ADDRESS AT THE AUSTRALIAN-INDONESIAN BUSINESS COUNCIL LUNCHEON - JAKARTA
Thank you very much for that very warm introduction. To the State Minister for Research and Technology, and the State Minister for State Enterprises, other very distinguished guests, ladies and gentlemen. I am particularly delighted that it was possible to include in this my fifth visit to Indonesia as Prime Minister and my eighth visit in different capacities, this luncheon of the Australian Indonesian Business Council because it gives me an opportunity to say a few things in two areas. It gives me an opportunity to say something having just come from a meeting of the World Economic Forum in New York, or colloquially called Davos in New York, an opportunity to reflect upon attitudes towards economic growth and recovery in the United States; but also and most importantly to stress the critical importance of growing business relations and economic links between Australia and Indonesia to the bilateral relationship between our two countries.
We are all aware that for a combination of circumstances the relationship between our two countries has gone through at a political level some strains and some difficulties in recent years. But we also know that sustained by very strong person to person links in so many areas, and this large gathering of people here today at this luncheon is a testament to the strength of those personal links in the area of business activity and business investment. We know that the basic infrastructure of the relationship has remained very strong because it is the person to person links in the end that drive a relationship more than anything else and it’s a happy fact that as I speak to you today there are some 18,000 Indonesian students studying in Australia, more than from any other country in the world and it’s that kind of linkage which over the years has been the constant in the relationship between our two countries.
May I say that on this visit of mine I have been very graciously received by the President and all of the senior ministers of her Government. We’ve had an opportunity of talking about the areas of similarity, the areas of debate, and the areas of difference that those discussions have been conducted in a spirit of wanting to achieve better outcomes and of recognising that geography and circumstance and the fact that we are regional neighbours means that our two societies are with each other forever and there is a responsibility in charge on all of us to do what we can to contribute to the maintenance and the development of very strong relations between our two countries.
Indonesia suffered grievously and in my view unfairly in many respects from the impact of the Asian economic downturn in 1997. And I was very pleased as Prime Minister of Australia that we were able to provide material and valuable assistance in relation to the IMF package in 1997, and we were also able to advocate to the international monetary fund at that time a more realistic approach to the reform process that was to be undertaken in Indonesia. And once again economic circumstances have combined to put pressure on Indonesia’s economy at a time when it is going through a process, along with the political structure of this country, a process of great change and great reform.
All economies of the world now are inevitably influenced by what occurs in the United State more than at any time that I can recall in the almost thirty years that I’ve been in public life. The influence of the United States politically and economically is strong and dominant. I believe that the American economy is already in the early stages of recovery. It may not be as strong a recovery as many would want but a recovery nonetheless. And I certainly found in New York both in the discussions I had with the Secretary of the United States Treasury – Mr Paul O’Neill, and other senior people in the business and financial community, not universal but nonetheless majority, optimism about the future of the American economy and a belief that the strength of consumer spending underpinned by the very low interest rates, historically almost low interest rates, than America has enjoyed in recent times, and the capacity because of the increase in wealth of so many middle class Americans to leverage off that increase to support their consumer spending there is a belief that an economic recovery is on the way.
Naturally of course the American economy and the world economy took an enormous confidence hit on the 11th of September and I have no doubt that the objectives of those who perpetrated that foul deed included a desire to harm and damage the exuberant economic confidence of the United States and of the American people. The good thing that I can report to those who care about investment not only here in Indonesia but all around the world, the good thing that I can report from the time that I spent in the United States in New York is that the exuberance and the confidence of the American people, although very seriously assaulted on the 11th of September, is nonetheless still there and their determination in their commitment to economic growth and enterprise, their determination to continue and to resume the patterns of growth that existed until last year should not be doubted. So I came away from that meeting with a great sense of hope and optimism about the United States economy.
And I can also say to you today as Prime Minister of Australia that I believe the economy of Australia in this calendar year will grow very strongly. Some such as the Economist magazine predict that our growth could be greater than that of any other industrialised country. Whether it reaches that level or falls a little short of it it will nonetheless be the case that we will experience very significant economic growth. I’m very happy to report that the last year has seen a steady growth in the trade flows between Australia and Indonesia. There’s been a very healthy growth in both exports and imports. I recognise that as I am reminded by my Indonesian ministerial friends that there is an imbalance in the pattern of trade and one of the things that we committed ourselves to in our discussions yesterday was to ensure that there were no unnecessary impediments between trade and investment flows between our two nations.
The Australian economy has benefited greatly over the last few years from a series of economic reforms some of which were undertaken by the government of Australia before I became Prime Minister and many of which have been undertaken by my Government over the last almost six years. In particular in the area of labour market reform we have made changes which have boosted the productivity of the Australian economy, made it more competitive, and that productivity boost has enabled us to maintain a faster rate of economic growth than has been possible over earlier years. For many years the great challenge of the Australian economy was to try and find a way of taking the speed limits off economic growth. We experienced the unhappy phenomenon of having a period of economic growth which led to a period of inflation or a blow out in our current account deficit which necessitated the imposition of a more restrictive monetary or fiscal policy which in turn suppressed economic growth. But by undertaking structural reform, by first of all floating our exchange rate which proved to be quite important in relation to Australia’s adjustment to the Asian economic downturn in 1997 and more recently under my Government bringing about a fiscal surplus position with our budget in recent years, major labour market reforms, significant reforms to Australia’s taxation system which represent one of the biggest systemic changes to our economy in recent years. These things have all combined to create a situation where some of the speed limits that used to be there on Australia’s economic growth are no longer there.
I also believe that we have benefited very greatly from a very stable legal and political climate in Australia. Certainly our political environment is robust and combative as the Australians and many others in the audience will know, but it is nonetheless a stable political climate. The certainty of corporate governance and the clarity of our legal system, all of those things are very important.
And I agree that increasingly in this borderless world, the use the frequent cliché, and a world of globalisation, countries with predictable and stable codes of corporate governance, prudential supervision and legal systems will be the beneficiaries of increasing levels of foreign investment.
When I was in New York there was much debate of course about the impact of globalisation, there was much debate about the impact of the tragic events of last September on how nations relate to each other, and how the process of globalisation might be affected. I think a very strong view emerged from those to whom I spoke that we must do more if we believe in globalisation to explain the benefits, to offer the critics of a more open economic system around the world, are allowed to propagate falsehoods all to infrequently those who understand its benefits are silent or inarticulate in expressing the benefits and explaining the advantages. The reality is that developing countries do, despite some of the anti-globalisation rhetoric, the reality is that developing countries do have much to gain, if globalisation involves as I believe it should, the opening up of markets for greater access to the products and the services of developing countries.
It’s frequently been said that if the protective trade barriers of the industrialised world were to be removed, then the value of that one single act to the wealth and the export income from developing countries would multiply by many times the existing level of foreign aid from those industrialised countries to the developing world. And if in fact you look at the experience and the history of nations over the last forty to fifty years, comparing the experience of those that have started off being under-developed with others of a similar situation, the first group adopting more open economic policies and the second group adopting more closed economic policies, the first group has turned out to be infinitely more successful.
I recognise that the process of economic change and economic adjustment is very difficult in a nation such as Indonesia. I know the importance to the many citizens of this country of a lot of the arrangements that have been in place for many years. But as a politician of now some twenty-seven years in the Australian Parliament, and almost six years as Prime Minister, I know in my own country how resistant many people are to change, and how difficult it is to explain the longer term virtues of change and reform, particularly if that involves some short term cost. And I do empathise very strongly with the Indonesian people, the Indonesian Government, and those in the business community who are seeking to lead this country’s transformation in so many areas.
And I want to leave you with my most important remark today, and that is, that in that process of change and reform which is so very important to the people of Indonesia, and to the people of this region, the people of Indonesia do have a firm and constant and understanding friend in Australia. We are a country that values the relationship we have with Indonesia. We have had our differences, and will have our differences in the future. But I believe that those who carry influence in both societies understand that being neighbours and because of shared history and shared experiences, we do have a future together, and a future that I know people in both countries want to build on and make more fruitful, and I hope that in a small way my visit on this occasion has contributed to building ever closer links between our two communities.
But it is very important that what this room represents, and that is the economic dynamism of the relationship, that has a very prominent part because without investment, without economic growth, without the beneficial effects of entrepreneurial risk taking, without achieving a proper balance between the role of the state and the role of the private sector, growing living standards and reaping the benefits globalisation will not be available to Indonesia. I know there are many in the Australian business community who are keen to support Indonesia’s future economic growth. Like all people in business, they like a good return, and that is understandable. They like certainty and predictability. They respect the efforts being made to bring about change and reform, and at a political level, I look forward to better and growing relationships between our two nations. And I say that sure in the knowledge that our association which has now been very long standing, Australia having been one of the very first supporters of the independence movement in Indonesia in the 1940’s, that it is an association that is built on very sound foundations. And I am delighted to be back here in Jakarta, and I wish all the members of the Council the very best of good fortune.
Thank you.