Ladies and gentlemen, it's an honour to speak to you. I find myself in esteemed company. I'd like to acknowledge: the Governor of Victoria, the Hon. Alex Chernov AC QC; Melbourne's Lord Mayor Robert Doyle; China's Consul General in Melbourne Shi Weiqiang. And all the respected business people and officials present this morning.
Probably no gathering in Australia today better understands that our relationship with China – and with Asia more broadly – is punctuated by defining moments, and characterised by a series of inspired choices.
Forty years ago, Australia faced a choice. This choice was between engaging with the People's Republic of China or continuing to somehow deny its existence. Gough Whitlam and my friend the late Mick Young chose not denial, but engagement.
From that one inspired choice flowed a diplomatic relationship of striking mutual benefit spanning four decades and still going strong.
Thirty years ago, Australia faced another choice. This choice was between liberalising our economy or continuing to pretend an insular, inward-looking economy could deliver the standard of living all Australians deserve.
Our former Prime Ministers Hawke and Keating persuaded us to stake our future on an open, outward-looking, economic model. It was this inspired choice that laid the foundation for a remarkable run of prosperity, including the uninterrupted economic expansion we have enjoyed over the last two decades.
Twenty years ago brought yet another choice. Between orienting ourselves towards an Asian future or continuing to imagine we could succeed as a colonial outpost of the old world. Former Prime Minister Keating emphasised that we needed to lift our gaze to an Asian future and we have since seen a remarkable increase in trade and engagement between Australia and our region.
Today I want to talk to you about our contemporary defining moment. Today we face another great choice – a choice that will determine our character as an economy and a society for decades to come.
Our choice will rest on the equally important decisions you and I need to make that flow from two threshold questions: Do we have the courage and the wherewithal to ensure we are not just on the right side of the world in the Asian Century, but also on the right side of history? And can we make this the Australian Century in Asia, rather than Australia hitching a ride as a passenger in the Asian Century?
Australia stands right at the centre of a transformative, defining shift that will shape the 21st century.
We are witnessing a dramatic swing in global economic weight from old world Western economies to the Asian economic powers of the future. This shift is well documented, but the facts themselves are stunning and worth mentioning again.
China alone now accounts for almost 15 per cent of global GDP. Its remarkable growth over the past 30 years has meant that the size of its economy has doubled every seven to eight years. And in this decade – by 2016 – China will surpass the US as the world's largest economy.
This audience today – representing the Australia China Business Council – well understands the economic rise of China.
But there is a broader and deeper tectonic shift at play – one that transcends any one nation alone. Over the next five years, the IMF expects China to drive around a third of global growth – but developing Asia more broadly will drive over half.
Developing Asia is the world's fastest growing region, and is expected to continue to be so for at least the next two decades. So it is not just China that will drive the Asian Century. It is also countries like India, Indonesia, and Vietnam. And perhaps – just perhaps – even those poverty stricken but populous nations in the region will rise and be a force to be reckoned with.
After all, a century is a long time. These tectonic shifts are occurring right on Australia's doorstep: In the 1950s, only 15 per cent of global GDP was within 10,000 km of Australia. Today, that share has more than doubled to around one third. And, by 2050, it could surge to almost two-thirds of total global GDP.
This tells us that Australia is now closer to the centre of global activity than it has been at any time in its modern history. And as the face of the global economy continues to transform, we can expect to only get closer to the economic core.
For Australia, the implications of all this are truly enormous. Many will see the opportunities and challenges of this transformation through the prism of the mining boom that's gearing up in our own economy.
That's understandable, when you consider that mining firms intend to invest $120 billion next financial year. That's a staggering increase of around 155 per cent in just two years – and is thirteen times higher than its level one decade earlier.
As impressive as this is, the unprecedented opportunities on offer from the Asian Century will extend far beyond the mining boom, which is only the first taste of Asia's rise.
Increasingly, it will be the growing prosperity of Asian populations that shape the opportunities and challenges facing Australia. I think it's worth just reflecting on this transformation for a minute because it's a dynamic that is still not that well understood.
Based on UN projections, China's urban population will increase by 216 million people between now and 2025. Throw in India and Indonesia, and the combined increase in the urban population over that period is projected to be more than 400 million. As incomes rise, the growing cities of the Asian Century will be populated by an increasingly prosperous and ambitious Asian middle class.
And we know that as this happens, Asia will evolve to become not only the world's largest production zone but also the world's largest consumption zone. Asia will demand more and better consumer goods – like complex consumer durables and high-end electronics which were previously available only to the wealthy in society. And they'll demand more sophisticated services – both at home and abroad. Education. Recreation. Healthcare. Financial services. Travel.
They will demand better homes, less polluted environments and more leisure for cultural pursuits and personal development. They will demand all the trimmings of one of the greatest economic and humanitarian achievements of our age – the lifting of hundreds of millions of people out of poverty and into a modern life.
This is history in the making and the opportunities are boundless.
It would of course be easier just to wait for these opportunities to present themselves – to coast along on the wave of Asian growth. But I deeply believe that such a course would represent a profound failing of our responsibility to all Australians today and into the future.
Australia's success in the Asian Century requires more than just an accident of geography, or geology. Australia's success in the Asian Century is not preordained. It is not guaranteed, and it will not be easy. Australia's success in the Asian Century will be determined by choice, not just by chance.
That is exactly why Prime Minister Gillard, my ministerial colleagues and I are working so closely with Ken Henry to produce the Asian Century White Paper.
It's why we have been talking to communities and groups like yours to hear your views about what side of history you want Australia to be on. And it's also why I've asked Treasury to update our regional modelling to ensure we fully understand the nature and magnitude of what we face.
Without pre-empting the outcomes of the White Paper, I want to spend some time sharing my own thoughts this morning so that you know where I'm coming from and where I think the opportunities lie. First, we must ensure we continue to put in place the domestic reforms that will underwrite our future productivity and economic adaptability.
While the ongoing industrialisation of Asian economies will underpin strong growth in our region for some time, it won't be possible to predict each and every opportunity or challenge that we will confront in the years ahead.
So the best way to prepare ourselves for these is to ensure we have the skills, the capital and the flexibility to respond. This means persisting with the reforms that have been central to the Government's agenda in recent years, as well as those that have underpinned our impressive record of economic growth and resilience over the past two decades.
I'm talking about reforms like the MRRT, the carbon price, investments in skills and infrastructure, tax cuts, prudent fiscal policy, broad ranging regulation and competition reform, and increasing our national pool of savings through superannuation. These policies will not only help non-mining sectors adjust to the immediate pressures of the mining boom, but it will put them in the best position to capitalise on future growth in global markets.
I know some commentators have argued that Australia is a low productivity growth economy that will struggle to compete in these new markets. And while we certainly need to lift productivity growth, we should not forget that the level of our productivity is high, both relative to our history and relative to other countries.
In terms of our labour productivity levels, Australia is one of the top dozen countries in the world for which data is available, and we have been so for more than the last decade.
We are a highly educated, multicultural, entrepreneurial society with a long record of economic success. We begin our journey in the Asian Century with many advantages.
And from that foundation, we must continue to build our reputation as a high-technology, low-carbon economy – moving up the value chain in product and service markets to supply a rapidly middle-classing Asia.
To do this we need to be prepared to take advantage of our prized position, and reversing the slowdown in productivity growth over the last decade or so is central to this task. This is why we need to make the case for ongoing domestic reforms, irrespective of how Asian growth evolves.
The second key area we must continue to focus on is deepening our engagement with the region. Australia and Australians have well established relations with Asia, but I believe there is always scope to grow and improve these.
There is also probably no other Treasurer that has travelled to China more to foster our mutual economic interests than I have – at last count six times. I plan to visit China as Treasurer for a seventh time this year and lead an Australian business delegation in the process.
It is also why I see opportunities between our two countries in the internationalisation of the Renmimbi and will be looking to nurture these.
Just last week we took an important step in this direction. The RBA and the People's Bank of China announced a $30 billion currency swap deal between them, making Australia among the first developed countries to do so. It is these framework Government-to-Government links that are essential between our two countries, especially where Government policy in Chinese society still influences a far wider range of activity than in other countries.
But what really matters for our economic relationship is the drive of businesses and people to establish their own relations – their own friendships – in the region.
Which brings me to the third area where I see Australia can advance in the Asian Century – and this is through business-to-business and people-to-people links. It will be the friendships made at school, the enjoyment of conversing in a common language, and the respect formed in conducting repeat business that will sustain our engagement with Asia into the future.
It will be these cultural, educational and commercial foundations that will support our success in the Asian Century. And while Government can assist in facilitating this, ultimately it is the responsibility of everyone in this room and others like you to make their own inspired choice to ensure they are on the right side of history.
The debate about Australia's future in Asia – like all policy debates – must be conducted with a consistent focus on maximising our long term advantages.
Too often we get distracted by minor, short-term shifts in economic data, or the headlines on the nightly news.
Too often we focus on the downside, the partisan politics, and the inevitable costs of structural change.
Too often it can be tempting to take the easy, complacent path.
Instead, we must make the inspired choices required to reap the extraordinary, multi-generational dividends that the big policy reforms and the Asian Century offer. We must take the harder, longer and far more demanding path of equipping ourselves to participate in the Asian Century.
In response to the questions I asked at the start: whether we can be on the right side of history not just the right side of the world; and whether we can make this the Australian Century in Asia and not just be passengers in the big shifts around us.
It is my strongly held belief that with your help, we can turn our tremendous chances into the right choices. There will always be bumps on the road and there will always be disagreements about how we travel it.
But it is our turn to make the next set of inspired decisions. And in the footsteps of Whitlam, Hawke and Keating, we should take these decisions with a view to unlocking new sources of prosperity.
Ensuring that we are on the right side of history. And making this the Australian Century in Asia.