E&OE.................
Thank you very much Richard Holbrooke for those very kind words of
welcome. I feel very honoured that a person who's had such a very
distinguished and effective, as far as achieving outcomes for the
long-term benefit of humanity, contribution and role in the diplomatic
life, not only of the United States but also of the free world, should
be here today and I thank him very warmly for those words of introduction.
Can I, before I say what I wanted to say in relation to the common
purpose we all have in being here, how grateful I am for so many people
in the investment community in Australia and in the United States
who have worked hard to put this gathering together and in particular
to Peter Charlton and Maurice Newman and many others who have worked
with them.
This is a great time to be showcasing the Commonwealth of Australia.
And I am also delighted that the Premier of New South Wales, Bob Carr,
the Labor Premier of New South Wales is with us today. And as the
Liberal Prime Minister of Australia I welcome him in particular to
make the point to our American friends that this is a united bipartisan
Australian effort.
We believe that we have a great story to tell about many things that
have been done to make our nation more competitive and economically
stronger than it has been at any time in the 25 to 30 years that I
have been in public life. You have heard a great deal this morning
particularly from my ministerial colleague, Joe Hockey, who has specific
responsibility in my Government for promoting Australia as a world
financial centre. And also from Ted Evans, the Secretary of our Treasury.
You have heard of the micro-detail of where the Australian economy
sits, of how in getting taxation reform through the national Parliament
we have put in place the fifth pillar of major economic reconstruction
and economic change of the Australian economy over the last 15 to
20 years.
Twenty years ago the Australian economy was far more cloistered, far
more closed, far more insular, far more regulated, far less worldly
than it is as we near the end of this millennium. We hadn't then deregulated
our financial system. We didn't allow in foreign banks, we didn't
have a floating exchange rate, we entertained the absurd delusion
that the central bank could control the level of interest rates. All
of that sounds fanciable, amusing and quaint and old-fashioned now
with the experience of the last 20 years. But I mention it to indicate
the distance that's been traveled and in doing it I have never been
reluctant in a number of areas to acknowledge the contribution of
prime ministers and others from the other side of politics in Australia.
Because without the bipartisan support for financial deregulation
and tariff reform in the 1980s and early 1990s the Australian economy
now would not be as strong as it is.
In recent years two or three other great reforms have been achieved.
One of those, of course, is in the space of two to three years to
turn a very large budget deficit into a very healthy surplus. And
I am particularly proud of the fact that Australia now has the lowest
level of government debt, the GDP ratio, of any OECD country. And
it is one of the great ambitions of our Government and particularly
of my Treasurer, Peter Costello, who has made such a great contribution
to this process for us to begin the early years of the next century
essentially free of net Commonwealth debt. And as a legacy and as
a contribution to future generations I can't think of a more practical
and finer one.
The changes in the Australian labour market in the last few years
have also been quite marked. One of the sometimes negative perceptions
of our country a few years ago was that we didn't have particularly
tranquil industrial relations. I am happy to emphasise the fact that
last year the number of industrial disputes was the lowest in 86 years.
But, of course, of all the reforms that we have undertaken none has
been bigger and one will have greater and more far reaching consequences
than, of course, the reforms to our taxation system that finally passed
into law only a few weeks ago and will come into effect on the 1st
of July next year.
Not only do those reforms sweep away a very old-fashioned and rickety,
indirect tax system and replace it with a simpler more comprehensive
indirect tax system that will be of great benefit to our exporters
and will also provide significant benefits in reduced business costs
to all of our domestic business operations. And it will also provide
very significant reductions in personal income tax for middle income
earners. And will also importantly provide to the States of Australia
which, under our federal system, have the ongoing responsibility for
police services, public hospitals, government schools, roads and all
of those social provisions that are so very important. It will provide
to the States of Australia a guaranteed source of revenue to fund
those obligations and those responsibilities.
But I think one of the more important things about the achievement
of that tax reform is that it has given to the Australian community
and to the political process in our country a belief that if you persevere
long enough you can achieve fundamental reform. There is sometimes
in all of our societies a sense in which the system is so burdened
with complexity and so burdened with checks and balances desirable
as those checks and balances may be. But there is so many of them
and they proliferate so much that you can't really ever achieve fundamental
reform. And I think the faith of the Australian people in the capacity
of our political process to achieve that fundamental reform has been
of enormous value.
The strongest message, of course, that comes out of Australia over
the last 12 months is the fact that we were able to stare down the
Asian economic collapse. And if I can encapsulate what I want to say
to you today, if I want to convey to you a metaphor for what Australia
has been able to achieve and what Australia represents at the moment
it is the fact that we were able to do that. And I don't mind saying
to you that it surprised just about everybody, myself included. A
couple of years ago if you'd have said to me: will we be able to survive
the Asian downturn? I'd have said regretfully I think it will adversely
affect us at some time before the end of 1998. Now, of course, it
didn't and there are a number of reasons for it. A lot of the reasons
are to be found in the reforms that I have mentioned because today's
strength is always the product of yesterday's reforms. As tomorrow's
strengths will be the product of today's reforms.
A lot of the credit for the successful management of our economy over
the last year ought to be given to the very skillful management of
our exchange rate policy by the Reserve Bank of Australia which I
think has done an outstanding job and we have seen during this period
of time the authorities in Australia working together in a very efficient
and a very effective way. And it bodes well in my mind for the future
conduct of public policy in so many of these areas.
But in public life and in policy making you never really get to the
top of the hill. You scale a hill and then there's another one on
the horizon and there are other challenges to be undertaken. And the
purpose of this conference, and certainly the purpose of my remarks,
is not to in any sense dwell upon or luxuriate in what may have been
achieved over the last few years but rather to tell all of you that
our process of reform has by no means been finished. And having completed
the, what I might call, the retail side of our taxation reform process,
of having got our goods and services tax established, the next big
thing, and this is of very particular relevance to the central goal
of this conference, is to complete the process of business taxation
reform.
Now, there are many reasons that make Australia particularly but not
only Sydney, of course, an attractive location as a world financial
centre. Undoubtedly our economic strength is one of those. Undoubtedly
our marvelous way of life, the congeniality of Australia as a place
in which to live and to raise children. The great social and political
stability, the fact that we speak the English language, the fact that
we have a culturally diverse and linguistically skilled population
who have deep and enduring family and people-to-people links with
the nations of South East Asia. There are some 300,000 - 400,000 people
living in Sydney, for example, who are ethnically Chinese from various
parts of South East Asia as well as from mainland China to give you
an example of the diversity of the Australian community, particularly
of the Sydney community.
We, of course, have a very clear set of rules relating to corporate
governance. We have a very well regulated and prudentially supervised
banking system. We have also, as Australians, had one characteristic
and Richard talked earlier about the affinity that exists between
the peoples of the United States and the people of Australia. And
one of the things that we have in common with our American friends
is that we have a fascination for new technology. And all of my life
I have been conscious of the fact that if something new comes on the
market, some new product, Australians literally devour it. And that
is why we have a mobile phone and internet take-up which is second
only to that of the United States and in some aspects of communications
reform in advance of that of the United States. And this is tremendously
important to the sort of exercise that we are engaged in today, it
is tremendously important to the capacity of our country to provide
the people, to provide the infrastructure and the wherewithal to be
an effective world financial centre.
Now, all of those things are very attractive, they are very nice and
they'll get a tick but, of course, they are only part of the story.
And I recognise that in the end the competitiveness of our business
taxation system will count for a great deal more than some of those
other things attractive though they are. And if you can get all of
them together and if you can tick every single one of the boxes then
you really do have a very compelling case. And that is why I want
to tell you today in very unambiguous terms that I know that what
we do in relation to the business tax reform process will be the ultimate
determinant of how successful we are in the years immediately ahead
of us in achieving the goal that so many of us have in common.
Now, a number of the changes we have already put through the national
Parliament including the abolition of stamp duty on share transactions
and the removal of the Financial Institutions Duty make a contribution
towards removing some of the impediments. But the recommendations
to come out of the Ralph review which we will have in our hands by
the end of this month and how the Government reacts to those recommendations
will be of crucial significance and importance in determining whether
or not we realise those goals.
I know that in a globalised world you really have to have a tax system
that, as far as possible, makes the choice between an investment in
the United States and an investment in Australia neutral. And while
that choice is not neutral and whilst it is tilted in favour of the
United States whether by operation of our capital gains tax or by
operation of our tax laws to deny to those funds and those other accumulations
of capital in this country that have a tax free status a similar treatment
in Australia then that is going to act as a disincentive. And that
is why I recognise as Prime Minister that how we react to the recommendations
in respect of capital gains tax in particular will determine how much
more attractive we can make investment in Australia.
There is little doubt in my mind that our present capital gains tax
does act as a disincentive in a number of areas and if we are really
serious about the exercise on which we are all collectively embarked
today then some fundamental changes will need to be made in that area.
And they will bulk very large in the considerations that we have.
I am particularly conscious of the many representations that have
been made to me over the years about the absence of a more realistic
capital gains tax approach to script exchanges. I am aware of the
break that is seen in the existing capital gains tax regime on the
accumulation of venture capital. And I am conscious of a number of
the other disincentives that that tax represents in relation to decisions
that are being made as to whether an investment should occur in Australia
or an investment should be retained in the United States or an investment
that is made elsewhere.
So putting all of that together, ladies and gentlemen, I know that
if we are to realise the goal that we want and it's not an end that
we pursue as an end in itself, there is no particular virtue in its
own right of being able to say that Sydney has become a world financial
centre or Australia has become a world financial centre. But if you
have responsibility for governing a nation which has achieved a great
deal and has demonstrated its economic strength and its economic capacity
but is nonetheless a nation which needs to build on successful industries
in areas such as mining and manufacturing and primary production.
By adding value to those industries, particularly in the service sector,
where you believe we have a capacity to perform effectively in one
of the areas where you most naturally turn your attention is the area
of financial services.
And if we can add to the undoubted generic strengths that I described
earlier in my speech a modernisation of the Australian taxation system
that removes some of the inhibitions that now exist, that recognises
that in a global economy with seamless transfers of capital matched
increasingly by seamless transfers of jobs that unless you are able
to have a taxation regime that removes the impediments between this
or that location you have no capacity at all to build upon the undoubted
generic strengths that I and other speakers have been canvassing.
So the central message I wanted to convey to you at this luncheon,
ladies and gentlemen, is that, yes, over the last few years Australia
has been a country of growing economic strengths and self-confidence.
A country, I believe, which has received an enormous national psychological
boost out of the fact that we were able to do something most of us
thought we couldn't do and that is avoid significant impact from the
Asian economic downturn. And nations, in many respects, are like individuals
and like communities. We are governed on some occasions by reason,
we are governed on some occasions by predictability, we are governed
on some occasions by instinct and we also enjoy tremendous fillips
and tremendous boosts from a psychological point of view.
And I can't overestimate to you today the boost that being able to
beat that Asian downturn has represented in the Australian psyche.
And wherever you go in our country you find that sense of excited
achievement that we have been able to do something that we really
deep down didn't think we were going to be able to do. We are not
totally sure that we have every explanation as to why we have done
it. I mean, confident government ministers, of course, list instinctively
and proudly the immediate contributions that their portfolios have
made to that magnificent achievement and they are encouraged by their
Prime Minister to do so.
But there are a lot of things to do with our national make-up that
have produced it but it has meant that we have a sense of ourselves
and a sense of what we have been able to achieve that I haven't found
in our country for a very long period of time. And for that reason,
as well as many others, now is a time for us to not, out of any sense
of complacency or any sense of smugness to say, well gee, isn't that
terrific let's enjoy ourselves for the next few years. There is no
sense of that in Australia. There is a sense that we have become a
'can do' country. There is a sense that we have challenges that we
tackle in a practical way.
We have a great base for being a world financial centre and I have
described that several times but we also, I think, now maturely recognise
that if we are to go further we have to make some very specific changes
to provide some very specific incentives particularly in a number
of taxation areas. And this conference is about communicating Australia's
strengths. It's about absorbing the concerns that potential investors
may have, it is about, of course, demonstrating a common commitment
we all have to a free enterprise system and it is about, of course,
demonstrating just how much we all live in a global financial environment.
Can I conclude my remarks by returning to a theme that Richard Holbrooke
touched upon in his very gracious introduction and that is the affinity
which exists between our two societies. In any close relationship
we will have our differences and there has been some well publicised
differences in recent days regarding one of our fine export products.
And it, of course, is a source of some irritation to our country that
that should have occurred and we don't in any way resile from or apologise
from the fierce criticism that we have tended to the American administration
regarding that.
But Richard spoke very warmly and very appropriately of the values
and attitudes that bind us together and those values, of course, are
infinitely more enduring than those things that tend on occasions
to cause disputation and to push us apart. And I am immensely proud
as the Prime Minister of Australia to be able to speak at this luncheon
today to talk a little of what my country has achieved and to be able
very genuinely to say that I speak for both sides of Australian politics
in saying that we share the sense of that national achievement. That
we are working together overseas to achieve something more for Australia.
I think by dint of what it has particularly achieved in the Australian
economic firmament there is an emphasis quite properly on the city
of Sydney but it is very much as a representative of the entire Australian
nation.
And on that note can I conclude by saying to all of you that Richard's
reference to the Olympic Games was very apposite. Can I say that the
preparations for the Olympic Games are in great shape and full credit
to SOCOG. I think Sydney will do those games on its ear. I think they
will be one of the most remembered Olympic Games of the modern era.
I think Sydney is superbly suited and superbly prepared. The facilities
are very well advanced.
I invite all of our American friends to visit our country for the
Games and it will be for a sports loving and sports crazy nation an
absolute gourmet delight of sporting celebration and a great way for
a proud and committed nation to welcome the world and to showcase
its remarkable way of life and its remarkable sense of national purpose.
Thank you.
[ends]