When I first began talking about a visit to Washington I said I wanted to have a chance to talk directly with the business community.
I want to thank The Chamber for the opportunity to address you tonight.
Australia and the United States are intimately linked in the global economy.
Those links go back a long way.
150 years ago, Californian gold prospectors were scurrying on to boats to Australia to be a part of the Gold Rush that opened up much of inland Australia.
In fact, one very prominent American came to Australia in the 1890s following the mining boom in Western Australia.
President Herbert Hoover spent about a year and a half in Western Australia planning and developing mine sites.
Hoover came back to Australia a number of times on mining projects and was a pioneer in the mining industry in Broken Hill - the city from which our great Australian resource company BHP gets its name.
Today, a different generation of business people shuttle between Sydney, Melbourne, Perth or Brisbane and cities like New York, Los Angeles, Chicago and Atlanta.
The United States is the largest foreign investor in Australia.
The United States is likewise the biggest investment market for Australian businesses.
And you maybe surprised to learn that Australia is America's 8th-largest source of foreign direct investment.
Corporations with operations in both countries form part of the global supply chain of everything from movies to motor vehicles, and from website design to wine.
Employees in both nations report to CEOs on the other side of the Pacific.
People, ideas, capital, goods and services flow freely between our countries.
Our economic ties are one part of our relationship.
But the relationship is also about the political and strategic links we share.
Links that are based on shared values.
And I shared vision for the future.
I want to address a number of these themes this evening concerning our common economic future at a time of growing global economic stress.
First, the strengths of the Australian economy in the face of the current global financial crisis.
Second, the global response to this crisis and especially the role we in Australia are playing in cooperation with our economic partners in promoting a coherent global response.
Third, the emergence of China as a major global economy, and the opportunities and challenges this presents to the U.S. and Australian economies.
Fourth, how increasing our commitment to freer trade through re-invigorating the Doha round is now more than ever necessary to give the global economy a real injection of confidence.
And finally, the economic importance of getting our response to climate change right.
Australia in the global economy
The global economy is facing some considerable uncertainty at present because of the global financial crisis.
I will talk more about our response to the crisis later in my remarks.
But I want to first explain a little about the Australian economy.
I am an absolute optimist about Australia's long-term economic prospects.
Australia's economic fundamentals are strong.
We are now in our 17th year of continuous economic growth.
Our major corporations and our major banks are healthy, highly profitable and with balance sheets in very good order.
We are a first-rate investment destination, an active global trader and enmeshed with economic ties around the globe.
We are continuing to deepen our trading and investment links into crucial markets in Asia such as China, Japan and the Republic of Korea.
Australia is a major energy, food and resources exporter, but those sectors employ only five per cent of our workforce.
The vast majority of Australians work in services sectors and these sectors are becoming increasingly internationalised.
We have the largest funds management industry in Asia.
In fact it is the fourth-largest in the world.
The Australian stock market is one of the largest in the region - worth more than one trillion US dollars.
It is about three times the size of the Singapore market and half the size of Hong Kong's Hang Seng, where many mainland China public listings occur.
The Australian Stock Exchange is also hosting the largest number of foreign listings in Asia.
And in all this we are supported by a skilled workforce with considerable international exposure and particular experience in the Asia-Pacific region.
Nearly 23 per cent of Australians were born overseas.
Just over 40 per cent of Australians have a parent born overseas.
And Chinese (Mandarin and Cantonese) is now the second most spoken language in Australia after English.
The mission of the Government that I lead is, in short, to build a modern Australia - one that is ready to tackle the challenges and seize the opportunities of the 21st century.
Our task is to look ahead and to prepare our people, our institutions, our education systems and our infrastructure for the challenges of tomorrow.
The Government that I lead does not believe we can retreat from change.
The new Australian Labor Government is committed to responsible economic management and is unashamedly pro-market, pro-business and pro-globalisation.
We do not believe it's in the interests of our people to pull back from full participation in the global economy.
There will be no retreat into protectionism - notwithstanding the rise in protectionist sentiment elsewhere in the world.
The long-term economic priority of the Government that I lead is to lift long-term productivity growth.
Higher productivity and higher levels of workforce participation deliver stronger, non-inflationary economic growth and increased employment for working families.
The Government's productivity agenda shapes our priorities for an education revolution from early childhood through to schools, training, universities and research.
The productivity agenda includes working with the private sector to build advanced infrastructure such as a high-speed national broadband network - critical for Australia to overcome the tyranny of distance.
It also means improving the operation of government between the Federal and State levels - an area where we achieved some historic changes last week when we began overhauling the entire financial relationship between the Federal and State governments in Australia.
The Government is also currently reviewing Australia's national innovation system.
Our goal is to foster greater investment in research and development and build a stronger culture of innovation as a platform for enhancing our global competitiveness.
We are doing this because we realise that in a globalised world it is our human, physical and intellectual capital that forms the basis of our enduring global competitiveness.
The global financial crisis and Australia's response
There are at present powerful cross-currents running through the world economy.
The current global financial crisis represents a significant risk to the prospects for growth of many economies.
In contrast, emerging market economies such as China and India are continuing to grow strongly.
In doing so they are dramatically expanding the supply capacity of the global economy while stimulating demand for commodities.
We are acutely aware of these cross-currents in Australia.
Our businesses and households are facing higher interest rates - in part, reflecting the higher global costs of borrowing.
This is happening while Australia's mining sector and banking sector continue to enjoy strong profits.
I don't need to convince this audience of the gravity of the global financial crisis which began in the US housing industry and home mortgage market, and has now spread through other security markets, equity markets and onto the real economy.
The current financial crisis largely represents a repricing of risk following the extraordinary global credit growth of the past few years.
This credit growth was characterised by a period of strong economic growth, low interest rates and rapid increases in asset prices (especially the housing and share markets).
These conditions created a financial boom in which credit became widely available and relatively cheap by historical standards.
Many investors began to accept higher risks and lower returns.
The flow of cheap credit saw lending extended without sufficient attention to risk.
The specific problem in the sub-prime mortgage market spread all the more rapidly because advances in financial engineering were rather more rapid than the increase in the market's ability to understand the risks associated with many new products based on asset-backed paper.
As liquidity dried up, the credit crunch in the sub-prime market evolved into a general tightening of credit across markets and across financial products.
Because the extent or distribution of these risks is not fully known, there has been less willingness to lend - the previous market complacency with risk has been replaced by total risk aversion.
During my time here in the US, I have spoken at length about these challenges with President Bush, the Secretary of the US Treasury, the Managing Director of the IMF, the Chairman of the Federal Reserve, and the Chairman of the SEC.
In these meetings, I have outlined how Australia will contribute to what must be a global response by our national regulators to a global financial crisis.
As financial markets become more global and assets are traded more rapidly between nations, so too must regulation and supervision become more global.
But without crushing the capacity of markets themselves to respond flexibly to new opportunities in the future.
Australia is a long-standing advocate and driver of improvements to global standards for the financial sector.
To improve international risk management systems, our global response should include:
* Options for stronger international financial supervision;
* The development of improved global standards to underpin national regimes for transparency, crisis management and stability;
* Strengthening the co-ordinating mechanisms for providing international surveillance of all countries' financial systems and for identifying systemic risks to the global financial markets; and
* Ensuring that national authorities respond effectively when specific risks are identified.
This requires us and others to work closely with the key international co-ordinating agencies, the Financial Stability Forum, the IMF, the Basel Committee, the G-20 and others, to identify key risks and vulnerabilities and programs of reform.
Australia is an active participant in many of these international efforts.
Australia is chairing the G20 Study Group on Global Credit Market Disruptions examining the causes of the recent credit market transactions and international transmission mechanisms.
The Reserve Bank of Australia is contributing to the work of the Financial Stability Forum.
This important forum comprised of 12 countries with significant financial markets and key international financial institutions, met in Rome just two days ago.
The FSF will soon report to G7 Finance Ministers on a range of regulatory and private-sector actions to strengthen the resilience of the global financial system.
Their report will identify the key weaknesses underlying the turmoil and recommend responses to enhance market and institutional resilience.
The report will also set out policy recommendations in the areas of: prudential oversight of capital; liquidity and risk management; transparency; disclosure and valuation practices; credit ratings; and authorities' responsiveness to stresses in the financial system.
The Chair of the FSF will present key conclusions to the International Monetary and Financial Committee (IMFC) on 12 April 2008.
The Australian Treasurer, Wayne Swan, will be attending this IMF meeting to reinforce our message about the importance of developing an effective global response to the financial crisis.
Today, the US Treasury Secretary, Hank Paulson, released recommendations for a stronger regulatory system for the US financial sector.
He outlined the US Treasury's objectives-based approach to address particular market failures by focusing on three goals: market stability; prudential financial regulation; and business conduct regulation.
I welcome the Treasury Secretary's review as an important part of the US response to the global financial crisis.
We will be examining these recommendations closely as we progress our approach to the global crisis.
The Australian Government believes we must be an active participant in a coherent global economic response.
China in the Global Economy
I mentioned earlier that the cross-currents in the global economy are keenly felt in Australia.
And one of the biggest currents that we feel is from the economic rise of China.
There is little doubt that what we are witnessing in the rise of China is a major historical change.
China's impact on the global economy has been significant in recent years.
Never before has such a large economy grown so quickly, with the possible exception of late 19th century, early 20th century America.
In a globalised world, the impact of China's growth is felt everywhere.
This growth has lifted hundreds of millions of people out of poverty in China.
It has helped to provide stability in China as it seeks to manage internal challenges like the rapid pace of urbanisation, widening income gaps between its urban and rural populations together with a raft of growing environmental challenges.
In the process of growing its own economy, China has also helped to drive global growth.
Last year, in purchasing power parity terms, it contributed over one-quarter of global growth according to IMF calculations.
China's low-cost manufacturing capacity has provided the world with cheaper consumer goods and cheaper inputs into business.
This has helped to keep inflation down in the United States, Australia and other economies.
It has also raised the living standards of people in advanced economies like our own.
In Australia, we have felt the force of China's growth.
China needs fuel and raw materials to drive its growth and Australia has helped to supply them.
The value of our minerals exports alone to China has grown five fold in five years.
But it is not just about the headline figures for resources trade.
China is now our top market for education exports - over 100,000 Chinese students enrolled in Australia last year.
4,200 Australian businesses export to China.
More than 3,000 businesses are active within China.
In the face of financial instability, the economic benefits of a growing China have to be recognised.
The United States too is benefiting from economic growth in China.
China is the US' third largest goods export market and its fastest growing export market.
US investors are also benefiting from their engagement with China.
While I understand the political sensitivities in the United States about the downside impact of China's economic rise, it's also important to be reminded of the upside as well.
WTO
In the face of global difficulties, it is important that the world accelerates the momentum for the drivers of global economic activity.
A crucial element of that is keeping up the momentum for freer world trade.
We salute the leadership role that the United States has played over the years in establishing the global rules-based trading system.
The raft of agreements which are now together overseen by members of the World Trade Organisation have unblocked barriers to trade, provided new certainty for businesses and investors, and have been an important driver of economic globalisation.
As a result of this system, countries around the globe, both developed and developing, have been able to sell their goods to others, and we have all been able to access cheaper goods.
Both producers and consumers around the globe have benefited and poverty levels have reduced.
In days of economic difficulty, we need to remind ourselves that it is all the more important to collaborate effectively to ensure that trade can flow freely - unencumbered by artificial barriers constructed by government which ultimately damage working families through higher consumer prices.
Tonight I would like particularly to emphasise the importance of pushing together for an ambitious conclusion to the Doha Round.
The negotiations are at a critical stage.
Over the past six weeks, there has been some encouraging progress in the Doha Round in the core areas of agriculture, industrial products and services.
We need to lock in the shape of the deal as soon as possible.
This needs to happen soon, in the next four to five weeks, for the Round to conclude by the end of the year.
We believe that not only is this do-able, but it is really our best chance at giving the global economy a psychological shot in the arm.
Political dynamics in the US, the EU and other countries means that failure to conclude a deal this year may see the Round going into cold storage for several years.
This would be to no one's benefit and would seriously undermine the global trading system. The moment is now!
I have discussed the WTO in my meetings here.
I am very encouraged by the strength of President Bush's commitment to concluding the Doha Round.
It is important that the Congress back the President's commitment.
US leadership is critical.
But so too is leadership and preparedness to move on the part of the other principals to the Round.
We also agreed that the deal needs to be an ambitious one, not a nominal one - one that can make a real difference to trade flows.
What this means of course, is that every WTO member must step forward with an offer that makes the Doha Round outcome worthwhile.
The time of gamesmanship is over - the stakes are too high.
Climate Change
When discussing the future economic terrain, you cannot ignore one other critical matter - climate change.
Climate change is the great moral and economic challenge of our time.
And it requires a combination of effective domestic and global action.
Domestically, Australia has committed to introducing an emissions trading scheme by 2010.
We have also committed to a long-term target of reducing our carbon emissions by 60 per cent over 2000 levels by 2050.
Globally, the change that we must achieve over coming decades in response to the climate threat is as great in scale as the Industrial Revolution.
We must move to a low carbon economy.
That will mean a profound shift in the Australian economy and in the global economy.
We will have to make that shift in a way that maintains our competitiveness. That is why we need a global approach to climate change.
Australia is the world's largest exporter of coal. For us, developing clean coal technology is a crucial part of our response to climate change.
That's why we're investing in accelerating the development and deployment of these technologies - the Government working with the private sector to find commercially viable solutions to climate change.
The low carbon revolution will also open up new opportunities in new sectors.
Already Australian businesses are building wind farms in China, licensing solar power technologies around the world and leading research in geothermal and wave energy.
Global arrangements need to support and encourage the trade in clean and green technology.
The other crucial element to meeting the challenges of climate change is establishing an effective international framework.
The first act of the new Australian Government was to sign the papers to ratify the Kyoto Protocol.
We did this because we believe that Australia - like all nations - has to play its part to find the global solution. And the best way to do that is by being part of the process.
The road map to a new climate change agreement that we agreed to in Bali in December will need to be closely followed.
In my discussions with the US Administration over the past few days I have stressed that Australia is committed to working closely with the United States to find a way forward on climate change.
Once again, the world needs US leadership.
Over 50 years ago and in the midst of the Second World War, under the leadership of Labor Prime Minister John Curtin, Australia's relationship with the rest of the world began to shift.
Australia became more outwardly focused and took the first steps in reinventing itself as modern economy.
This is a great legacy.
It drives us to seek global responses to global challenges.
My visit here has come at a turbulent time for the global economy.
How we can best respond to the situation has been a focus of my discussions with business and government figures here.
As have the challenges of climate change and world trade.
There is no doubt these are big challenges.
However, I am an absolute optimist about our ability to meet these challenges just as I am an absolute optimist about Australia's long-term future.
More than that, I am an absolute optimist about our ability to seize the opportunities of the future.
But we must work together to seek coherent global solutions.
To do that, Australia will engage directly and actively with our partners around the world.
One of the most important partners for us is the United States.
I am committed to keeping that partnership strong.
Together we can seize the opportunities and confront the challenges that will face our economies in the future, just as we have in the past.