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The recently released ‘Australia in the Asian Century’ white paper makes some pretty big calls about the future of Australia in the decades ahead. For those of us in financial services its timing is ironic: coming just as we slip further down the rankings among our Asian neighbours as a financial services hub.
The aims of the paper are laudable, but it looks like we still have quite a bit of work to do.
It’s true that if we can pull off some of the big ticket items, we will surely all be better off. After all, who doesn’t want Australia’s tax and transfer system to be “efficient and fair”, or to have an “innovation system, in the top 10 globally, that supports excellence and dynamism in business with a creative problem-solving culture”?
Aren’t these the kinds of goals that we have been trying to achieve for decades?
So, back to the irony. At the same time as Australia strives to carve out a central role for itself in the Asia-Pacific region, a recent article by John Kehoe in the Australian Financial Review reported that Australia is losing ground in its plan to become the financial services centre of the region.
In the last five years, Sydney has fallen six places to 15th amid criticisms that the Government has been too slow in adopting the recommendations of the 2009 Australian Financial Services Task Force, a.ka. the Johnson Review, for financial services policy reform. Specific criticisms centre on a lack of development in the local bond market; delays in the introduction of alternative fund management vehicles; and the removal of the LIBOR cap on foreign banks borrowing from their parents. The Minister for Financial Services, Bill Shorten, rejects these, saying that “substantial progress has been made” and that he will be “leading a trade delegation to Myanmar to build further relationships with the region”.
It seems that there is a lot of talk, but not quite so much action.
And it’s disappointing, because financial services reform could potentially help attract additional investment from overseas at a perfect time, as the boom in mining investment declines. Australia is widely acknowledged as one of the most efficient and competitive full-service financial sectors in the Asia-Pacific, with many of the key requirements for a successful financial centre, including a highly skilled workforce and good regulatory framework. Yet this doesn’t seem to be as appealing to foreign investors as it should. Perhaps the real reason, as Kehoe states, is the “formidable competition from Hong Kong and Singapore, both of which provide tax incentives, acceptable regulatory frameworks and coherent policies”.
There is little doubt that we are entering the Asian century. Globalisation of world production has seen Asia’s share of the world’s output double in the last 60 years and growth is expected to continue, with real GDP in China expected to double by 2030, exceeding the US and Europe combined.
We all seem agreed that it would be a foolish waste for Australia not to focus on building greater relationships with Asia this century. We just need to agree on how. And nowhere is the need – or the opportunity – more pressing than in financial services. Maybe it’s time to (literally) put our money where our mouth is.
