Hon. J.B.

HOCKEY
Treasurer
AUSTRALIAN INVESTMENT FORUM
SOFITEL, SYDNEY
SATURDAY, 19 JULY 2014
E&OE…………………….
TREASURER:
[inaudible]
… It is great to see you and thank you so much to Andrew Robb, my very good
friend and Trade Minister. I see Ian Macfarlane, the Minister for Industry. He is
doing an outstanding job, he is also extremely experienced. Also, my flat mate
from Canberra, the Minister for Infrastructure Jamie Briggs, who I hope turned
the lights off before he left yesterday.
To all of you, ladies and gentlemen, thank you so much for coming, particularly
our state colleagues as well. If I have missed anyone, I apologise.
Since white settlement in Australia in 1788 we have had a great challenge in
this nation. We have a very big landmass but a very small population. As the
Mayor of Shanghai said to me about two weeks ago, “the whole population of
Australia would make up a couple of suburbs of Shanghai”. One of the
challenges we have with a small population is that we don’t have an enormous
pool of domestic savings that allows us to build the nation that we have the
capacity to have. We are blessed as a bountiful nation - we have an enormous
amount of resources; agricultural resources, minerals, energy resources, human
resources.
Our great advantage in the 21st century is that we are in exactly the right time
zone as well. So over all of these years, over the last 200 plus years, every year
we have relied on the rest of the world to send money to Australia to make up
the difference between what we can fund in our development and what is
possible. Each year, roughly, we import around $40 billion a year in additional
capital.
So, we rely on foreign investment. There have been lots of waves of foreign
investment. Of course, with first settlement, we relied on the United Kingdom
for many years. The United Kingdom is still one of our largest foreign investors.
Then we started to see a surge in United States investment. Australians were a
little bit anxious about that in the 1970s and the foreign investment regime we
now have in place was a response to domestic concerns about the massive
foreign investment coming in from the United States. That’s always a surprise

to our friends in Japan and China. Japan, of course, with a wave of export of
capital in the 1980s, we too benefited from that and, in turn, Japan is our third
largest investor now. We have the United Kingdom, the United States and Japan
– our third largest investor.
Over the last few years we’ve seen a wave of new investment from China – we
have seen massive increases. China is now our largest trading partner, as you’d
know. But, still, there is an element of state control about Chinese outbound
investment. I confess that in Australia there has been some level of anxiety
about the fact that it is State-Owned Enterprises that have invested. But, since
coming to Government we have honoured our word that this nation is open for
business – that includes from State-Owned Enterprises in China. There will
always need to be a check and a balance for a very small and vulnerable nation.
We are not the United States. Even large nations like China and Japan have
significant barriers, if you like, for investment. Even the United States does; the
United States Government at one stage knocked back an investment from
Australia’s Commonwealth Serum Laboratories, for an investment there not too
long ago. No matter how much we talk about freedom of access, it doesn’t
always apply.
However, since coming to Government we have built upon the massive increase
in direct foreign investment in Australia over the last few years. Currently,
foreign direct investment is $630 billion, a 40 per cent increase since 2008,
which is quite remarkable given the GFC. I want to say to you, with my
colleagues here, we are open for business and we want more.
In the last few months, in relation to State-Owned Enterprises, I approved the
biggest investment by State Grid - one of the biggest companies in the world,
located in China. I approved their investment here in Australia. It is their
biggest offshore investment. [inaudible] and Yancoal, similarly, have had an
open door. Of course, as we’ve seen, the great work done by Andrew Robb in
less than 12 months - he will go down as one of Australia’s great Trade
Ministers, I have no doubt about that. In the last 12 months he has managed to
sign deals with Korea and Japan, which in effect continued to open the doors
but most significantly, land the proposition that we are open for business.
Recently, he and I were in China and again I am very confident that Andrew has
been able to negotiate a free trade agreement. There is still work to be done,
but the imperative to get on with the job is obvious to all.
Now, one of my tasks is to chair the G20 Finance Ministers and Central Bank
Governors meeting. We have had two meetings already this year and we’ve got
three more. Those meetings are helping to shape the destiny of the world
economy - there is no doubt about that. We have shifted away from a regulatory
framework, focusing on trying to fix the problems of the past, getting bogged
down in more financial services regulation, getting bogged down in procedure.
This year we have decided to focus on growth and jobs. As I said to the B20
yesterday - and I’ve been saying repeatedly - Governments around the world
have run out of money. Wherever they are, they’ve run out of money. Because
they’ve run out of money you are going to see, over the next few years, a trend

towards fiscal consolidation. Now, that has contractionary impacts, we know
that. Traditionally, you’ve been able to do that and have a balancing act with
monetary policy, but monetary policy also, is going to have to have some
contractionary elements. Sooner or later, everyone is going to be tightening
monetary policy.
So, you’ve got fiscal policy tightening, you’ve got monetary policy tightening out
of necessity, so what is going to drive the world economy? It has to be structural
reform. There are a lot of Governments that find that very difficult. In Australia,
traditionally there has been a bipartisan response to structural reform. At the
moment we haven’t got it, but we will get there again, because we must. You
need to drive the structural reform agenda and the G20 is very focused on that
structural reform. I won’t quote the Finance Minister, but there are Finance
Ministers that don’t like having numbers attached to goals. Out of the Sydney
meeting of the G20 Finance Ministers I was determined - and in the end all of
my Finance Minister colleagues were determined - to put a number on our goal
– a two per cent increase in world growth.
In addition to that we’re going to have more than 20 million new jobs. The only
way we are going to do that is through the structural reforms that deliver
greater accessibility for capital, easier flow of money, and transparency and
accountability associated with those investments. Significantly, we need to build
the infrastructure of our productive economies. That is going to rely heavily on
your investment.
Of course, there is a trillion dollars a year in shortfall, in monetary shortfall, for
infrastructure around the world. It is not just about new productive
infrastructure, it has got to be about upgrading brownfield infrastructure as
well, and having multi-user facilities so that we better utilise infrastructure that is hugely important as well. Sometimes it is going to take those multi-user
facilities to be supported by government in order to make sure that a number of
different developments around that facility, be it a multi-user train line or a
multi-user port, that they are open and there is a credible transparent
accessibility regime associated with it that then gives all of the business
opportunities around that infrastructure the chance to compete so that we get
maximum bang for our money.
Now, how are we going to do it? In Australia we are rebuilding Infrastructure
Australia as an independent infrastructure entity. To provide advice there has
got to be cost benefit analysis done on projects and we’re doing that. Secondly,
a lot of assets are in the hands of State Governments. They have, like we have,
at times, lazy balance sheets. Business tells me all the time they’re concerned
about lazy balance sheets or lazy capital. Well, Governments have that as well.
So, now, I have put an incentive pool on the table for State Governments provincial governments - I’ll give them $5 billion if they privatise assets, first in
first served, provided that every dollar of assets sold by the State Government
goes into new productive infrastructure. The Victorian Government, I hope will
be first to sign up, selling the Port of Melbourne for, I hope, more than $9
billion. They will get part of my incentive pool and put new seed capital into

railway infrastructure and a range of other things that are going to build a more
productive economy in Victoria. Even South Australia, the great Labor
Government of South Australia, my word, they oppose the initiative and are one
of the first to sign up! How about that? No surprise there.
See, money brings people together. Even the ACT Labor Government couldn’t
think of enough to sell in order to access the pool - I think they’re selling
telegraph poles. That’s fine, as long as we’re building things. And you know
what? This is a huge opportunity for all of you to invest as well; long-term stable
investment. It is not just traditional infrastructure; railways and roads and
airports and ports. It is not just that, it is about getting on with the job of
building additional new infrastructure that lifts the opportunity in our economy.
Now, ten per cent of our economy is resources, two per cent of our economy is
agriculture – two per cent. Yet, they represent a huge chunk of our exports, as
Andrew Robb knows.
So, I just say to you, where is the opportunity? Well, for all of our history
Australia has been at the bottom of the earth. They called us ‘the land down
under’. The world, as a result of new technology, the world has become divided
into three time zones - the Asian time zone, the European time zone and the
American time zone. We are part of the Asian time zone. We are in the fastest
growing region in the world and with our excellent transparency, our excellent
judicial system, with our innovative population, with our sophisticated medical
system, our sophisticated legal system, our sophisticated accounting system,
transparent, significant and liquid capital markets - with up to $3 trillion in
funds under management over the next ten years - we have the capacity to be a
great partner in the fastest growing region not just in the world but in history,
that is the opportunity.
Now, you guys, you’re the ones that can make it happen. You’ve got to build
bridges, you’ve got to build partnerships and the best way to do that is to have
links between human beings. Do not simply send a cheque. Everyone seems to
be doing that to us now, it’s not going to last forever but that’s terrific, we want
the cheques, well, the Government wants the cheques. If anyone wants to
voluntarily pay tax… But, the fact is, you’ve got to build long-term partnerships.
The very best investments are always based on mutual respect and trust. That is
no different between business people or between government, but it has got to
be between communities. That’s the way you build long-term sustainable and
profitable business enterprises.
So, we welcome your investment and we welcome your contribution, Thank you
for supporting Andrew Robb and the Austrade team. We look forward to longterm relationships built on mutual respect and trust. Most significantly, as a
result of everything we are focused on, the G20, T20, B20, everything we are
doing is focused on creating more jobs because out of jobs - which are only
every really created by the private sector - but out of jobs you get prosperity
and out of prosperity you get a better earth. Thank you very much.
[ENDS]