: Well look I'd be better off asking the experts who do this every day.
SMITH: It's not going to make a huge amount in terms in actual, the dollar amount per trade, depending on the amount of course. But it's going be a few basis points.
The fact is that it's the convenience of being able to do this and rather, for example in a trade document rather than going through US dollars and having the movement of the currency over time you can immediately lock in your exchange rates, so you basically are able to create your own forward contract far more easily that you would have been able to do otherwise.
JOURNALIST: Prime Minister or Dr Emerson, will this deal make it any easier to formalise an FTA with China at all, is it another step towards that?
PM: It's not directly a step in the creation of a free trade agreement but the greater our economic cooperation with China, the more compelling is the logic and the need for a free trade agreement.
So every time we take a step forward we strengthen the economic cooperation and that means that the free trade agreement, the argument for it, strengthens too.
And if I could just comment on what Mike has said I think we all, from a common sense perspective, know that a few dollars difference on many dollars ends up being a lot of money.
JOURNALIST: I just wonder if Mr Smith or Ms Kelly might be able to tell us how deep this market might be and what sort of volumes are we talking about?
KELLY: Let me start, but I know Mike will like to add to it as well, look it'll start small, inevitably it'll start small, but the point of this is this is a strategic development for our country.
We'll be only the third major currency that will actually be a currency pair with the renminbi, so that's a very important strategic step and really does signal the strength and the health of the relationship between China and between Australia. And size and the opportunity of the trade flow. Those are growing at very significant levels.
So it'll start small but it will inevitably grow. Mike you may want to give some further colour.
SMITH: I think what is important is the market making opportunity in this as well so it will become a proper traded currency mix, and the volumes of that are limitless.
But even if you consider just trade volume and if would like say working capital, or those amounts that are required by businesses in Australia here or Chinese businesses into Australia, that's going to run into billions of dollars and tens of billions of dollars. And that will pick up fairly quickly.
If you look at how the internationalisation of the renminbi has moved in Hong Kong it's already into the tens of billions.
JOURNALIST: Prime Minister, Australian exporters are obviously going to be jittery about anything that's strengthens the Australian dollar. Is this sort of an announcement going to have an impact on the level of the dollar?
PM: No, no, it won't have an impact on the level of the dollar; it will have an impact on how the dollar can be traded and what it can be exchanged for.
When you look at the opportunities for our exporters here into China the huge volumes obviously being done now in resources, but the huge volumes for the future, are across so many of our industries whether its agriculture and food, whether it's the services sector, legal architectural, financial services, health services.
All of these opportunities lie in front of us and this is a foundation stone for that, for making that an efficient way of doing business and an efficient way of trading currencies.
And can I just say in terms of the broader perspective it's in everybody's interest to see the further internationalisation of the RMB, so significant from that point of view too.
JOURNALIST: What is day one for this? So when can the first $A-RMB be directly traded?
PM: Wednesday. Do you want to get some money moving in the market personally?
JOURNALIST: Yes, lots of money!
PM: Right, they're paid well at the Financial Review and there will be engagement in trade from the Financial Review journalists from Wednesday!
JOURNALIST: On the G'Day China week, and I'd like to get both of your perspectives as well Mike and Gail on that. Is that the sort of attention that Australia should have been giving to China for some time or that we need to be doing now?
PM: Well, Gail and Mike are here to deal with the financial announcement but I'm very pleased to also be in a position to announce today that we will be having an Australia Week in China.
We have had great success in taking Australia to the United States of America through our G'day program in the United States. It's made a difference for the profile of Australia, our products, our services, our arts, our culture, our personalities.
We are going to have an Australia Week in China, starting in the second half of 2014.
JOURNALIST: Prime Minister perhaps a question for you or Minister Shorten, just on superannuation-
PM: Just before we move to other questions are there any directly on the trading of currency?
JOURNALIST: Prime Minister, in your speech today you'll be talking about the [inaudible] reforms that Australia went through in the 80s and the strength and the growth that's given to the Australian economy. What message are you sending to the Chinese about what they should be doing with their currency?
PM: I think the message from today is a very simple one. Here we are working with and strongly engaged with China, ever increasing the economic cooperation between our two countries, including doing what is a truly significant and strategic thing for the future - enabling direct trading of our currencies here in China.
JOURNALIST: But would you like to see the Chinese currency floated or reformed?
PM: We are very satisfied to be here announcing today's step.
JOURNALIST: Can you tell us a just a bit more about the details of this ‘G'day China'? What it is? What will see from it?
PM: You will see a program that will be more modelled on the kind of things that have happened in the USA. The program obviously will be shaped between now and the first Australia Week in China.
But our aspiration is to take some of the things that we've learned from the very successful work both in LA and in New York, where we have got a white hot spotlight on Australia and the opportunities and advantages of doing business with Australia, of coming to Australia, of being a consumer of Australian cultural exports.
So just let's just be clear, does anybody else have a question on currency trading? Anybody want some market information to inform their future financial development? No?
I think we can ask Gail and Mike to stand aside on that basis, maybe someone at the back of the pack who wants to talk about their mortgage or something?
JOURNALIST: Can I just ask you one more on the tourism event? China's already I think the largest inbound market for tourists. Potentially how large do you think the tourism market can get from China for Australia?
PM: I don't see a limit. Clearly there is a limit ultimately in our capacity though we can keep expanding the capacity of our tourism industry and so many of our tourism operators would love to do so.
We are at the stage where we are seeing very large numbers of visitors from China. But we are talking about a middle class here in China that will be numbered in the tens and tens and tens of millions.
And so, those people will want to take holidays and have tourism and cultural experiences the way in which Australians want to do that.
Australians like to travel. Middle class consumers from China will want to travel and they'll want to come and see and do the things that Australia has to offer.
Any spotlight we can put on the rich diversity of tourism experiences in Australia is good for Australian tourism. I'll go to the Minister.
MINISTER EMERSON: There are industry projections of a million tourists from China by 2020. If anything that's on the conservative side.
And this program can only lift the profile of Australia here in China. So certainly aiming for a million tourists by 2020, but likely to exceed that.
JOURNALIST: Prime Minister, much of this trip has been about building confidence between our economy and the Chinese economy. Barnaby Joyce has had some things to say again about foreign investment, talking about lowering the Foreign Investment Review Board threshold. What's your response to those comments?
PM: I spoke to the new President of China yesterday about foreign investment and I said to him that Australia welcomes foreign investment from China because it equals Australian jobs.
It means more Australians are employed in good jobs for the future. So that was the message that I gave the President. I'll turn to the Minister for Trade for some comments.
MINISTER EMERSON: Senator Joyce's comments are economically reckless. The Coalition is questioning the national interest as expressed by the Foreign Investment Review Board. The national interest should never be the political plaything of any party.
The fact that Senator Joyce, who aspires to be the alternative Deputy Prime Minister of Australia, has again spoken out against Chinese investment in Australia, is economically reckless and it is against Australia's national interest.
JOURNALIST: Prime Minister, the Xinhua has reported this morning, and it was also on the People's Daily and the China Daily, and I'll just quote you here, they said - and they're quoting the President - “She said China and Australia have agreed to foster a strategic partnership built upon on mutual trust and mutual benefit”.
The article goes on to say that both countries had pledged to build an annual meeting mechanism between their prime ministers. This seems very different language from what you and the Foreign Minister told us yesterday where you sort of gave us the idea that it was too early in the term of the new leadership to agree to such things. What's going on here?
PM: Well what we said yesterday is we continue to work on the architecture of the relationship between our two countries.
On the nature of the relationship between our two countries, this is a rich, diverse, complex, big relationship of ongoing and strategic importance to Australia.
JOURNALIST: They said you've agreed to it. They've said that this is-
PM: I've understood your question and I've given my response.
JOURNALIST: Prime Minister, there's appears to just be some breaking news out of North Korea, preparing for a fourth underground nuclear weapons test. I might just get your reaction to that.
And just so I might try and get a go on superannuation. Perhaps you or Bill Shorten just explain what you hope to get out of this trip, whether China is looking at the same kind of systems that we have?
PM: Well I'll go to Minister Shorten on the second question. On the first question, I'm not going to comment on media reports I haven't had the opportunity to see. They're obviously coming through on your Blackberry as you're standing here right now.
But our outlook towards North Korea remains what I have said consistently, we absolutely condemn the provocative words from North Korea, and of course we would condemn any provocative conduct which is aimed at raising tensions on the Korean peninsula and in the region and brings an inherent risk of miscalculation.
MINISTER SHORTEN: Good morning. In terms of superannuation, the Commonwealth Government is leading the largest group of superannuation industry leaders that we've ever seen come to China.
Over the next number of days we'll be meeting with regulators, visiting the Shanghai Stock Exchange, we'll be meeting with regulators and investors in Beijing as well. The trip was oversubscribed, there's a great deal of interest in the Australian superannuation industry in China.
I think it is worth remembering when we talk about the Australian superannuation industry we have $1.5 trillion in national savings. Or put another way, that's a third of the size of the whole of the GDP of China.
So Australia punches above its weight in terms of national savings pools. That is why it's important that we have stability at home in terms of our superannuation savings.
That is why the Government's made it clear that we want to suggest an above-politics, bipartisan approach; a group of custodians to help evaluate policy of whoever is the government of the day so superannuation can be adequate for people's retirement, it can be focused on the long-term sustainability of the system and changes can be consistent and prospective.
That is why when you stand here overlooking Shanghai and the clear Chinese miracle of its economy, Australia and Australians do not have time to waste on partisanship, locally, domestically on superannuation politics.
I think it would be a fantastic opportunity if the Opposition recognise that opposing some of our changes which will allow 160,000 people over the age of 60 put aside an extra $10,000 in their savings from 1 July this year, I think it is time to put down the negativity and let's treat superannuation as above politics.
Let's remove the bipartisanship, because we want Australian fund managers to be able to use the remarkable Australian national institution of superannuation to be part of the remarkable growth of China.
JOURNALIST: You've got the delegation travelling with you. What has been the response to the Government's announcement on super? Have the industry people with you been angry, have they been happy? How have they responded to the changes?
MINISTER SHORTEN: You'll have the opportunity to talk the Australia's leaders in superannuation yourself in the next couple of days.
But the reaction uniformly of the superannuation leaders in Australia is that our changes are sensible, that our changes are for the long-term.
They're excited by the prospect of being able to move superannuation out of the debate about the annual budget cycle or the sort of bipartisan tit-for-tat politics. I also know they support the idea of lifting the concessional caps.
Why on earth would anyone in Australia, any Australian politician, want to stop people over the age of 60 from being able to put aside an extra $10,000 if they have it, into their superannuation so they can retire with more comfort and dignity than they otherwise would?
JOURNALIST: Prime Minister, just quickly, the Opposition has put a $90 billion price tag on your National Broadband Network, are they in the ballpark there?
PM: No.
Thank you very much.
[ENDS]