Crawford Australian Leadership Forum: Keynote dinner address

It is an absolute pleasure to be here at the Crawford Australian Leadership Forum. I am delighted to be back at our national university once more and I note the strong line-up of thinkers and policy makers contributing to this two-day conference. Given the times, I am sure the debate has been thought-provoking and, perhaps, even confronting.

I am aware that your discussions have focused heavily on contemporary geopolitical and economic issues, and that will also be the focus of my speech this evening. Australia is an export orientated economy, with a strong focus on commodities including minerals, energy and food.

While this represents our great strength as a nation, it is also a point of weakness as we are more vulnerable than many others to the vagaries of international commodity markets, which are invariably, inevitably volatile.

Australia has derived great national benefits from the stable economic growth in our region – the first wave from Japan's spectacular economic growth from the 1960s to the early 1990s.

A foundation of our trading relationship was the visionary decision of then PM Menzies to sign a commerce agreement with Japan in the aftermath of World War II. To our great fortune, China began its rapid economic expansion from the 1990s, effectively accelerating, when Japan's growth rates were slowing.

Other nations in our region are also embarking on rapid economic expansion. India's new Prime Minister Modi comes to office with a strong pro-growth agenda, while ASEAN nations are showing increasingly dynamic growth.

Looking ahead, there appear to be endless opportunities for Australia in terms of demand for our resources, energy, agricultural output and our services with the growing middle classes in our region.

However, any good financial manager engages in risk management and the Australian Government knows it must be acutely aware of threats to regional or global stability that could impact on Australia, strategically or economically.<

There are many issues to contemplate, but two in particular have the potential to gather momentum and go beyond the collective control of regional and world leaders. The first is territorial disputes, such as those playing out in the East and South China Seas at present.

The second is that the majority of the world's poor now live in middle-income countries, where the benefits of overall growth have not spread throughout society or where the scale of growth has been insufficient to elevate those most disadvantaged.

One lesson from the uprisings in Arab countries, formerly known as the Arab Spring, relates to the sense of alienation that can develop when large sections of the community become frustrated at the lack of opportunity to improve their standard of living.

Allow me to address each issue in a little more detail.

With regard to territorial disputes, and I stress I am not drawing any direct parallels, it is nevertheless useful to consider the consequences of a single event that occurred one hundred years and two days ago.

The assassination of Austrian Archduke Franz Ferdinand and his wife Sophie in Sarajevo on 28 June 1914, marked the beginning of a tragic, month-long descent into what became a global conflict, the First World War, bringing the imperial age to an end.

It was a time of major shifts in the geopolitical tectonic plates, as the world's first truly global empire, the British Empire, sought to defend its interests against a German challenge for primacy - military and economic.

Around this time, one hundred years ago, public debates were influenced by a special form of late 19th, early 20thCentury Social Darwinism that applied evolutionary principles to the combat of nations – where the strongest imposed their will against weaker opponents.

Many believed that in the immediate aftermath of Archduke Ferdinand's untimely death, any conflict would be short-lived, like many of the European wars of the previous century.

They could not have been more misguided. Recently I met with Canadian author and scholar Margaret MacMillan here in Canberra and discussed her latest book, The War That Ended Peace – a riveting account of the origins of the cataclysmic conflict that spiralled out of control within a few short weeks due to a series of miscalculations and misjudgements. The abysmal failure to achieve peace at that time led to the deaths of more than 10 million people across at least 10 countries over the 4 years of 1914-1918.

MacMillan also painted an evocative picture of the pre-war period and the inter-mingled optimism, pessimism and fatalism of that era.

Europeans before the War lived in a time that was – in some ways – like our own.

For it was a time of disruptive technological change, as electricity, motor cars, aeroplanes and the extraordinary possibilities of industrialisation brought not only rapid change but also increasing prosperity and a dynamic social mobility, previously unimagined.

One hundred years on, we live in another era of optimism and great invention – in which our technological, social and economic foundations are moving rapidly.

While there are a few similarities, and given this is the centenary of the Great War, we will inevitably ponder the comparisons of the respective times, but I do not believe we are doomed to follow down the path taken one hundred years ago. As the famous quote notes, it is those who forget history who are doomed to repeat it.

As then British Prime Minister David Lloyd George - who led his country's Wartime Coalition Government both during and after the First World War observed: 'The nations slithered over the brink into the boiling cauldron of war without any trace of apprehension or dismay'.

While we also live in a time of rapid and disruptive change, unlike the early 20th Century, change today can be harnessed into a positive force for good. There is no room for complacency, but the globalisation that has taken place in the last half-century has in fact raised the threshold against conflict, as the world has become increasingly interconnected and interdependent.

Global supply chains for virtually everything would greatly increase the cost of any major conflict, particularly one involving global economic powers. Stability, peace and prosperity are intrinsically linked.

In foreign policy terms, the Coalition Government will continue our national tradition of actively working in every available forum to protect and promote peace throughout our region and beyond. We will be part of a cohort of nations that will not sleepwalk into conflict, but work assiduously to maintain peace.

A key plank of our effort will be through what I call 'economic diplomacy'. Just as traditional diplomacy aims for peace, economic diplomacy aims for prosperity – and peace!

Today, trade in goods and services - indeed almost every transaction- occurs across a multitude of borders. The gaps between the developed and developing worlds are shrinking and more rapidly, largely driven by the unleashing of economic forces within China - possibly the most remarkable social and economic phenomenon of our age. Hundreds of millions have been lifted out of poverty, through economic and market reforms – China today is the largest trading partner of over 120 nations world wide.

It is tempting to make the argument that in our world of global production, it makes utterly no sense for any nation or people to take to arms.

Take the Apple iPhone as a small but apt example. Its global sales have reached over 500 million - its success is built on US innovation and technology, while being assembled in large factories in China, with component parts manufactured not only in China and the US, but in Japan, Korea, Germany and elsewhere.

Every nation in the global supply chains has much more to lose from conflict than they could ever hope to gain. And yet, there is increasing instability and conflict in our time. We cannot take for granted that globalisation is, of itself, a bulwark against aggression and conflict.

This is not a new concept. British author, parliamentarian and 1933 Nobel Laureate, Sir Norman Angell observed just over 100 years ago, that economic interdependency at that time had become so significant, that war had become economically pointless. He argued that rational self-interest would triumph in the considerations of national leaders. Tragically history proved that global trade did not prevent irrational or mad decisions, and did not stop war. We must learn from that lesson.

Today we are witnessing the re-emergence of Asia as an economic power. China has been the largest economy in 18 of the last 20 centuries and is set to be again in the 21st Century. This has brought with it renewed, and increasingly significant border tensions as China asserts what it sees as its role as a global power – as we have witnessed recently between China and Japan, with Vietnam, the Philippines and other countries in the East and South China Seas.

Australia takes no position on the merits of the competing claims, but we do have a vested interest, a deep vested interest, in the maintenance of peace and stability in the seas and oceans to our north and west. That is why we urge all nations to refrain from unilateral or coercive behaviour and for all disputes to be settled peacefully through negotiation and according to international law.

And it is in this context that perhaps the most critical lesson from WWI is relevant – that isolated, single, random events can unleash forces that quickly spiral out of control. That is why we urge all nations involved in territorial disputes to show restraint, to avoid miscalculation or misjudgement that could trigger another round of escalating tensions.

International institutions must also remain engaged in the most difficult disputes, to prevent any slide into conflict. One example where this is forging ahead successfully is the East Asia Summit, where the ASEAN countries together with China, Japan, the United States, Russia and Australia, have the opportunity to resolve the different challenges we face - strategic, political, economic, financial and environmental - in our region of the Indian Ocean Asia Pacific.

With ASEAN at its heart, and China and the United States as key members, the EAS is the kind of evolving international forum that has the membership and mandate to build stability and security.

The Howard Government achieved a major coup, supported by our friends in Japan, in gaining membership of the EAS in 2005 and we must work hard to ensure its ongoing role.

A stronger global system

More broadly, Australians must strive even harder for a future of peace and prosperity, and work even harder to make that our reality.

As the world continues on its path towards greater globalisation and mutual inter-dependence we must ensure it is not fragmented into competing hostile trade blocs. Notwithstanding sometimes glaring inconsistencies around the world, most leaders in most countries understand that freer trade and finance is to everyone's benefit, not only their own.

Most have seen the benefits of globalisation, whether in their own country or another – and they want more integration into supply chains so as to capture the benefits. Protectionist walls and sentiment still exist – but they are slowly coming down over the longer term.

Today, China, Russia and 158 other countries are members of the World Trade Organisation because they know that it is absolutely in their national interest to be actively engaged in global trade liberalisation and facilitation. Australia is determined to conclude free trade agreements with our Asian trading partners and through our membership of both the TPP and RCEP, we hope to realise the dream of an Asia Pacific free trade zone.

The major economies of the world are in the G20 because of their economic clout and because they themselves appreciate the self-interest of involvement in decisions about the global economy. That is certainly true of Australia, as this year we serve as the chair of the G20 leaders forum in Brisbane, as we did with the G20 in Melbourne in 2006 when it was a finance ministers forum.

The G20 was raised to leader-level in response to the Global Financial Crisis, and has now replaced the G8 as the premier forum for global economic reform. The agenda for this year's G20 meeting is economic growth, with a 2 % increase in global GDP as an ambitious target and with growth in developing nations a key element.

As I noted earlier, the majority of the world's poor now live in middle income countries.

There is an urgent need to ensure the benefits of global and national growth reach poor people. Severe imbalances in wealth distribution have led to instability as those without rise up to demand a fair share of the economic spoils. The current conflicts in the Middle East are based on a myriad of complex issues, but inequality is a common feature.

Recently I launched a policy for what I describe as the new aid paradigm. Australia's foreign aid will be directed to stimulate economic growth by supporting private sector business activity in developing countries in our region to alleviate poverty and lift standards of living. We will target the barriers to economic empowerment through a focus on public/private partnerships, infrastructure, education and health, and the empowerment of women and girls.

A key issue we must address, and which is also on the G20 agenda, is the potential to increase taxation revenues. Tax revenues lost to corruption, avoidance and evasion in many developing countries dwarf any inflows of foreign aid. Supporting governments to put greater rigour in tax collection will also ensure more stable and sustainable governments.

Given the billions of dollars Australia has invested in aid to developing countries in our region in recent years, we should not simply accept that some development challenges are intractable. Nor should we accept the fact that social and economic indicators are going backwards in some aid recipient nations.

We need fresh thinking, and new approaches. I am establishing a new Development Innovation Hub within the Department of Foreign Affairs and Trade to explore and fund new ways of investing in overseas development. I am searching for creative, innovative thinkers from within our public service, from the private sector, academia, civil society – nationally and internationally. I want to ensure we have access to the best new ideas and practices, and trial them. If they work we'll scale them up. Yes this will mean a different risk profile, and I note Secretary Varghese is here tonight, and he's more than up to the challenge – but we must be more innovative if we are to make a significant difference to the lives of people in our part of the world.

Conclusion

Australians inherently look to the future with optimism – we are a naturally upbeat people with a positive view of life. However, we are not naïve and we understand the world is constantly changing, with forces for good and for ill battling for survival.

Our challenge is to shape those forces, to promote those which are constructive and manage those that seek to be destructive. And to do that, we must continually challenge ourselves to find new insights and strengths that we can dedicate to the cause of regional and global prosperity and security.

One of the initiatives of which I am most proud, and which I believe has long-term implications for Australia and the region, is our New Colombo Plan. In Opposition, I was inspired by the number of business and political leaders I met in our region who had been original Colombo Plan scholars in Australia in the 1950s to the 1970s.

The original plan brought tens of thousands of the best and brightest young people in our region to Australia, to study and learn about our nation. My idea was to reverse that process and send our best and brightest young people to the nations in our region, where they can live, study and work, and immerse themselves in rich and vibrant cultures and communities and languages.

Importantly, it includes a business internship so that young Australians also get the experience of working in another country. In what I consider Australian soft power diplomacy at its best, Indonesian Foreign Minister Marty Natalegawa has offered internships within the Indonesian Foreign Ministry for Australian New Colombo Plan scholars.

This will be a life-changing experience for these young Australians, who will be ambassadors for our nation and ambassadors for peace and prosperity, and return home with new skills and insights – but importantly with networks and friendships that will benefit our nation for generations.

There are many challenges and opportunities in the years ahead, however the Government firmly believes that 'economic diplomacy' and working to strengthen the diplomatic foundations of our region can ensure that we are on the path towards shared prosperity.-