Well thank you very much Mr Charlton and ladies and gentlemen. I welcome this opportunity to participate in this conference so exquisitely timed in a week in which the delights of Sydney and the delights of Australia are fortuitously on maximum display to many parts of the world.
I speak, of course, as somebody who has lived most of his life in this city, but as naturally and foremost as Prime Minister of the entire country. And I also speak as leader of a Government that has a very strong commitment to the capitalist economy, a strong commitment to ethical and competitive capitalism as being the best way of generating national wealth. And within that broad description, of course, financial markets play a hugely important role. The Economist magazine recently identified five dimensions to reshaping the financial markets over recent decades. It spoke first of the fact that virtually everything about the markets has been influenced by the forces of technology, it said there';s been an unmistakable trend towards deregulation, but deregulation in turn has been accompanied by a liberalisation of rules governing participation in the markets. But that liberalisation has led to a large amount of consolidation of market participants, and that finally consolidation has gone hand in hand with the process of globalisation.
Australia has been in the forefront of the processes described by the Economist magazine. And, as in quite a number of areas, this country has been able to punch above her weight. Australia is one of the key centres in Asia for capital market activity and in terms of total market capitalisation, Australia lies only third behind Tokyo and Hong Kong. An average daily turnover in Australian debt markets was more than $14 billion in the last completed financial year.
As I';m sure all of you are aware, we established Axiss Australia in 1999 to boost Australia';s positioning as a global financial services centre. And since then, more than 100 offshore financial service firms have either set up new businesses or expanded existing activities in Australia. And Axiss has played an important role in raising Australia';s profile internationally and articulating Australia';s advantages as a centre for financial services.
You probably heard a little already of the general strength and reach of the Australian economy, but you will forgive me for reminding all of you that we have had 12 years of continuous annual growth and it';s the longest economic expansion that Australia has experienced since the 1960s. I would argue it is a more soundly based expansion and that the strength of the Australian economy now is more soundly based than it was in the 1960s, golden though some of those years were for many people. And the reason for that observation is that in the 1960s ours was a highly protected, very cloistered and inward looking economy. We had a fixed exchange rate. We had high tariff barriers. There was still, within the Australian Federation, there was still some limitations on internal economic competition. We had a fairly old-fashioned taxation system. We relied almost entirely on a process of centralised wage fixation, and many of the forces of international competition that we now take for granted and happily engage in were completely absent.
But for the first time since 1968, Australia enjoys the concurrent combination of unemployment below 6% and inflation below 3%. Our net Government debt to GDP ratio at just 3.9% is amongst the lowest in the world and it';s substantially below the OECD average of 48.7%. And since 1996, almost 1.3 million new jobs have been created and the real wages of Australian workers, because of higher productivity, have risen by 12.2% yet our inflation levels, because of that higher productivity, have remained at very subdued levels. So the picture that one can paint is a very bright picture, it';s a picture of continued economic strength and it';s a picture of a nation continuing to want to engage in further economic reform and wanting to involve itself more fully in world economic activity and world financial markets.
In recent times we have introduced legislation to further, by changes to the tax system, internationalise the Australian economy. And some of these reforms will simplify and better target the rules for Australian investors, including managed funds and superannuation funds, earning income overseas; to modernise Australia';s double taxation agreements with other countries; to ensure that Australian businesses operating offshore are subject to similar taxation as their locally based competitors and to encourage the establishment in Australia of regional headquarters of foreign groups and improve Australia';s attractiveness as a continuing base for our multinational companies. Together these changes and reforms, although they have not received the same publicity and the same focus as other more broadly based economic reforms of recent years, provide a solid contribution to the further opening up of the Australian economy. Unfortunately at present we have been unable to progress these reforms through the Australian Senate because the opposition parties have taken it upon themselves, particularly the Labor Party, to oppose these reforms in the name of rather cheap economic populism by alleging in some way that they are unfairly advantaging the big end of town to the detriment of the broader Australian community. I might pass on from that comment with just but one further observation and that is that many of the reforms that, to their credit, were carried out by the former government in Australia were made possible by the fact that the then opposition parties in the Senate supported sensible economic reforms such as financial deregulation and tariff reform which were seen in the national interest.
The other area that I want to focus on very briefly this morning, Mr Chairman, is the question of international trade and Australia';s relations with the rest of the world as a major trading nation. A nation such as Australia ultimately lives or dies economically according to our capacity to engage the rest of the world in trade. We can never, of course, return to the days when we looked inward, largely ignored the rest of the world except those parts of the world that were desperate to buy our primary produce and imagine that that mentality could give us a secure economic future. Over the last 30 or more years we have become far more outward looking so far as our trading horizons are concerned. Australia has diversified our trade performance and in fact it was our ability to switch some of our trade from the Asian region to North America and Europe which enabled this country to avoid the worst effects of the Asian economic downturn in 1997 and 1998. And it is strongly arguable that if we had not been able to achieve that shift in those years we, like other countries in the region, would have been engulfed by the economic downturn which put an end to some of the unrealistic views which had developed about the fundamental strengths of some of the economies in our region.
Australia remains a nation which, of course, derives a lot of export income from the mining and other primary industries. But, of course, it is no longer the case that we rely entirely on those industries and the growth in recent decades of the service sector, and also a very significant expansion in manufacturing exports, has given to Australia a very diversified trading base. And this Government, over the last seven years, has consciously sought to diversify our trade as much as possible. We remain very strongly committed to the multilateral negotiation process. The ideal is to see a successful world trade round based on the Doha understandings. And it is ideally speaking in Australia';s interest to see broad multilateral trading agreements liberalising and removing trade barriers that impede access for Australian goods and services to see those sorts of arrangements achieved. But we have taken the view that consistent with that goal, and on the basis that bilateral trading agreements don';t compete with that goal, that it is in Australia';s interest to endeavour to negotiate bilateral free trade agreements and to put special emphasis on our trading associations with certain countries. And that is why we are at present negotiating a free trade agreement with the United States. If that can be achieved it will underwrite Australia';s economic future in a way that no other bilateral trading agreement can possibly do. Self evidently, the United States'; economy will be more and not less important to Australia as time goes by. The significance of the United States in the world economy will grow over the next 50 years, rather than as some predicted a decade or more ago, diminish. And from Australia';s point of view, the opportunity to become linked through a bilateral free trade agreement with the largest and strongest economy in the world is an opportunity that we should pursue to the limit and not easily give up. I cannot predict this morning whether that process of negotiation will be successful or not. We will not sign a free trade agreement with the United States unless there are evident benefits in it for Australia. Just the act of signing a free trade agreement with the biggest country in the world does not, of course, confer a benefit. There needs to be clear gains, particularly in areas such as agriculture, for it to be worth the candle for Australia to sign. But we are very strongly committed to it, both at a negotiation and political level and we will know over the course of, I guess, the next month or two whether that goal is going to be realised.
We have just completed successfully the negotiations of the Free Trade Agreement with Thailand. Thailand is the fastest growing of the ASEAN economies with a population of 62 million. That particular agreement is going to a very strong benefit to the Australian motor car industry, to the Australian wine industry and even to sections of the Australian dairy industry. Some months ago we signed a Free Trade Agreement with Singapore. And, of course, it is well known in Australia that in the last seven years we have increased our trade with China by something in the order of two to three hundred per cent. China is one of our fastest growing markets, is now our third largest trading partner… I';m sorry, third largest export destination and is a nation that is very very important to Australia';s economic future. The conclusion of the natural gas contract with the Guangdong Province last year and the prospect of even larger contracts in the area of natural gas, which became evident during the visit to Australia of President Hu Jintao last month, are evidence of the strength of the relationship that we have been able to develop with China.
I cite these things, Mr Chairman, to illustrate the reality of the world in which Australia lives. I have never believed that it made any sense for Australia, with a population of 20 million people, having strong strategic links with the United States, having strong historical ties with Europe, but located in the Asian Pacific region, I';ve never thought it made any sense for Australia to behave as if our economic and political interest lay either heavily or exclusively with one part of the world. Of course, our immediate political and economic and trade destiny is very much tied up with the Asian Pacific region, but the nature of the Australian economy, the sophistication of the Australian people, the diversity of our interests and the international character of our associations means that in all areas Australia is a nation which must seek associations and linkages with all parts of the world and that is what the Government has endeavoured to do. And our pursuit of close relations with nations such as the United States have not in any way hampered our capacity to deal effectively with the nations of our region and to develop, as those countries develop, particularly but not only China, a trading association of very great mutual benefit.
Ladies and gentlemen, it';s always been a view of people in Australia that in the fullness of time this country would be as it now become a major financial centre in the Asian Pacific region. And, of course, the volume of financial activity generated in the city in the Sydney is… maybe higher than in other areas of the country, but it remains nonetheless the case that it';s a tribute to the financial community of the entire nation that that goal has been realised. And I take this opportunity of congratulating those in the Australian financial community of the way in which this country';s perspective has been altered, the way in which this country';s reputation has been enhanced and the significantly increased role that this country is properly playing in the financial community of the world.
I wish the conference well. To those of you who are visiting Australia for purposes related to the Rugby World Cup, I hope you';ve had, and continue to have, an extremely enjoyable time. We Australians pride ourselves in organising great cultural events of this character and this has been no exception and we hope for those of you who are visiting our country continue to enjoy yourselves and take away some very fond recollections of Australian hospitality, not to mention of course Australian sporting prowess.
Thank you.
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