It is no exaggeration to say that every Australian has been affected by COVID-19 -some tragically more so than others.
The OECD tells us that we are in the midst of the biggest global downturn since the Great Depression. We have weathered the storm better than most countries – and that has not been an accident. On the economic side of things we have shown enormous resilience, aided by our quick introduction of programs like JobKeeper, which were made possible because of our budget and economic strength.
We also shouldn’t underestimate the resilience within parts of our economy, such as the export sector, which has been a source of such strength, consistent with our proud history and long-running commitment to being an open, trading nation.
The latest data shows a $19.2 billion trade surplus for the March quarter.
And even in the face of the global economic slowdown, we’ve just seen our largest ever monthly trade surpluses in March and April at $10.6 billion and $8.8 billion respectively. Good economic sense and the weight of history lie firmly in favour of continued economic openness.
Openness in terms of the opportunities our businesses have to sell their goods and services overseas. Openness in terms of again welcoming investment when it is in our national interest. And openness in terms of welcoming overseas visitors in the future, when we safely can.
Liberalised trade settings for the three decades have given a 5.4 per cent boost to Australia’s real GDP. Australian households are an $8,400 estimated better off due to our open trade policies. Being part of global supply chains means we can export the large surpluses we produce in many goods, not to mention the expertise of our people and businesses. It also means Australian consumers and businesses can get access to the world’s best technology and products at the best prices.
Likewise, our openness to foreign investment has been crucial to Australian industries, by supplementing domestic savings and bringing business nous and new technology to our shores.
International tourism has also been vital in terms of strengthening people-to-people ties and cultural links. It is also a major economic injector for so many tourism towns across regional Australia.
This all adds up to Australian jobs. One in five Australian jobs relies on trade, one in 10 on Foreign Direct Investment and one in 13 on tourism.
Trade in most commodities has continued through COVID-19, demonstrating the competitiveness and resilience of our exports.
While concerted effort was needed to sustain supplies of particular medical products, at every step our strong commercial ties throughout the world help us to stand in good stead.
In times like these, however, rhetoric calling for a turn inward can be seductive.
Going right back to the birth of our Federation, in the days of Barton and Deakin, the debate about how our economy should be has been central to how we define ourselves as a nation and our relationship with the world.
The barriers erected by Australian Governments throughout much of the 20th Century, though politically popular, held our economy back enormously.
By opening up – and there has been a bipartisan consensus mostly around this – we righted the ship so we could realise our economic potential.
Most protectionist arguments are nothing but an illusion, promising a return to a nostalgic but mythical past.
An inward looking Australia would be a smaller, poorer Australia. A country beset by inefficiencies and lower incomes. An economy unable to capitalise on our comparative advantages.
At best we’d be average at everything, but potentially great at nothing.
Going forward, in a world that was already marked by growing economic nationalism, the challenge is to get the balance right for Australia by having domestic capacity in key certain areas, while not engaging in a wholesale retreat from the openness that underpins our prosperity.
We need to better interrogate how certain supply chains work and whether factors to do with public health, national security, or market concentration mean we need to take steps to make some more resilient.
Alongside this is Australia’s role as an advanced manufacturing nation.
I am not talking about mass consumer goods like cars and washing machines.
Instead, our focus should be technology-led manufacturing using our skills, R&D, and highly-trained workforce.
This can provide us with valuable export earnings plus the manufacturing DNA to face the next crisis, whatever that may be.
Trade policy: expanding opportunities and securing the global system
To ensure our trade policy contributes to our Job Maker objectives, Australia’s three main priorities are in trade:
First, expanding the options for our exporters by opening up even more commercially significant and emerging markets;
Second, strengthening the rules-based system that underpins international trade.
Third, promoting the high quality of our goods and services across the world.
Since 2013, our Government has increased the share of our trade covered by FTAs from 26 per cent to around 70 per cent of Australia’s trade. Concluding new bilateral agreements with Japan, The Republic of Korea, Hong Kong, Peru and Indonesia.
On the plurilateral front, we’ve concluded the CPTPP agreement, expanding opportunities in markets like Mexico and Canada.
And we’re committed to sign the Regional Comprehensive Economic Partnership Agreement in November. Next week, I will participate in a virtual meeting with my RCEP colleagues to take this key agreement forward.
We remain committed to the ratification later this year of PACER Plus to enhance trade opportunities across our close Pacific family.
We also remain focussed on securing an agreement with the European Union as soon as possible. Not even 16,000 kilometres of social distance from Europe could dampen our shared ambition to reach a deal, with a full virtual negotiating round taking place last month.
The EU is a massive, high-income market of almost 450 million people and, as a bloc, it’s already Australia’s third largest trading partner[1] and our third largest source of foreign investment.[2] There’s so much potential for growth in areas like agriculture, e-commerce, and investment.
With improved access to the EU, our economic ties will grow stronger, generating new market opportunities for exporters, delivering greater choices for consumers.
One area of exciting emerging partnership with the EU is clean energy. Closer economic ties present opportunities for Australian businesses in areas such as environmental and low emissions technology.
Australian and European companies are already making an impact in each other’s markets. Australian company Tritium provides much of the electric vehicle charging equipment in Europe. And NOJA Power supplies switchgear technology that integrates renewables into European power networks.
Italian firm Salini Impregilo and German company Voith Hydro are both central to Snowy 2.0, while French company Noeon is planning to build what will be Australia’s largest solar farm in Queensland’s Darling Downs.
At the government level, the EU-Australia High-Level Climate Change Dialogue will kick-off later this month. An important focus will be cooperation and investment in technologies for renewable energy.
When we talk about the EU, the UK is often mentioned thereafter. With the UK formally leaving the EU on 31 January of this year, there has been much conversation about a potential bilateral free trade agreement.
There is no doubt Australia was a casualty of the UK’s entry into the European Economic Community 48 years ago. In 1973 the UK was Australia’s third largest two-way goods trading partner. Now it is our 12th. UK consumers turned away from Australian produce when high tariffs and low quotas were imposed as a result of their membership of the EU.
Brexit presents new opportunities for our two nations. Although the UK was legally unable to commence trade negotiations while still a formal member of the EU, Australia innovated and established a trade working group to get the ball rolling as soon as possible.
We have also settled some agreements with the UK that will come into operation on 1 January of next year. These will ensure continuity of cooperation on nuclear issues, access for Australian wines and mutual recognition of certain standards.
We have thrown the kitchen sink at being in the best possible place to commence negotiations. Today we take the next step. I can announce that later today Australia and the UK will formally commence free trade negotiations.
Australia will be looking to secure better market access for goods exports, especially in agriculture, and high-standard rules on digital trade and investment, to expand our already deep economic relationship.
Beyond our EU and UK FTAs, we’ll also build on the negotiating progress made last year with the Pacific Alliance of Latin American economies to conclude a high quality FTA once current issues pass.
Non-tariff barriers are an increasing focus as the new frontier for our produce to access markets in the world.
These can be huge impediments for exporters, costing industry up to three times more than tariffs on some estimates.
For example, an important recent win was extending the shelf-life for vacuum-packed red meat in three Middle Eastern markets. The previous requirements cost Australian exporters up to $60 million a year in the UAE alone.
Our Government has also helped exporters access electronic certification by securing agreement from countries including Vietnam to accept our electronic health certificates and certificates of origin.
In keeping with our election commitments on improving transparency in free trade agreements, I am pleased to announce today the establishment of our Ministerial Advisory Council; a drawing together of a broad cross-section of industry and civil society representatives to help inform our trade negotiations, starting with the Australia-EU FTA.
The first meeting of this Ministerial Advisory Council will be held next month and builds on our well established consultative processes, complementing the important work of the Joint Standing Committee on Treaties.
As we diversify the opportunities for our exporters, we also need to get the global trade architecture right: this is the second priority of our trade policy.
Shoring up global rules and institutions helps to keep trade flowing smoothly even at times of stress.
Australia has worked hard in forums like the G20 and APEC to build international consensus on maintaining and enhancing openness to make the recovery, and the world’s recovery, as rapid as possible.
In e-commerce, more important than ever in our socially-distanced world, we’re negotiating the first set of global digital trade rules through the World Trade Organization.
And in agriculture, we’re working through the Cairns Group – a long-established coalition of 19 nations in the WTO – on capping and halving agriculture subsidy entitlements by 2030.
This would be a great result for Australian farmers, some of the least subsidised in the world, by tackling unfair distortions that hurt us in many overseas markets.
Also, as coordinator and a leader of the Cairns Group, I am pleased to announce that, today in Geneva at the WTO, Australia will be launching a series of new initiatives to limit the impacts of COVID-19 on global food security.
These initiatives aim to avoid a slide into protectionism to ensure we do not end up with greater global food insecurity as a result of the pandemic. In particular, we are angling for countries to roll-back emergency measures taken during the crisis, such as additional trade-distorting agriculture subsidies, and to ensure transparency and scrutiny of COVID-19 agricultural support measures.
For all its flaws, the WTO remains the best option for economies big and small.
I know the WTO and its byzantine processes can seem academic or arcane.
But having an effective rule book with a working dispute settlement mechanism is the cornerstone of a functional rules-based trading system. It couldn’t be more essential for a country like Australia, which relies so much on our exporters being able to fairly access global markets.
A working dispute system means that when one nation breaks the rules, it can be held to account through a predictable and impartial process. And it limits the ability of bigger players to simply flex their muscles to get their way.
For Australia, it was challenging and disappointing to see the WTO’s Appellate Body cease to function in December last year, with an impasse over appointments.
But as Australia has always done, we’re finding a way forward.
While looking for reforms to bring the Appellate Body back to life, we’ve worked with the EU and 19 other WTO members to create an interim appeal system to finalise disputes between participating countries. We firmly hope to add more countries to that list.
It’s an important sign for us that China is one of the parties to this interim arrangement. It shows that they see many of the same benefits of a rules-based global trading system that we do.
Our partnership with China has been built over many years, extending the hand of friendship based on pragmatism and mutual benefit.
What we will never do though is change who we are, or what we stand for. We will never sell out our national interest – we will not compromise our sovereignty, our values or our principles.
It isn’t a question of idealism. The truth is that we believe in our exporters, and the quality of their offerings, the reliability and integrity of our supply, and our competitiveness on price, we believe those attributes will stand us and our exporters in good stead.
The reason countries trade is mutual benefit – it’s not an altruistic venture.
China is the second largest economy in the world, the biggest goods market in our region, and our two economies have strong mutual complementarities. This is why China is our largest trading partner.
But just as China’s economic recovery will support our recovery, so too will we support China’s. Many of our goods and services are the building blocks of China’s economy.
It’s not a zero sum game. We all win together or we all lose together.
Barley is a case in point. China’s decision on Australian barley impedes the ability of Australian exporters and farmers to compete on fair terms. It doesn’t just affect our farmers. It’s also a significant cost to Chinese consumers and producers.
Australia’s agricultural commodity forecaster – ABARES – has estimated the loss to Australia from China’s decision to be $330 million, but the loss to China being in the order of $3.6 billion.
We produce some of the best malting barley in the world. We know that China’s brewing industry appreciates the qualitative superiority of our malting barley. Our Government maintains there is no basis to apply anti-dumping duties. While seeking a reversal of this decision we are working closely with the industry on alternative market opportunities throughout Asia and the Middle East.
Aligning future export opportunities and industries
Of course, China’s economy is just one moving part in a rapidly changing global landscape.
Australia needs to adapt to such shifts and position our next generation of industries to exploit Australia’s emerging comparative advantages.
Many countries are looking to pursue new trade and investment opportunities. Competition is intense.
We’re making investments to put ourselves at the front of the queue as a partner of choice in big, emerging economies like Indonesia, India, and Vietnam. These countries will only grow as markets for our export sectors like education, agriculture, energy and critical minerals.
That’s the thinking behind our economic partnership agreement with Indonesia, the India Economic Strategy, and enhanced engagement with Vietnam.
I’m especially pleased that our trade agreement with Indonesia comes into effect on the 5th of July.
While our new comprehensive strategic partnership with India commits us to further expand bilateral trade and investment, and as we pave the way into these emerging markets, we also need to position our future industries to grasp Australia’s comparative advantages. For instance, our highly competitive agriculture sector is a great launching pad for exporting Australian innovations in food security and ag tech.
Huge opportunities exist for Australian agriculture to move along the value curve – from commodities to branded products and even into pre-packaged meals. Australia can also become a clean energy export powerhouse, building on our reputation as a long-standing and reliable supplier of energy and resources.
Hydrogen has big potential for Australia, including as an export industry. Some projections indicate it could grow to an $11 billion industry by 2050, supporting potentially 8000 jobs mainly in regional Australia. Signals of international demand and investment are already strong. Australia is forecast to export 42 per cent of potential supply to east and South East Asia by 2040.
Two of our closest existing trade partners, Japan and South Korea, have made ambitious commitments to be hydrogen importers.
We’ve already established agreements with both governments to develop the hydrogen sector. Exciting and visionary projects across northern Australia are already generating investment interest. That region of Australia and many other parts are well placed to produce and export hydrogen, given the proximity to Asian markets, well-developed infrastructure and abundant solar resources.
I’ve asked our team at Austrade to prioritise the attraction of investment that is required to turn these visions into a reality. Likewise, some of Australia’s most exciting opportunities lie in critical minerals like lithium and rare earths, needed to manufacture renewable technology. Our lithium exports are already increasing, and with significant investment, we’re looking to again, move up the value chain by supplying battery-grade lithium for electric vehicle markets.
Australian know-how is not to be underestimated as a crucial part of our future export strategies.
The value of Australian services exports have grown from $60 billion in 2013 to $102 billion in 2019. We don’t just export resources or commodities, but now we export highly skilled capabilities in areas like mining services and ag tech.
Our successful management of COVID-19, along with the sad rise of greater division and disharmony elsewhere in the world, can only enhance Australia’s standing as the best and safest destination in the world to enjoy a high-quality, world-class English language education experience.
The remote work revolution caused by COVID can also only help a more distant nation like Australia to further grow our services sector. From existing successes like our 2019 exporter of the year, Brisbane architecture firm, Populous, through to emerging resources like FinTech, we have much to offer.
Whether in the promotion of our goods, our skilled services or our amazing experiences, the integration of our new nation brand will be a key part of our future strategy. Australia’s irrepressive sense of optimism drives everything we do. We’re down to earth. We’re friendly. We’re optimistic. We’re clever and dynamic.
Too often, we undersell ourselves but we are the 13th largest economy in the world despite only being the 55th most populous.
As we engage with the world post-COVID, we will promote Australian trade and investment opportunities more boldly, more confidently and more consistently than we have done before. Australian government agencies have already started to use the nation brand. We are progressively getting the states, territories and private sector to do so too.
Nowhere is resilience though, right now on greater show than in our tourism industry.
Firstly, there were last summer’s devastating bushfires. Then, COVID-19 hit.
My heartbreaks when I hear of some of the stresses so many tourism operators are facing right now, having been hit so hard for so long and knowing that they are likely to be the last parts of Australian business to return to true normality. I saw some of those stresses up close when I visited Cairns and the Gold Coast right before border and travel restrictions were put in place.
But true to form, our tourism operators, small and family businesses many of them, across Australia, aren’t wallowing. They are eager to get back to doing what they do best: giving visitors exceptional experiences to brighten their lives.
While our international borders remain necessarily closed, enormous opportunity exists to harness the potential of Australians holidaying at home.
International tourism is usually worth $45.2 billion to our economy each year.
However, Australians like to travel, and last year, we spent some $65.2 billion on travel overseas.
As states open up their borders, Tourism Australia now stands ready to relaunch our Holiday Here This Year campaign. For those Australians who can afford to do so, we want them to feel an almost patriotic duty to get out and support the jobs and small businesses of their fellow citizens by having whatever Aussie holiday they can.
We’re also working with the tourism industry on recovery strategies. We will be returning strongly to international markets as circumstances allow, playing to all of Australia’s strengths. There’s still nothing like Australia for adventure, nature, food and wine, outdoor experiences and vibrant cities.
We should have pride in our unique and wonderful experiences. I hope Australians use this time to travel across our magical continent and become better informed ambassadors of all that we have to offer.
There is also nothing like Australia in terms of our health response to COVID-19, and the opportunity our management of the pandemic presents to give a cautious travelling public the confidence that Australia is safe to travel around.
Where possible, we will not only be drawing tourists back with our incredible experiences, but also reminding them of our strong health system and reputation as a nation that is safe, open and welcoming.
Beyond the immediate recovery, when we return to finalising our Tourism 2030 strategy, I’m also determined that Indigenous tourism will be a bigger priority for the future.
The stories of the oldest living culture in the world should be anchored in the experiences our nation shares with cultural tourists from around the world. Exceptional Indigenous-owned and operated tourism businesses like Nitmiluk Tours and Cicada Lodge have added depth and vibrancy to our tourism offering in recent years.
I hope that our government’s $40 million investment in supporting the growth of the Indigenous tourism businesses can deliver similar dividends to Indigenous Australians as those that are being yielded through our Indigenous procurement policy.
Conclusion
Ladies and gentlemen, just as our innovative and resilient people, coupled with an open and trading economy, propelled us through almost three decades of uninterrupted growth, it will also be a source of strength as we recover from this terrible virus.
Now would be precisely the wrong time to forget the foundations of our recent success and give in to the tempting but ultimately empty promises of protectionism.
We need to do what is right for future generations by again future-proofing the Australian economy. We must build on our historical success as a nation to open to trade and investment and people from around the world.
Australia has made our own luck by choosing to have an open economy.
It has helped to give us a standard of living that is the envy of many others.
Our ongoing good fortune will again be the product of making the right choices and backing the ingenuity, resilience and hospitality of the Australian people. Thank you for your attendance today and I look forward to your questions.
[1] For goods and services in FY18-19. CY19 trade figures not available until 24 June.
[2] For CY19.
