Speech to Boao Forum for Asia Perth Conference

Perth

Speech, check against delivery, E&OE

11 July 2011

Minister Zeng Peiyan, to my friend and colleague Yasuo Fukuda, the former prime minister of Japan — who I remember working with very closely during his period as prime minister — to the Premier of Western Australia Colin Barnett, and I acknowledge the West Australian Government's contribution to this important forum.

Of course, also to the Secretary General of the BOAO Forum, Mr Zhou Wenzhong, who knows Australia very well; he was ambassador here.

I do note though, Ambassador Zhou, that when you left Australia your hair was perfectly black. After your posting to the United States, I notice your hair has turned grey, but I'll leave others to reach their conclusions about what the cause may have been.

And also to all distinguished friends and guests who are here with us from China.

First of all to our Chinese friends can I say a few words of welcome.

[Speaks in Chinese]

… and I've asked him to convey my personal regards back to the Chinese leaders when he returns to Beijing.

Absolute importance of the Australia China relationship, back to the recognition back in 1970.

These changes have been profound indeed. Chairman Mao was still alive, Chinese politics was chaotic.

Over the years China's economic changes have been absolutely profound and they deserve the world's recognition. What Deng Xiaoping said all those years ago, if a reform what was needed was to carefully feel for the stones on the riverbed one by one.

Deng Xiaoping also had this saying seek truth from facts and the only criterion for truth is practice. After 35 years, China has passed that test.

If we look at the changes of the last 30 years or so, the impact on Australia, on Asia and the world has been profound.

From this opening session of this conference, I would just like to make three very simple points. The first is directed at Australian business and it's for Australian business to recognise the profound changes that are occurring in the Chinese economy as reflected in the 12th five-year plan.

For the last 30 years, China has relied on a growth model based on three things: maximum growth; high investment and high savings; and thirdly, labour-intensive manufacturing for export.

This has been a very successful formula. If we were in the software business it's what you would call China one-point-zero — China 1.0.

But China has now changed; it's changing its growth model. And its new growth model has these characteristics: firstly, sustainable economic growth; lower carbon intensity; high renewable energy; as well as greater energy efficiency.

Secondly, higher domestic consumption based on greater state pensions for hundreds of millions of Chinese who before had none, based on a new minimum wage for the guaranteed 13 per cent annual increase; and based on also greater state investment in health and education and in basic housing.

The third element of this new Chinese growth model is a great emphasis on the growth of the Chinese services sector, [speaks Chinese].

The contrast between the two growth models is very stark. It is not that the reliance upon labour intensive manufacturing industry will stop tomorrow, it will not, but the steady transfer of the growth model to a services-based economy is already happening — and it is reflected in the five-year plan that that is what will occur in the decades ahead.

And again if we're in the software business, we'd probably call this Chinese growth model 2.0, two-point zero.

And I'd say to Australian business it's very important for them to recognise the profound nature of this change, to recognise the vast new array of opportunities which exist because of that change.

Right across the Chinese services sector — whether it's education services, whether it's health services, whether it's engineering and design services, whether it's in water efficiency, whether it's in renewable energy, whether it is across the full range of services, including of course tourism. And this is reflecting, of course, in China's rising income levels.

That's my first point.

My second is directed to our Chinese friends. And it's about the Australian economy. The Australian economy is the 12th largest in the world — and the fourth largest in Asia after China, Japan, and India.

The Australian economy was the only developed economy not to go into recession through the global financial crisis. And we did so with the lowest debt — and the lowest deficit — of all the advanced economies, and we'll be among the first to return from deficit to surplus.

Furthermore, the Australian Government continues to prosecute a continuing program of economic reform which is based on how do we increase, continue to increase our productivity levels into the future.

We believe it is the right thing to do. Furthermore, together with other governments in the world, we've decided also to introduce a price on carbon.

We've decided also to increase our investment of the renewable energy's sector. This is the right plan for Australia, it is the right plan for the world — as reflected in the actions of multiple governments around the world. And in that context I would notice China's commitment to reducing the carbon intensity of its own growth model as well.

I notice with our Chinese friends in recent days that a debate has emerged concerning the economic policy direction of Australia into the future. Of course, Chinese officials are always welcome to engage in these debates. We welcome such a debate. I would add one thing.

And that is in the trade policy review body of the World Trade Organization, when it concluded its 2011 review of the Australian economy, it said — and I quote – “Australia is one of the most open economies in the world.”

It has successfully weathered the global financial crisis without backsliding on trade liberalisation. And they congratulated Australia for continuing to be among the most open economies in the world. According to the Wall Street Journal Index of Economic Freedom Australia ranked third worldwide. Of course there are many areas for us still to improve.

Also in the spirit of a good and open debate, I would note that we also need to engage in a debate about China's process of economic liberalisation as well.

As our Chinese friends know, there are many sectors in which foreign investment is prohibited entirely, and there are some sectors where Australian companies face investment restrictions, equity caps, limits in the number of branches in representative offices, and restrictions in the types of business they are able to undertake.

We welcome the debate on all these things. And that's why of course we are currently in the process of negotiating a free trade agreement with our Chinese friends.

I am an optimist for the future of the Australia China economic relationship, and an optimist for the future of the trade and investment relationship in particular, because of the vast complementarities which exist between our two economies, and on top of that, not just in the energy and resources sector — which is the focus of this conference — but also in the future dynamic growth of the Chinese services sector as well, which brings me to my third point.

We are here to talk about the economy. We're here to talk about growth. We're here to talk about trade and investment, and the energy sector — and the resources sector in particular.

But as China and Australia, we must always recognise that these two great debates for the future — how to integrate our economies, how to integrate our trade and investment all hinge on the future of regional peace and stability in Asia as well.

And that's where Australia and China have a great common mission to share because our prosperity rests on the continued stability of East Asia as well.

And that is why when our governments meet together in the East Asian Summit later this year together with President Obama, President Medvedev, as well as the Prime Minister of India, the President of Indonesia, and the heads of government from right across the region.

We'll be looking at how we shape, in the future, a stable and prosperous and secure East Asia for the decades ahead because our common ambition is to ensure that that stability and peace — which has underpinned our economic growth for 40 years now — continues for the next 40 years as well.

Secretary general, thank you for your kind invitation to be at this opening of this important conference.

I congratulate the West Australian Government for its co-sponsorship of this conference. It is a good initiative. It is the first time that BOAO has taken its conference schedule outside of China itself.

And I can think of no better forum in which these great debates, to which I've just pointed, can be conducted in the spirit of true friendship and mutual cooperation.

I thank you very much.

END

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