Minister for Financial Services, Superannuation and Corporate Law
9 June 2009 - 14 September 2010
Leadership Challenges for the New Era
The 6th World Islamic Economic Forum, Kuala Lumpur, Malaysia
19 May 2010
Australia's relationship with Malaysia
Good afternoon and thank you for the invitation to be here.
I would particularly like to thank our Malaysian hosts for your hospitality.
Since the current Australian Government took office in late 2007, Prime Minister Rudd has made two official visits here and our economic and cultural relations with Malaysia have never been stronger.
Our bilateral relationship dates back to 1955, and spans trade, investment, tourism, education, defence, counter-terrorism and law enforcement.
Malaysia is Australia's third-largest trading partner in ASEAN and our eleventh largest trading partner overall, with merchandise trade worth over 12 billion Australian dollars in the previous financial year.
Around 21,000 Malaysian students attend Australian educational institutions each year, representing Australia's our third-largest source of international higher education enrolments.
Asia's recovery from the GFC
I note that the theme of this session is "Leadership Challenges for the New Era". Certainly, plenty of leadership will be required as the world emerges from the Global Financial Crisis.
Our region has done remarkably well to keep our heads above water throughout the GFC – and to now be leading the rest of the world toward recovery.
Remembering the serious regional financial crisis that engulfed the region barely a decade ago, it is all the more remarkable that Asia should be leading the global recovery.
Importantly, this growth is broad-based. It is not just driven by exports but also by resilient domestic demand and a strong surge in investment.
Now we must provide leadership to ensure we, as individual nations – and we as a region – capitalise on our strengths, build on our success in weathering the GFC and ensure our nations and our region come out stronger.
Australia's economic strength and financial services centre ambitions
In Australia, that has meant the fastest fiscal consolidation in 50 years.
By the middle of 2013, our budget will be back in surplus – three years ahead of schedule. We also have the lowest debt and deficit of any major advanced economy.
We have also been taken steps to strengthen our retirement income system, increasing our mandatory superannuation payments – known as the superannuation guarantee – from 9 per cent of a worker's income to 12 per cent.
Over the next 25 years, changes we've announced to superannuation over the past fortnight will increase our pool of funds under management by 500 billion Australian dollars.
That will see this pool of funds under management rise from $1.2 trillion to a projected $5.8 trillion by 2035.
Not only does our compulsory superannuation system help Australians prepare for – and fund – their own retirements but it has also given our financial services industry invaluable experience in managing funds.
It is this experience that we would like to offer to the region. Consequently, we have an ambition to reach out to our regional friends and neighbours and encourage you to do business in Australia.
With this in mind, in 2008, we commissioned a panel, headed by Mr Mark Johnson, to review our financial services sector. Their conclusions included a number of recommendations aimed at improving the tax and regulatory environment in Australia.
We plan to adopt nearly all their ideas, including a reduction in interest withholding tax and – crucially to this conference – a review of any taxation and regulatory arrangements that currently stand in the way of Islamic finance products in Australia.
Islamic finance is already coming under increased consideration in Australia, and we recently hosted Islamic financial service trade missions from the Dubai Export Development Corporation on behalf of the United Arab Emirates.
Centre for International Finance and Regulation
Another measure we have recently announced is the establishment of a Centre for International Finance and Regulation.
This Centre is designed to contribute to regional financial system stability – by developing and supporting students, academics and researchers from the Asia-Pacific region; and by building regional capacity.
The work of the Centre will seek to inform government, regulators and financial industry practitioners in Australia and the region.
It will have a focus on regional engagement, innovation and improved regulation. One of the key underlying themes will be to ensure that government policy, regulatory actions and market practice support development of appropriately regulated markets.
We want the Centre to foster financial sector innovation while, at the same time, ensuring the risk inherent in the financial system is appropriately managed.
In short, the Centre will exist to enhance understanding of global financial markets, their interconnectedness, and their influence on national economies.
The value of regional engagement
Of course, as well as strengthening our individual economies, we need to strengthen our region as a whole.
While we are in some senses competitors, we must not lose sight of the fact that we all benefit from growing the region and facilitating cross-border capital flows.
That is why another idea from the Johnson Report that we are interested in pursuing is an Asian Regional funds passport.
This would involve a multilateral framework to enable a complying retail investment fund in a country that signs up to the passport framework to offer its products in each of the other signatory countries.
This sort of framework already exists elsewhere, such as Europe's Undertakings for Collective Investment in Transferable Securities – or UCITS – where it is operating successfully.
The benefits of such a framework are wide-ranging. Consumers benefits from greater investment choice and more competition, and our respective local fund managers benefit from being able to access a wider pool of capital from their home base.
We recognise that this reform would take some time to introduce but I'm looking forward to engaging with our Asian counterparts on the opportunities that this may present our region.
Co-operation between regional financial centres has the potential to realise significant mutual benefits.
Later today, in this spirit of regional co-operation, I will be meeting with Mr Tan Sri Dr Zeti Akhtar Aziz, the Governor of Bank Negara Malaysia, to finalise a Memorandum of Understanding between Australia's Treasury and Bank Negara.
This MoU is aimed at establishing strategic cross-border cooperation in relation to global financial services to ensure efficiency and effectiveness of regulation in the overall financial systems of each country.
Originally concentrated on Islamic finance, the MoU has since been broadened to encompass regulation of all financial products. I welcome the spirit of co-operation it represents between the two countries and the benefits it will facilitate in terms of ongoing exchanges in the area of financial regulation.
I also welcome other opportunities for broader multilateral engagement, such as the ongoing success of the annual APEC leaders' conference. The dialogue that happens through APEC is invaluable and, of course, I recognise that much of the good work goes on behind the scenes in the time between the annual leaders' meeting.
In my brief remarks this afternoon, I hope I have touched on some of the good work that is going on in Australia, as well as our desire to look outwards, and our openness to regional engagement and co-operation.
Thank you again for the invitation to be with you.