If you think of the US-Australia relationship, most people probably think first of all about our how we fought side by side in the Pacific after Pearl Harbor.
Later codified through the ANZUS alliance – our military and strategic cooperation remains a vital feature of the US-Australia relationship today.
And will do so for many, many decades to come.
But there’s another vital strut to the US-Australia relationship, that’s often underappreciated – our major trade and investment ties.
Today, the USA is the largest investor in Australia, and Australia is the twelfth largest provider of foreign direct investment (FDI) in the United States. The United States is one of the top five source countries for visitors to Australia in terms of numbers and expenditure.
But our economic relationship has a very long history. Right back almost as far as the earliest days of European settlement of Australia, Americans have been involved in the economic development of Australia.
Fittingly enough, the links probably began with a place in America that was small yet had a uniquely influential role in global supply chains in the 18th and 19th century – the famous Massachusetts whaling town of Nantucket.
In 1791, Captain Eber Bunker, a sea-farer from Nantucket, was hired to bring the British ship William and Ann from the UK to Australia, as part of the Third Fleet.
And in 1831, when Australia lifted its ban on American whaling vessels, ships from Nantucket quickly filled the fields.
Then in the late 1840’s, America and Australia influenced each other’s economic development in a significant way.
The 1848 California gold rush caused many people to leave Australia for California to search for gold, and this population drain prompted the NSW Government to relax its prior policy of suppressing news of gold finds (as they had believed a gold rush would cause economic disruption for employers).
Sure enough, large scale gold finds promptly followed in 1851, which led to large-scale immigration to Australia, including many of California’s “49’ers” searching for new fortune.
In 1897, a young American mining engineer called Herbert Hoover came to the world’s big new gold discoveries in Western Australia, and was appointed mine manager at the Sons of Gwalia gold mine – a mine that’s still in operation to this day.
Later, Hoover was one of the founding investors in the Zinc Corporation (later part of the Rio Tinto Group), which pioneered the production of zinc at the fabulous Broken Hill silver/lead/zinc mining complex.
In the 1920’s, the American Smelting and Refining Company (ASARCO), a company whose early investors included the Rockefellers and then the Guggenheims, was instrumental in underwriting the development of the giant Mount Isa Mine’s base metals complex in Queensland - again a project that’s still in operation nearly 100 years later.
Even the current foundations of the mighty Pilbara iron ore province were laid in part with American capital.
In 1962, the Goldsworthy iron ore mine was developed by a consortium including the Cyprus Mines Corporation of Los Angeles and Utah Development Co of San Francisco.
Today, the largest ever Australian investment project – the $56bn Gorgon gas field LNG export project – is being funded by U.S. capital from Chevron.
Australia and America are as close as brothers when it comes to our philosophical underpinnings.
We believe in freedom, and democracy.
And we believe in having open, competitive, market economies driven by vibrant, successful private sectors.
Without in any way underplaying the importance of our strategic cooperation, let me make this prediction:
This century, the US-Australia relationship will also be defined by our shared commitment to open markets, business and commerce.
I’ve just returned from a big business delegation to North America with Prime Minister Abbott.
For me, the trip confirmed how much we share when it comes to a belief in a strong, vibrant and open private sector.
And that Australia and the US are entering a new phase of our relationship – taking it to the next level, I call it.
And it’s centred on sustainable growth.
Open for Business
Since coming to office, the Abbott Government has made it very clear that we are ‘open for business’.
Our government has been busy driving the right conditions for investment and growth.
Pushing through domestic reform
Reforms that increase trade and encourage investment.
Using our platform as G20 leader to encourage similar global reforms:
- Removing tariffs and non-tariff barriers.
- Streamlining customs procedures.
- Investing in infrastructure.
- And freeing up trade in services.
One of the big lessons of the global financial crisis is that governments alone can’t put things right in the economy.
Around the world there is real disillusionment with the interventionist policies many governments have put in place since 2008.
We know government is not the source of wealth creation.
It is the energies of the private sector that shift growth and jobs to a higher level.
And we have to help the private sector get on with the job – improve competitiveness and productivity, lower costs for business and lift incomes.
We have to live within our means, keep our finances in shape and keep public debt down.
Australia has built up high levels of government debt in recent years by our own standards, and we are committed to reversing this trend.
If you don’t control debt, debt comes to control you.
We are eliminating red and green tape that restricts business initiative and increases costs.
Over the last six years we witnessed a net increase in federal regulations of 21,000
Recently, our first Repeal Day removed 10,000 such regulations from the books.
We will hold a Repeal Day every six months for as long as we are in office.
We aim to reduce the cost of complying with deferral regulations by about $1 billion a year.
And we are moving to scrap the carbon and mining taxes, themselves the source of costly regulations as well as their job-destroying cost impact.
Our philosophy is that businesses and individuals need to take more responsibility for their own success or failure.
Most importantly, we need to back our country’s strengths - the things we do as well as anybody, and better than most.
These are reforms on which Australia and the US are aligned – and in a globally competitive marketplace, will be a huge asset for our relationship as we look ahead.
Opportunities for Trade and Investment
We already have a highly robust trade and investment relationship.
It’s been built up over decades and decades of shared values, like-mindedness and an eye for entrepreneurial innovative business activity.
Next year we celebrate an economic milestone – the tenth anniversary of the entry-into-force of the Australia-United States Free Trade Agreement.
This landmark agreement has been the catalyst for greater economic integration between our two nations – from which we have both benefitted enormously.
The United States is the largest foreign investor in Australia, with $658 billion of investment.
The United States is also by far Australia’s most important destination for investment abroad - around $472 billion.
Australia’s strengths broadly align with the drivers of foreign direct investment from the US.
Resources and energy, agribusiness and food, tourism, health and medical research, and all the services, technology, high-end manufacturing and infrastructure that clusters around these strengths.
Now we need to build on this.
Australia wants US investment, and we are a good place to invest.
Australia is experiencing our 23rd consecutive year of growth, much of that success stemming from the open and responsive nature of our economy.
The latest figures indicate growth of 3.5 per cent in the 12 months to March – the fastest in almost two years.
Rates of inflation, unemployment and public debt are low by OECD standards.
Australia is rated ‘triple A’ by all three major global ratings agencies.
My trip to the US was all about promoting the strengths and opportunities of the Australian economy.
We had some really impressive people on the delegation -representatives from a range of major Australian companies and organisations, including BHP Billiton, Boeing Australia, the Garvan Institute of Medical Research, Lend Lease, Transurban and Austmine.
They represent some of the key areas of growth.
Resources and energy – where enormous opportunities remain beyond the height of the boom.
Huge scope for further growth, particularly on the energy side with fuels such as LNG.
The International Energy Agency forecasts that global demand for LNG, much of it from Asia, is predicted to increase by more than 50 per cent by 2035, and Australia is well positioned to supply a significant portion.
Australia is already the third-largest LNG producer in the world but as major new developments in Queensland and Western Australia come on stream we are positioning to overtake Qatar as the largest producer within two to three years.
US investment can play a hugely important role in this next phase, just as it has done in the boom of the last 12 years.
I have some personal experience here, having worked for Chevron in a previous life on one of its early investment teams for the massive Gorgon gas project in Western Australia.
The outlook for shale gas is also exciting.
In Australia, we are estimated to have the 7th largest deposits of recoverable shale resources in the world, potentially adding another century to our gas resource life.
That is on top of the coal seam gas we are now beginning to export in major quantities.
None of this is to overlook more traditional sources of energy such as coal, which remains our second-biggest export, as well as our great mineral strengths in fields such as iron ore, currently our largest merchandise export.
We have recently introduced new measures, like the Exploration Development Incentive that will allow investors to deduct a portion of mining exploration expenditure against their taxable income.
Then we have infrastructure.
Infrastructure is absolutely critical to Australia’s future – the region’s future – and to economic growth.
Rapid economic and population growth has left Australia with an infrastructure shortfall estimated to be worth as much as $700 billion.
In this regard, our new National Asset Recycling Initiative attracted enormous interest last week among the investment funds in New York and Toronto.
This proposal involves giving the states a 15 per cent bonus on the sale price of any public asset they privatise, as long as all the proceeds go back into the construction of a new public asset.
With the Australian states holding an estimated $200 billion worth of assets appropriate for privatisation, this opens up the prospect of many attractive brown field, green field and public/private partnership investments.
To further assist our recent Budget foreshadowed a further $50 billion to help fund upgrades of key assets like roads and freight rail networks.
Over the next 20 year period the United Nations estimates that Australia will have the third-fastest population growth in the OECD.
We have rapidly growing urban areas – 89 per cent of us live in major cities and along the eastern coastline.
This is putting pressure on urban infrastructure – the cost of congestion could reach $20 billion a year by 2020.
We need a new wave of infrastructure spending to address this.
A Greater Role for Business
We want to expand the private sector’s role in financing and building infrastructure.
We have a 25-year history of private sector involvement in infrastructure development, commencing with the Sydney Harbour tunnel.
We want a greater range of alternative methods of financing such as Public Private Partnerships, concessional bridging loans and asset privatisations.
There are plenty of ‘greenfield’ opportunities.
Like WestConnex in Sydney – 33 kilometres of roads and tunnels costing $11 billion.
Or the Perth Freight Link, the first tolled road in Western Australia to improve access to Fremantle Port, a $1.6 billion cost to be sourced through public/private partnerships.
We also have our vision for Northern Australia.
A new “investment frontier” with potential to expand resources and energy but also tourism, agriculture and tropical health and medical research and education.
The north represents half the land area of Australia but is currently home to just a million people.
Developing northern Australia is crucial for Australia’s future and its integration with Asia.
There are huge opportunities for US-Australian cooperation.
To meet the rapidly growing needs of the rapidly growing middle classes - they need food, they need medicine, they need consumables, technology, holidays, education.
Projects across the board – infrastructure, and resources and energy, seriously expanded agribusiness, high quality, expanded tourism, tropical health services and advanced manufacturing.
For example, given the worldwide aging population, investment in medical research and aged care facilities is one area of opportunity that I think Australia and the US are well-placed to grab together.
The Federal Budget just earmarked $20 billion for the world's biggest medical research fund, delivering an extra $1 billion a year in perpetuity to medical research by 2020.
Huge opportunities for investment and collaboration in pharmaceuticals, biologics relevant to the tropics, where 40 per cent of the world’s population resides.
High-end manufacturing like what we are seeing in Geelong in Victoria, or in Western Sydney for medicine.
Massive opportunities to develop Tropical Medicine expertise and research in Queensland and Northern Territory – like at James Cook University.
We are one of only two developed nations in the tropical zone – and the need for medical services and products is going to skyrocket in coming decades.
Australia and the US are perfectly placed to harness our intellectual capital and research capabilities here.
To this end, our business delegation to the U.S. last week involved a workshop and a range of high-level meetings between the CEOs of major Australian medical research institutes and hospitals, and their counterparts at the world-leading Texas Medical Center.
Our two countries share the deep and fundamental belief in freedom – and that means the free market too.
Australia has secured Free Trade Agreements this year with both Japan and Korea, our second and third-largest trading partners respectively.
And we are hopefully within reach of a similar agreement with our largest trading partner, China, by the end of the year.
These agreements are important as they constitute bricks in the wall for freeing up global trade and investment.
Australia and the United States share active commitment to negotiating other bi-lateral and multi-lateral agreements.
The Trans Pacific Partnership Agreement is a priority. President Obama made that very clear on our trip.
The TPP would bring together economies accounting for just under 40 per cent of the world’s GDP and 800 million people.
We are also currently negotiating the Trade in Services Agreement, the Regional Comprehensive Economic Partnership Agreement, the Pacific Agreement on Closer Economic Relations, the Information Technology Agreement, and the Environmental Goods Agreement, amongst other things.
In all of these, we are working closely with our counterparts in the United States.
Globally, we all need to push for structural reform.
Together Australia and the US need to find ways to make it easier and cheaper to do business.
Trade and investment reforms – whether bilateral, regional or global – are the bricks in the wall of freer global trade, leading to higher sustainable growth and jobs.
Together we are working to strengthen global and regional economic architecture – with a long history of collaboration in the WTO, APEC and EAS to promote sustainable growth.
The next 35 to 40 years will see the explosion in the numbers of people in the middle class in the region from India to China, and every country in between, from 600 million to around three billion.
This will present extraordinary opportunities, as well as major challenges.
It will be the century of water, food and energy security, with a high priority on innovation.
Throughout this century, the long-standing, successful commercial partnerships between Australia and the U.S. will be central in assisting our region maximise these opportunities, while coping effectively and peacefully with the challenges.
- Trade Minister's Office: (02) 6277 7420
- DFAT Media Liaison: (02) 6261 1555