Address to the Asia Society

Thank you Tom (Nagorski) for your kind introduction, and I thank Kevin (Rudd) for this invitation and for his ongoing contribution to international policy making.

I am really delighted to address the Asia Society during this extraordinarily busy UN General Assembly Leaders' Week.

For over six decades, the Asia Society has made a valuable contribution to strengthening relations between organisations and individuals in the United States and Asia, with the aim of building a more prosperous, secure and peaceful Asia, contributing to global peace and prosperity.

The decision of John D. Rockefeller to establish the Asia Society in 1956 was remarkably far-sighted.

Like much of the world, Asia was recovering from the Second World War and was a theatre of Cold War competition.

President Eisenhower, in his Annual Message to Congress on the State of the Union on 5 January 1956, warned of the serious threat that Communism posed to the free world.

He pledged assistance to Asian nations struggling to maintain freedom against coercion and subversion.

Having played such a significant role in winning the Second World War, the President was determined to win the battle for influence in what we have come to label the Long Peace which followed.

In 1956, the economic ascent of Asia was in its infancy.

For example, the combined GDP of Northeast and Southeast Asia – collectively known as East Asia - comprised around 15 per cent of global GDP.

The figure is now about 30 per cent and could exceed 40 per cent in a decade's time based on current trends.

The region was also then extremely poor in absolute terms.

The average GDP per capita in the United States was 13 times larger than in Asia, where more than 90 percent lived on $2 a day or less.

Today, GDP per capita in the United States is less than five times larger than in Asia and poverty now afflicts less than 20 per cent of people in the region.

Despite Asia's remarkable economic rise we should note that of the top 20 global economies, in GDP per capita terms – if that's the best measure of prosperity and standards of living – only three are in Asia. Most are yet to reach the status of fully industrialised economies. There's obvious potential for even greater growth.

As we reflect on the decades since the Asia Society was founded, we remain thankful that President Eisenhower's vision of freedom throughout Asia continues to inspire and support the aspirations of people in our region.

Countries such as Japan and South Korea have emerged as exemplars for Asia and the global community of modern and prosperous democracies.

In 2007, the Association of Southeast Asian Nations (ASEAN) adopted its Charter which includes aspirations:

• to strengthen democracy;
• enhance good governance and the rule of law;
• and to promote and protect human rights and fundamental freedoms.

The ASEAN Charter reflects what has been repeated many times over six decades: domestic stability and enduring prosperity is most likely in societies with strong liberal institutions and political, personal and economic freedoms.

It is worth noting that history shows all the high-income economies in the world to date are liberal-democracies, with the exception of several oil-rich states.

As economic power moves from west to east, Australia is located in what is the most economically dynamic region in the world.

This economic dynamism will continue - or not - depending on the wisdom, decisions and determination of leaders, governments and populations.

Even allowing for North Korea's threatening and destabilising behaviour and its illegal ballistic missile and nuclear programs, we enjoy relative peace and stability in Asia.

To a large extent, the prospects for continued peace and stability in Asia depend on our capacity to manage the consequences of rising prosperity and wealth – which is overwhelmingly a blessing.

However, growing individual and national wealth – and the demand and expectation for that to continue – presents challenges.

Many parts of Asia are rapidly ageing.

The number of people over the age of 70 in Asia is due to more than treble over the next three decades–from about 207 million to more than 677 million.

For example, Japan, South Korea, and Singapore will have one of the highest median ages in the world over the next two decades.

China confronts the most dramatic challenge.

When the country was still in the middle of its rapid growth phase two decades ago, there were approximately six workers for every retiree.

By 2030, there could be as few as 2 workers for every retiree.

This makes the challenge for developing Asian nations to:

• get rich before they get old
• avoid the middle-income trap and
• harness the opportunities that come from an emerging middle class.

From the 1960s onward, the region has largely become more prosperous on the back of industrial export-orientated models of rapid development, pioneered most effectively by Japan.

Cheaper and willing surplus labour in the region was utilised to build and assemble manufactured products for the world.

That expert-led model is going through a transition.

Products were made in Asia for the world's largest consumer markets in the US and Europe. Whereas today, the largest emerging middle class is in Asia. Managing the transition from reliance on exports to domestic consumption will be no easy task.

Another challenge for the region – as it is for the rest of the world – is the disruption from the scale and pace of technological advances.

We are entering the 4th Industrial Revolution, or what many experts call the Second Machine Age.

The disruptive effects of advanced manufacturing technologies – robotics, automation, 3D printing – and exponential improvements in artificial intelligence will make many traditional jobs and industries obsolete, while creating new industries and fields of employment.

Some predictions are that within a decade one third of jobs in existence now are at risk of being replaced by software, robots and smart machines.

Jobs most at risk in the medium term are those entailing predictable repetitive work. This may free many people from these jobs, but the challenge will be to find more fulfilling work for those who lose their jobs.

My innovationXchange, which is an ideas hub that I set up within the Department of Foreign Affairs and Trade, has partnered with MIT and an Australian tech company called Atlassian to hold a global 'solve-a-thon' – an ideas challenge – to attract the most creative and innovative ideas for the skills that will be needed for young people and the workforces of the future.

Disruptive change will impact almost every sector and every economy over time.

The reality is that economic and business models that worked well in the past will not be as relevant or effective in the future. This is not new, however it is the pace of change that will challenge societies and policy makers.

Economies in the region can continue to grow if they are able to adapt and innovate, which will require nimble work from governments.

A successful evolution into increasingly sophisticated consumer economies will not happen effortlessly or inevitably.

Regional economies must become more efficient and creative in the way they do things – and in some circumstances, create entirely new markets to drive growth.

Innovation will be rewarded.

Liberal principles such as rule of law, property, and intellectual property rights, more flexible regulatory environments, and policies that support individual and private sector creativity will become even more important.

It will also require greater contestability to ensure limited resources go to the most efficient and productive uses.

This is Asia's domestic reform challenge.

Another aspect of rising national wealth is that it enables nations to invest more in their military. Defence outlays in the region expanded over 5.5% in the last financial year, which easily outpaced the 1% overall increase in global military spending.

By 2020, the combined military budgets of the Asian countries could exceed US$600 billion which would match US military spending for the first time in at least a hundred years.

Rising national power also naturally leads to growing ambition.

In a region where there are unsettled territorial disputes and pre-existing rivalries dating back decades, even centuries, peace and stability cannot be taken for granted.

With its rapidly growing economy which is already the second largest in the world and with the largest military budget in Asia, much attention is focused on China.

Its economic rise is one of the greatest success stories of recent history, with hundreds of millions of people lifted out of poverty.

China is a crucial economic power and partner to the region and the world.

It is vital for China that it plays a constructive role commensurate with its standing. And of course China has additional responsibilities as a permanent member of the Security Council in terms of safeguarding international peace and security.

Those who constructed the security and economic architecture in the region after the Second World War did so with the intention that Asia – freer and more prosperous over time – would promote, advocate and defend their interests.

With greater power and wealth comes responsibility to protect and strengthen the very system which supported that rise.

The importance of the international rules-based order, liberal institutions and the role of the US for the continuation of peace, stability and prosperity cannot be overstated.

The rules-based order is not facing the same direct assault as during periods of the Cold War. However there is a growing tendency for nations to opportunistically bend or ignore international law and rules for narrow advantage and short-term gain.

And the rules-based order will quickly fray if it is perceived that advantage can be gained by flouting or working around it.

We need to defend and strengthen the existing order so that the region and individual countries continue to rise economically.

This international order is not designed to entrench past gains, protect existing privileges, or constrain any country's rise.

It serves to regulate rivalries and behaviour and ensure countries compete fairly and in a way that does not threaten others or destabilise the region.

This order protects the rights of small and large countries by preventing stronger powers from arbitrarily imposing their will on less powerful countries.

We support China playing a greater leadership role in reinforcing and strengthening the rules-based order that has enabled its rise and continues to underpin its growing prosperity.

There are multiple opportunities for regional states to lend their weight and voice to defending and advancing these principles.

For example, the East Asia Summit provides the preeminent setting for countries to advocate for the principles they value and wish to protect.

And when ASEAN speaks, confidently, and with one voice, the authority and standing of that organisation and its member states are considerably enhanced.

Australia is committed to strengthening the military and security arrangements in Asia as a further safeguard for peace.

We are also exquisitely placed to partner with Asian countries as they continue to strengthen. We actually hold a world record; 26 consecutive years of uninterrupted economic growth.

Our prosperity is due in part to our continuing quest for economic reform and conducive regulatory environments; and our commitment to an open export-oriented market economy and the open trading system.

We are a resources and energy super-power, on track to become the largest LNG exporter in the world as well as a leading exporter of coal and uranium – both essential for the energy needs of our region.

Australia is also a major exporter of food and other agricultural products – beef, dairy, wine – all essential for food security. But our greatest natural resource is our people and we provide high quality services for the region – in education, tourism, finance, banking, design and technology. We're also a super power – a lifestyle superpower – and I urge you to experience the delights of visiting Australia, if you are not from Australia!

We do not presume to tell other nations how to regulate or govern themselves, however we can offer the benefit of our experiences and lessons learned.

Conversely, there is much we can learn from our friends in Asia.

I consider that one of our most valuable investments in our engagement with Asia comes from a student initiative that I established in 2014, known as the New Colombo Plan.

There was an original Colombo Plan back in the 1950s, which enabled young people in Asia to study in Australia and gain qualifications from our universities to equip them with the skills to help them rebuild their nations after the devastation of the Second World War.

Over thirty years about 40,000 overseas students studied in Australia under the original Colombo Plan. And many of them have gone on to become business, community and political leaders in our region.

The New Colombo Plan offers opportunities for Australian undergraduate students to live in and study at institutions in any one of our 38 partner countries in the Indian Ocean and Asia-Pacific; from Mongolia in the west to the Marshall Islands in the east and all nations in between.

The time spent at Asian universities is recognized by our universities toward the completion of their degree in Australia. And what makes this program particularly special is that students are also offered the opportunity to undertake work experience, internships and practicums in the host country.

Some countries have actually changed their visa regulations to allow our New Colombo Plan students to undertake this work. Companies, businesses, NGOs and government departments are offering our students the opportunity to see how they operate by giving them the most extraordinary chance to experience the economic, political and social life of the host country.

My plan is for our students to return to Australia more Asia-literate, with new perspectives and insights, new skills – including language skills – that will better equip them as our leaders for the future. Over the first five years of its life, the New Colombo Plan will have supported over 30,000 Australian students to live, study and work in our region.

Importantly, they will develop friendships, create networks, and gain an understanding of the region that will last a lifetime. This will help ensure that our regional relationships flourish and endure.

Before the end of the year, I will release the Australian government's Foreign Policy White Paper. It will be our first foreign affairs blueprint since 2003.

The White Paper will provide a framework to guide our decisions on international engagement in a more complex and contested world.

Asia is a remarkable and dynamic region with a rich history. It has come far in recent decades and has the potential to reach greater heights.

Australia will continue to work closely with our great friends, including the US, and our partners in the region, to ensure that our best days for peace and prosperity lie ahead of us.