Address to the G'Day USA Australian Outlook Luncheon
Speech, E&OE, (check against delivery)
The Harvard Club, New York
24 January 2014
Ladies and Gentlemen
I am absolutely delighted to be here in New York and at the Harvard Club. In a former life I attended Harvard Business School, the idea being that as a lawyer, I knew about being a lawyer but I knew nothing about running a business. And I had become a managing partner so I took myself off on a sabbatical to learn from the best of the best about business. And while I was there I decided, "mmm…I'm going to be a politician". So Harvard has got a lot to answer for, I think.
On Wednesday in Washington DC, during a Snow Day (someone explain that to me), I spoke at a US Studies Centre event on the vital importance of the Australia-US strategic alliance. And I made the point that while the formal security guarantee – the ANZUS treaty – may have been signed in September 1951, its foundation actually lay in the prescient decision of then Prime Minister Robert Menzies, who within three months of Britain's declaration of war on Germany in September of 1939, had dispatched to Washington Richard Casey, a Cabinet Minister in the Australian Government, thus establishing Australia's first ever diplomatic post outside of London at a time when there was no indication that the United States would have anything to do with the war in Europe.
Of course, today, seven decades on, we have no stronger, no more important security partner than the United States.
On my way here from Washington yesterday, I was struck by the even longer history of the economic alliance between Australia and the United States. For even prior to Australia's official birth as a nation in 1901, Americans had been key partners in Australia's economic development, recognising early on the potential that our natural resources presented.
Now I'm from Western Australia. As they say, you can tell a West Australian, but you can't tell them much. One American has reached almost mythical status in the history of our "wild West".
He was in the first graduating class ever from Stanford University, and armed with a diploma in geology and mining, headed off to the gold rush of Western Australia, arriving in 1897. He was employed as an expert inspecting engineer in Kalgoorlie and Coolgardie, that's about more than 300 miles from the relative – and I mean relative, in those days – civilisation of Perth.
He came across a little developed gold mine, Sons of Gwalia, convinced that it was a mine of promise, he secured financial backing from London, floated the Sons of Gwalia in 1898 and transformed it into a spectacular mining success.
By the time he left Western Australia, he was one of the best-known mining engineers in the colony. And one of the richest – for in 1905, he co-founded the Zinc Corporation – later to become Rio-Tinto-Zinc Corporation – of Broken Hill.
That, of course, today is Rio Tinto the global mining and metals giant employing some 70,000 people in 40 countries across six continents, with a market capitalisation of around 100 billion dollars.
That enterprising American, one Herbert Hoover, went on to become the 31st President of the United States.
Now of course, in politics timing is everything. He was inaugurated in March 1929 – promising that prosperity for all was just around the corner. But 1929 was not a good year to be campaigning on that platform.
But I must tell you, in Kalgoorlie to this day, Herbert Hoover remains a legendary figure. He donated an elaborate mirror to his favourite haunt, Kalgoorlie's Palace Hotel, which to this day hangs in the foyer. And at what has become an extraordinary event, our annual Diggers and Dealers conference – which attracts thousands of miners, investors and speculators to Kalgoorlie each year – they raise a toast to Herbert Hoover. There's also a framed copy of a poem he allegedly dedicated to a barmaid, but that's a story that I don't need to tell.
There are still fortunes to be made by Americans in Australia, and I am here today to tell you why. Although, the facts can speak for themselves.
The Gorgon natural gas project in northwest Australia, worth around 55 billion dollars, is half owned by Chevron, with a further quarter owned each by ExxonMobil and Shell. It is one of the world's largest natural gas projects and the largest single resource development in Australia's history.
Chevron also recently drew the world's attention to Australia's shale potential when it announced a deal to spend up to $350 million exploring for shale gas with Australian-based Beach Energy. And as the United States knows, shale gas is predicted to be the world's next big energy source – and Australia is forecast to be the most attractive shale gas prospect outside of North America, estimated to hold one of the world's largest recoverable reserves.
So Australia truly does remain a land of opportunity. And past, present and future, the United States is – and I suggest is likely to remain – Australia's single most important economic partner, taking into account investment stocks worth over one trillion dollars, plus our two-way trade.
Australia – a Top 20 nation
And I believe that our economic partnership, like our strategic partnership, can and should be enhanced by even greater trade and investment flows.
You know, Australians are generally a pretty unassuming lot. Even though our economy has grown in each and every year for the past 22 years, we haven't let too many in on that, and many overseas are yet to grasp the sheer size of our economy – its strength, its stability, its diversity and the opportunities it offers.
Australia is well and truly a Top 20 nation.
And that's not just because we're a member of the G20 – indeed Australia is chair of the G20 this year and will welcome the world's leaders to Brisbane in November.
Now, admittedly our population of 23 million puts us at number 53 in the demographic stakes, but we are top 20 for virtually every other major indicator in global terms.
Our economy is the 12th largest in the world. The 4th biggest in Asia – after only China, Japan and India – and remember, with just a fraction of their populations.
We are the 5th wealthiest nation on earth. Credit Suisse places the median wealth of adult Australians as the highest in the world – number one.
Our currency is the 5th most traded.
We're the 13th most popular investment destination for foreign investment.
We have the largest reserves in the world of brown coal, mineral sands, nickel, lead, uranium, iron ore and zinc, and amongst the largest reserves of bauxite and copper.
We have the world's 3rd largest pool of investment funds under management.
We are also a leader in other key growth sectors: sitting in the top four for fuel and mining exports; top five for education exports; top ten for tourism; and top fifteen for agricultural exports.
And Australia's labour force is one of the most multicultural, multilingual and educated in the world. One in ten Australians speaks an Asian language and almost 1.3 million Australians speak a European language other than English.
The World Bank ranks Australia 11th for ease of doing business.
And the Wall Street Journal and the Heritage Foundation place us 3rd on their 2014 index of economic freedom.
We're also a pretty good place to live. The BBC's correspondent in New York, Nick Bryant, puts us up there in the super-power stakes – that is a "lifestyle superpower".
And here we are entering our 23rd consecutive year of economic growth.
That means the Australian economy has grown each and every year since Bush 41 was President.
It's an achievement that's unparalleled among advanced economies, and it will continue, notwithstanding the global economic outlook.
Global Economic outlook
Now despite some steps in the right direction the global economy still hasn't escaped the spectre of the Global Financial Crisis.
It has been a long recovery and risks remain on the horizon, particularly in the euro area.
So while global growth is subdued at present, we do expect it to pick up in the years ahead, and no small part of that is the growing momentum behind the recovery here in the United States, which is reflected in the Federal Reserve's decision to begin normalising monetary policy.
As we return to more normal times, the challenges faced by individual nations will become increasingly divergent.
Countries will need good fundamentals to attract a share of global capital and investment; they'll need the resilient institutions and the opportunities that make a country a good place to invest.
Australia as a gateway to Asia
And Australia can offer all of that and more, for we can also claim to be a gateway to Asia – a region of immense opportunity.
The demographic transformation alone, where it is estimated that Asia's middle class will triple to 1.7 billion by 2020 – and that would be three times more consumers – within the next 6 years, tells you why.
Those facts alone make the Asian region the place to be.
So, one of Australia's greatest economic advantages is how deeply we are engaged with Asia. It's our neighbourhood, and we are enmeshed in the dynamic Asian economies.
Three quarters of all our exports are to Asia; over 40 per cent of our merchandise trade is with China, Japan and South Korea.
Indeed, some of our most significant exports – iron ore and coal in particular – have fuelled Asia's growth over the past decade and more.
As countries like China have grown, so too has Australia's economy.
And the United States has played a major role because United States companies have continued to invest heavily in the Australian resources sector.
It was in the 1960s that US companies were at the forefront of innovation in Australia's then growing resource industry.
Utah and Cyprus Mines, together with Consolidated Goldfields, were the first companies – the first companies – to get an iron ore operation underway in the Pilbara region of Australia's north-west.
That region is now the absolute heart of Australia's iron ore industry and worth billions of dollars to the Australian economy.
Today Australia remains a substantial recipient of US inward investment in the energy and resources sectors and we want to keep it that way. We want to see the reinvestment.
I've already mentioned Chevron and Exxon – but American multinational companies such as GE, Hess, Apache, Peabody Energy and ConocoPhillips also have significant investments in Australia.
And there's substantial scope for expansion, particularly to the Asian markets increasingly hungry for top-quality, reliable Australian energy and resource exports.
In the future, American investors can increasingly gain traction in Asian markets through investments in Australian resources.
But we are deeply engaged with Asia in other ways, well beyond resources.
Nine of Australia's top 12 export markets are in the Asian region.
Australia is a world-class agricultural producer – and we're increasingly supplying high-quality food to our neighbours across the Indian Ocean-Asia-Pacific region, I call it the Indo-Pacific.
We have an enviable reputation for the quality and professionalism of our education sector – indeed, we are attracting more than 400 thousand international students – mostly from China, India and South Korea – to our educational institutions.
And increasingly Australian students will be studying at universities in Asia and undertaking internships in Asia, supported by the Australian Government's signature foreign policy initiative – not an education initiative, this is a foreign policy initiative – we've called the New Colombo Plan, which begins this year, to build over time not only a highly professional workforce, but an Asia literate one.
What I foresee is a generation of Australian students, generation after generation of Australian students, undertaking work and study in Asia as part of their undergraduate degree so that it becomes a rite of passage for a student studying at Australian university.
And, you know, we shares time zones with China, Japan, Korea, Indonesia, Malaysia and Singapore.
There's less of a time difference to powerful regional players like India and Thailand than there is between our own east and west coasts. And this means that we do business in real time with Asia.
Open for business / Economic diplomacy
On election night last September, then Prime Minister-elect, Tony Abbott, declared that Australia was "under new management and open for business".
For we understand the critical importance of a strong economy to our nation's continued prosperity.
Our first priority is to ensure we have the right economic settings to make Australia a destination of choice for trade and investment.
And this is not empty rhetoric.
We're taking action to get rid of unnecessary regulation and red tape so that is easier to do business in Australia.
Entire days of our national Parliament are being set aside to simply repeal legislation. I reckon I'd be able to sell tickets to that.
To get rid of the needless and out-dated regulation which result in paperwork hurdles that can cost business millions of dollars each year.
We're also repealing unnecessary mining and carbon taxes that were introduced by the previous government, which are a burden on business and risk our international reputation for competitiveness.
We're also collapsing the environmental approval process for major projects into a one-stop-shop. Formerly, there were layers – state, federal, local – we're collapsing them into a one-stop, streamlined shop.
We're determined to restore Australia's budget to surplus and make the government live within its means. And we're paying down the debt.
And that determination to set things right on the home front pays off when we engage with the world.
A major achievement of our first 100 days in office is the successful conclusion of a free trade agreement with South Korea.
The deal is expected to generate over 5 billion dollars in additional income to the Australian economy over the next 15 years – by eliminating tariffs on our major exports to Korea, and providing significant new market openings for our businesses in services and also investment.
And we're pressing ahead with bilateral Free Trade Agreements with Japan and China. And Australia is also an active, positive participant in the negotiations for multilateral agreements – particularly the Trans-Pacific Partnership, but also the Regional Comprehensive Economic Partnership that includes the Southeast Asian countries and China.
We in the Australian Government welcome the United States' strategic rebalance towards Asia and we also recognise that the Trans Pacific Partnership is the economic expression of the United States' foreign policy ambition in the region.
Our foreign policy is orientated towards growing our trade and investment opportunities, all part of what we call economic diplomacy and I've put it at the heart of our engagement with the world. Economic policy is foreign policy to us. Or as Secretary Clinton put it, "the power of economics and the economics of power".
Building and deepening international business links, making sure our diplomats overseas put the potential for economic growth at the heart of their work, encouraging foreign investment, entrenching ourselves at the heart of the Indo-Pacific region – this all creates its own rewards.
Australia's foreign policy is designed to project a strong, vibrant, open, trading economy; as well as a thriving liberal democracy with a commitment to freedom and the rule of law.
Those characteristics work hand in hand to create a great environment for business and investment.
If you invest in Australia you'll find willing partners – both at the Government level and in the private sector.
So why Australia?
So why Australia? I say, "why not Australia?"
Our economic record speaks for itself.
22 consecutive years of uninterrupted economic growth.
22 years without a recession – a feat unrivalled by any other major western economy.
Australia is a rock-solid investment destination.
An investment destination where you know you'll get a strong return, but with the safety and security of a like-minded nation with shared values and with interests that overwhelmingly align.
We are a nation with a century-long record of parliamentary democracy, open government and a trusted legal system.
And on top of those foundations, we've built an economy with world-leading productivity levels, a multicultural and multi-lingual workforce, world-class research institutions and strong intellectual property protection.
But perhaps our biggest attraction is the adaptability and resilience of our economy.
Australia is the only country to be ranked in the top 5 of the world's most resilient economies for each of the past five years.
Now we don't pretend the Global Financial Crisis and the Asian Financial Crisis a decade earlier weren't tough going, they were. But the strength of our economic fundamentals, and the fundamentals in our institutions that were so strong, enabled Australia to not just weather the storm, but to thrive.
On current forecasts, Australia's economy is expected to outperform every major advanced economy outside the United States over the next five years.
Right now, our economy is in a state of transition.
We are moving from the high investment phase of the mining boom to a period in which mining production and exports will be strong drivers of growth.
But it's the other sectors of our economy, which have fought through the high-dollar period of the mining boom, which are showing signs of recovery.
And one example is our leisure tourism sector, which is tapping into new markets and growing established ones.
I see tourism as one of our greatest strengths. So much so, that as Foreign Minister, I've brought tourism into the Foreign Affairs and Trade portfolio for the first time – in order to better focus, better align our efforts to attract more international visitors to Australia.
Almost six and a half million people visited Australia last year, and that's an increase of five per cent on the year before. And John Olsen, I'm hoping after another G'Day USA promotion we'll see double that in years to come!
Visitors from China alone increased by more than 15 per cent and the Indian market grew by over 13 per cent.
Around 40 per cent of all spending by tourists in Australia comes from Asian visitors, and that market is continuing to grow.
I'm pleased to say plenty of Americans are still making their way down under.
Just last year, we welcomed even more American visitors than the year before, a five and a half per cent increase – despite our dollar remaining high. And nearly half of them were repeat visitors.
United States tourism to Australia is a two-and-a-half billion dollar market – and one that's projected to double by 2020.
Why? Well, because we offer:
- Safety and security,
- Really great food and wine,
- World-class natural environments, stunning beaches, great cities,
- Friendly locals,
- And we really, really, really like each other.
American investment in Australia
Many of Australia's economic achievements have been backed by US capital. The United States has been our largest foreign investor for the past decade.
American investments in Australia total 618 billion dollars.
And the United States is by far Australia's largest destination for our investment abroad, with stock valued at some 434 billion Australian dollars.
Now the free trade agreement signed by our former Prime Minister John Howard and President George W. Bush has made Australia an even better option for US investors.
This Free Trade Agreement lifted the threshold for unchecked – that is, no government interference – unchecked US foreign direct investment to the highest level for any country.
Non-government investors from the US can invest in Australian assets to a value of one billion dollars without any government approval.
That's more than four times higher than the threshold for almost all other investors, and United States companies have already taken advantage of that.
Let me give you one of these examples. One the world's largest biotech companies, Amgen, from California invests $35 million of its global R&D budget in Australia and has been conducting clinical trials in Australia for 20 years.
Ten per cent of its clinical trials globally have been done in Australia, and the company employs nearly 150 people in five cities in Australia.
That's because Australia is home to some of the world's best doctors and scientists, who've been trained at some of our outstanding universities.
We have a culture of innovation and invention. And it's very bold of me to say this in the land of innovation and invention but Australian scientists invented WI-FI, as well as the bionic ear, spray on skin for burns victims, sonograms and the black box flight recorder, to name a few.
Australia has one of the world's most highly-educated workforces, as I said. But let me put this out: nearly forty per cent of our workers hold a tertiary qualification.
In some sectors, like scientific and technical services, that figure is well over 70 per cent.
But along with that higher learning, Australians are, by nature, by instinct, innovators and creative thinkers.
We're also pretty hard-working, we're gutsy, and we're resilient.
We understand the countries of our Indo-Pacific neighbourhood.
I put it to you: it's a hard combination to beat.
And one that investors from around the world are finding increasingly attractive.
The success in Australia of companies like Amgen, as well as Boeing, IBM, Citrix, Unisys and Eli-Lilly, says a lot about our economy.
Increasingly American food and agriculture companies like Cargill are becoming household names in Australia's rural towns and helping to grow our agri-food sector for the demands of the Asian region where food security is a touchstone issue.
Our agriculture sector, like the rest of the economy, is open for business and open for investment.
So in conclusion, let me assure you that free trade and foreign investment are part of Australia's national DNA.
Trade and investment are the twin pillars that helped build Australia from the earliest days of European settlement – in resources, agriculture, manufacturing and the services sectors.
And these are lessons that we want to share with the world, and we're fortunate to have the platform to do so this year as we chair the G20.
Which brings me back to my original premise – Australia as a Top 20 nation.
We're an influential economic player.
And as a new Government we have a key focus on business and investor confidence. Which translates into respecting sovereign risk, and providing a stable investment environment – for the longer term.
So that in Australia you have the confidence of stability and security – in government, in the banking sector, and in the national economy.
You're also getting a really good friend who knows and understands the United States, and a government and a private sector that will welcome you with open arms.
We're a great place to invest in our own right – but we are also a gateway to the Indian Ocean-Asia-Pacific.
If you're not part of it already I really do urge you to come on down under and see for yourself.
- Minister's office: (02) 6277 7500
- DFAT Media Liaison: (02) 6261 1555