I would like to thank Axiss Australia for hosting this dinner and thank our High Commissioner, Phillip Flood for his kind introduction.
I am also grateful that so many people in the investment community in Australia, as well as here in the UK and in Europe, have been able to come together for this gathering tonight.
In particular, I am delighted that so many of Australia's Premiers and Chief Ministers are present here, as are the Chief Executive Officers and directors of several of Australia's major financial sector institutions.
This broad and bipartisan representation underscores the breadth of the Australian support for this initiative.
Axiss Australia's objective is to position Australia as a global financial centre, with particular emphasis on its importance in the Asia Pacific time zone.
Since its establishment a year ago, Axiss Australia has sought to promote and improve international understanding of the Australian financial markets.
I speak to you tonight from the vantage point of the unprecedented strength of the Australian economy.
This is an economy which stared down the worst which the Asian economic collapse entailed.
This is an economy which has been nourished, renewed and reinforced by a succession of reforms of which the most recent - taxation - is by far the most historic and far-reaching.
Right now, Australia is embracing the greatest single change ever to its taxation system.
Australians are taking this momentous change in their stride - with typical Australian pragmatism and common sense.
For years Australians have known that their taxation system was decaying. It had become hopelessly inadequate to the needs of a modern, expanding economy.
My Government supplied the missing ingredient - the political will and determination to bring about the necessary changes, to give the Australian people the taxation system they needed.
There were many obstacles. There was plenty of political sabotage. We didn't get all we had wanted, but we got most of it.
In the process, we have not only remade our taxation system with sharply lower personal income tax, but have also given to the states of Australia something they have long pursued; namely a guaranteed and rising revenue base to fund to provision of those basic community services indispensable for a modern, decent and caring society.
Tonight is an opportunity not only to promote the claims of Australia as a world financial centre, to talk to you of Australia's recent economic achievements, but also to put into context the economic and political relationships Australia has with Asia, Europe and North America.
Australia's best two customers are Japan and Korea, yet between them Britain and the United States receive 70 per cent of the outward foreign investment from Australia.
Fifty three per cent of total Australian exports go to the East Asia region. Yet the capacity of Australia to shift a large amount of her trade to both Europe and North America during the Asian economic collapse was decisive in maintaining the strong growth of the Australian economy during that difficult period for our region.
This analysis is a reminder that although Asia bulks very large in Australia's economic well-being, we should never lose sight of the economic significance to us of both Europe and North America. This is, of course, in addition to the immense political, cultural and historic links we have with those parts of the world.
The United Kingdom is a major partner for Australia, underpinned by deep historical and cultural ties.
British capital has played a major role over the years in Australia's industrial development.
Powerful commercial links between our two countries today continue to fortify this relationship.
The United Kingdom is Australia's sixth largest merchandise trading partner but our top-ranked trading partner within the European Union, in terms of goods and services. Britain is the largest overseas market for Australia's wine exports.
The United Kingdom is also the second largest foreign investor in Australia, just behind the United States. Amongst those British businesses with a significant foreign presence in Australia are BAe Systems, P&O, Glaxo-Wellcome, Cadbury Schweppes, Rothschilds, HSBC, British Airways, Virgin and Travelex. This investment sustains many thousands of jobs at home for Australians.
At the same time, the United Kingdom is the second largest destination for Australian investment abroad. Over one thousand Australian companies are active in the United Kingdom, with a large number using Britain as a beach-head for their operations into continental Europe.
Over recent years, the Government has taken strong but fair decisions to secure Australia's economic foundations.
These decisions have delivered economic outcomes unsurpassed at any time in the past 25 to 30 years.
Broad-ranging economic reform has underpinned Australia's transformation to a new economy - both through opening up the economy to international competition and through removing the rigidities that were preventing Australian businesses from adapting to the new environment.
The Australian economy is now a thoroughly modern one.
It is dynamic, globally oriented and at the forefront of technological advance.
Just last week, the OECD identified Australia as one of the six fast-growth new economies of the 1990s.
Australia has grown faster than either the United Kingdom or the European Union as a whole in each year since 1992, averaging growth of 4 per cent per annum over the past eight years compared with average annual growth of 2« per cent for the United Kingdom and just under 2 per cent for the European Union.
Our recent economic success has not come about by accident. It is readily explained by five key pillars of reform:
-tariff reform;
-deregulation of the financial system;
-reform of our once arthritic labour market;
-the restoration and consolidation of our fiscal position; and
-fundamental tax reform.
A sustained programme of tariff reduction - started under the former Labor Government - has opened up Australian markets.
Not only has this exposed local firms to the increased competitive pressures of the global environment, but such international exposure has provided greater access to innovation and encouraged Australian firms to grasp opportunities and seek out new markets.
There is growing anger in Australia at the unfairness of existing world trade rules. There is a double standard. What applies to manufacturing exports does not apply to agricultural exports. Even within the agricultural sector, Australia is heavily penalised. Subsidies are allowed to American and European farmers which are not permitted for Australian agricultural producers.
To be fully effective, all sectors need to be adequately covered by the WTO rules. At the moment, agriculture has been put in the too hard basket. To be quite blunt, I'm not encouraged to believe that there is any change of heart within either the United States or the European Union on this issue.
Australia will continue to campaign very strongly for further reform of world trading rules, and especially for further liberalisation of this sector.
In this regard, I am encouraged by the British Government's Action Plan for Farming and its professed commitment toward a more market oriented Common Agricultural Policy.
There has been substantial reform of Australia's financial services regulation. Australia now has a streamlined and simple regulatory framework designed to encourage efficiency, competition and innovation.
At the same time, the framework has maintained the highest standards of prudence, transparency and integrity for which the system has become known.
The government's Corporate Law Economic Reform Programme is building a more flexible and responsive regulatory framework.
These reforms will allow the financial sector to adapt to the changes presented by technological developments, globalisation and increased competition.
The reforms allow consistent and comparable disclosure of financial products, a harmonised regime for licensing of financial service providers as well as the opportunity for greater competition between markets and clearing and settlement facilities by introducing more flexible regulatory arrangements.
Over the past 17 years, Australia has also realised the benefits that flow from a flexible exchange rate, including in helping the economy adjust to external shocks.
This was convincingly demonstrated during the Asian financial crisis.
In the face of a serious economic slowdown in our region, a depreciating Australian dollar ensured that Australia's exporters were given a better chance to divert their products to other markets, including in North America, Europe and the United Kingdom.
They did this with considerable success.
In the twelve months to November 1998, when Australian exports to the ASEAN countries fell by 21 per cent, and to Korea by 13 per cent, our exports to the United States increased by 34 per cent and to the United Kingdom by a massive 87 per cent over the same period - from $2.5 billion to $4.6 billion.
We have also freed up Australia's labour market.
Enterprise bargaining and individual workplace agreements have encouraged employers and employees to negotiate and agree to arrangements better suited to their own requirements.
The productivity improvements associated with this development have allowed wages to increase without igniting inflationary pressures.
In the past four years, the real wages of Australia's workers have increased at an annual average rate of 2.6 per cent while average labour productivity has increased at 3 per cent per year.
In this labour market environment which has encouraged agreement rather than conflict, industrial disputation has been low. Indeed, the number of working days lost per worker in 1998 was the lowest outcome since records were first collected in 1913.
On coming to office in 1996, my Government implemented a landmark programme of fiscal consolidation.
We set a medium-term objective of delivering a balanced budget, on average, over the course of the economic cycle.
We are now meeting this objective. The Government has delivered underlying Budget surpluses for the past three years and significant surpluses are in prospect for the next four years and beyond.
The significance of this achievement for the wider economy should not be understated.
It has allowed the Government to retire $40 billion of Government debt, and also allowed the Government to greatly reduce its call on the local debt market.
This in itself has been a major factor in taking pressure off interest rates in Australia.
The lowest interest rates in a generation have helped families with mortgages, and reduced business costs. This has delivered higher profits, encouraged more business investment and contributed to the creation of more than 700,000 new jobs over the past four years.
Retiring debt has reduced the Government's annual interest bill by around $3 billion and has allowed the Government to meet its other social responsibilities.
Australia's whole of government net debt is currently less than one quarter of that in the United States and the OECD average. With the full sale of Telstra, Commonwealth net debt could be eliminated by 2003-04, for the sake of a debt free legacy for our children's generation.
An independent monetary policy is the other arm of the sound macroeconomic framework that is now in place.
A 1996 charter formalised the Reserve Bank of Australia's role of keeping inflation within a target range of 2 to 3 per cent, on average, over the course of the economic cycle.
Despite sustained strong growth, inflation has been below 3 per cent for 15 consecutive quarters - the best sustained inflation outcome in recorded history.
Our fiscal and monetary policies are therefore conducted within a sound, well-defined framework. This provides both transparency and certainty to the exercise of macroeconomic policy in Australia.
The macroeconomic framework has delivered tangible benefits for Australians and has contributed to Australia's success in weathering the Asian economic and financial crisis.
When many countries were raising interest rates in the face of large currency depreciations, Australian interest rates were being cut, accommodating the fall in the Australian dollar and thus enabling the Australian economy to sustain its strong growth rate.
I have already spoken enthusiastically of Australia's new taxation system.
The Government's tax reform plan puts behind us once and for all an old tax system which has held Australia back.
As of last week, an outdated wholesale sales tax system - levied at varying and hidden rates on some goods but not on services - has been replaced with a 10 per cent broadly based goods and services tax.
Personal income tax rates have been reduced - providing the largest income tax cuts in Australia's history. Four in every five Australian taxpayers now face a marginal tax rate of 30 per cent or less.
We are also in the process of implementing a new business taxation system.
The company tax rate has been reduced to 34 per cent and will fall further to 30 per cent on 1 July 2001- putting it amongst the lowest company tax rates in the region.
The Government has also introduced an internationally competitive capital gains tax regime. For individuals, a 50 per cent exclusion will apply on capital gains for assets held for over 12 months.
Capital gains tax rollover relief will also be available for scrip-for-scrip takeovers between companies and trusts - a major benefit for high technology start ups.
Investments in venture capital projects in Australia by non-resident tax-exempt pension funds, such as UK and US pension funds, have also been made exempt from capital gains tax.
In addition, from 1 July 2001, temporary residents will be exempt from tax on their foreign sourced income relating to assets acquired before taking up residence in Australia.
A significant element of the new tax system involves a wholesale change to current Commonwealth-State financial relations.
Every last cent of GST revenue will go directly to the states and territories. This gives them access to a more secure revenue base from which to fund the essential public services that all Australians need.
This arrangement also means that the annual Premiers' Conferences will become a thing of the past.
It is fitting that such a profound change in the history of Commonwealth-State financial relations should occur so close to the commemoration of the passage of the Australian Constitution through the British Parliament one hundred years ago.
The economic reforms I have outlined have transformed Australia into a more open and competitive economy.
They have, without doubt, improved the living standards of a countless number of Australians.
They have created a favourable environment to encourage risk taking and innovation and, importantly, the diffusion of new technology.
It is undeniable that the world has been transformed by information technology.
That said, there has, in my view, been a lot of loose talk about some sort of artificial dichotomy between the new and old economy.
Some have attempted to portray Australia as an old economy. Such views are wide of the mark.
Australia is a modern, sophisticated economy drawing heavily on information technology and benefiting from the explosion of service industries.
Equally, however, we have immense strengths and wealth in our great resource-based industries - agriculture, mining and most specifically in the contemporary world context, clean energy.
Australia is an eager, reliable and competitive supplier to the world. We intend to win our fair share of world markets in commodities such as liquid natural gas, which will improve the lives and environment of many in both the developed and the developing world.
To achieve these goals, Australian industry needs liberal amounts of capital both from home and abroad.
The structure of our economy is not altogether dissimilar to that of the United States - with the services sector close to 80 per cent of the economy.
Australia has more computers per person than any other country in the world except one. The number of households connected to the internet is growing rapidly - and by early next year it is estimated that almost 40 per cent of Australian households will be on line.
We also have a higher number of Internet Service Providers per person than any country in Asia - including Japan - and a higher number than Europe.
In this context, it is important to stress that what really matters is the application of the new technologies to mainstream economic and business activity.
Australia's rapid adoption of new technology continues to improve productivity throughout our industries.
I was, therefore, interested to read of the comments made earlier this year by Dr Greenspan.
In his typically understated way, he made the point that a number of countries have participated in the recent wave of invention and innovation but have been arguably slower to apply them and, therefore, slower to reap the associated benefits.
Dr Greenspan's contention in explaining why this might be so is that these countries have typically had less flexible and, therefore, more costly labour markets.
This carries with it an important message for Australia - and many others - on the need to persevere with further labour market reform.
Australia has the highest per capita share ownership in the western world. Our financial markets are seeking to integrate themselves fully with major capital markets which will further strengthen our linkages to the global economy.
In the context of a rapidly changing technological environment, Australia has also embraced, enthusiastically, innovative and contemporary financial products.
Amongst debt capital markets, the Australian securitisation market is the third largest in the world.
Our equity capital market remains strong, with over A$27 billion in new funds raised in the 1998-99 year. Australia boasts the ninth largest foreign exchange market in the world and the Australian currency is the seventh most actively traded currency.
Australia's financial exchanges are leaders in the Asian region. The Sydney Futures Exchange is the largest in the region and has continued to grow, with a turnover of around A$10 trillion in 1999.
The Australian Stock Exchange maintains a capitalisation of over A$800 million, ranks amongst the most prominent exchanges in the world and recognises the importance of international alliances.
The ASX recently agreed with the Singapore stock exchange to develop and establish an electronic link between the two exchanges' trading and settlement systems.
It has also entered into a strategic alliance with the NASDAQ Stock Market to provide co-listing services and is participating in multilateral discussions on the feasibility of a global equity market.
Australia also has leading edge supporting infrastructure for the financial services sector.
The Asia Pacific Telecommunications index published in 2000 ranked Australia as one of the most competitive telecommunications economies in the region.
Australia also offers other advantages as a centre for global financial services.
Our workforce is highly educated, skilled and multilingual. Around 40 per cent of the working age population have university, diploma or trade qualifications and Australia was ranked second in the latest World Competitiveness Yearbook for the availability of its skilled labour.
Australians possess a wide variety of language skills, with around 2« million Australians speaking a language other than English at home and around 800,000 speaking an Asian language.
Our salaries are very competitive, and compare more than favourably with those for similarly qualified personnel in other parts of the Asia Pacific region.
The cost of prime office space in Australia's main central business districts is between a third to a half that of similar property in Tokyo, Hong Kong, Singapore and Beijing. Australia, of course, offers a great lifestyle.
Australia's position within the Asia Pacific region allows Asian markets to be serviced quickly and cost-effectively.
Our trading day spans the close of business in the US and the opening of business in Europe.
What an eminently suitable location from which to conduct global financial business operations.
Our economy is strong and stable. It has been driven along by substantial economic reform.
Our financial markets are sophisticated and deep and are underpinned by a transparent and streamlined regulatory system.
Australia has rapidly adopted new technologies and continues to provide a high level of infrastructure to support the sector.
We will continue to work with the international financial community to share the expansion of Australia as a major centre for global financial services.
I look forward to seeing you in Sydney for the Olympics.