Department of the Treasury - Australian Government

03/09/2022 | Press release | Distributed by Public on 03/09/2022 17:13

Address to the Australian Financial Review


Securing Australia in an increasingly uncertain world


I acknowledge the traditional owners of the land and pay my respects to their elders, past and present.

As we gather here, thousands of our fellow Australians are battling devastating floods that have already taken 20 lives and destroyed local communities.

Our deepest thoughts are with those families affected and members of the SES and Australian Defence Force that have come to their aid.

In their hour of need, we stand by these communities and help them rebuild.

It is a great honour to speak to you tonight, as we celebrate the Australian Financial Review's outstanding contribution to public policy and debate over the past 70 years.

There are many special guests in the room, but in particular I would like to acknowledge former Prime Ministers John Howard, Paul Keating, Malcolm Turnbull and former Treasurers Peter Costello and Wayne Swan.

It is good to see all those exclusives you have given the Fin over the years rewarded at last, with a free meal!

To Reserve Bank Governor Phil Lowe, ACCC Chair Rod Sims, ASIC Chair Joe Longo, APRA Chair Wayne Byres and Treasury Secretary Steven Kennedy - I am also pleased to see you here, but in your case, I am hoping the invitation is not the result of any exclusives!

I also want to acknowledge my chief political opponent, Joe Aston. Also here is Jim Chalmers.

Tonight, as we recognise the significant role played by the Australian Financial Review, we also pay tribute to a long list of outstanding editors and journalists who made it possible.

Among them Jack Horsfall, Max Newton, Max Walsh, Paddy McGuinness, Alan Kohler, Greg Hywood, Colleen Ryan, and today, Michael Stutchbury.

They and their columnists, including Chanticleer, Pierpont, Street Talk, Rear Window and the Modest Member have created Australia's must read financial publication.

As former editor Colleen Ryan recalls, the newsroom was once a raucous place full of typewriters, smoking, drinks at 5 o'clock, followed by more drinks at 8 o'clock.

The drinking culture seemed quite pronounced back then, with Greg Hywood reminiscing about his first day at the Fin as a young journalist just out of university.

He turned up in the Melbourne office at 10am, only for Trevor Sykes to instruct the industrial relations writer, Bob Mills, to take Greg down to what he called 'the local branch office'.

Greg thought that meant the Stock Exchange.

But he soon found out that it was simply a walk downhill to the front bar at the Grosvenor Hotel.

Seven hours and numerous beers later, having not been allowed to leave, Trevor Skyes says bluntly to the young Hywood, "today we taught you to drink, tomorrow we teach you to type."

Which Greg tells me, to this day, they never did!

Over 70 years, the newsroom may have changed - from ashtrays and beer cans to lattes and laptops - but the issues that matter most, have not.

The paper's first ever front page led with a story about the Commonwealth and States arguing over finances and the first editorial tackled the dangers of inflation.

Notwithstanding the Fin's policy purity on these issues, I am now reliably informed by exclusive Treasury analysis that the AFR's cover price has increased at almost twice the rate of inflation over the past 70 years!

If I had seen Treasury's analysis earlier, I would not have pushed so hard with Google and Facebook!

In all seriousness, no newspaper has more relentlessly advocated for economic liberalism, structural reform, free trade, foreign investment and sound budget management.

At the paper's editorial core is a belief in free enterprise and the indispensable role business plays in generating our national wealth and prosperity.

But the paper's support of business has not seen it become a mouthpiece for business.

The AFR has never been afraid to hold incumbents or vested interests to account, be they business leaders or politicians.

Sometimes ruthlessly!

The AFR called Artie Fadden's 1951 Budget "a disastrous series of financial proposals".

Harold Holt's 1963 Budget a "philosophical vacuum".

And, believe it or not, the AFR lamented after Joe Hockey's 2014 Budget that it "clearly could have been much tougher"!

Let's hope the headlines are more sympathetic in a few weeks' time.

I am reminded though that over the past seven decades the AFR's editors have only twice been "truly satisfied" with the government's economic policy performance!

The Hawke-Keating and Howard-Costello years.

A high bar indeed.

While some may take issue with their ratings, what is without question is that the editorial position of the AFR has, more often than not, been on the right side of history.

In the 1950's promoting Menzies' landmark trade treaty with Japan.

In the 1960's identifying the need for foreign capital to develop our mining industry as demand grew out of Asia.

In the 1970's pushing for tariff reforms and new trading partners as the UK joined the common market.

In the 1980's and 90's it was competition policy, floating the dollar and tax reform.

And in the 2000's the AFR's policy focus on industrial relations, tax reform and climate change, as seen in editorials this week, continue to dominate its agenda.

As the AFR has reminded us time and again, the task of economic reform has no finish line.

It's ongoing and requires commitment, purpose and the resolve to persist, even in the face of determined opposition.

That's why I am proud to be part of a Government that has delivered significant structural reform in the contested areas of tax, super, energy, insolvency and digital platforms to name just a few.

And in the face of the greatest economic shock since the Great Depression, put in place the policies that have seen Australia outperform all major advanced economies and put us within reach of the lowest unemployment rate in nearly 50 years.

This is no accident, this was not the result of luck.

Economic priorities must always be seen in the historical context in which they are set.

In the post-war era we have seen a period of remarkable global stability and prosperity.

It has been underpinned by a well-established international rules-based order, with institutions such as the IMF and the World Bank established at Bretton Woods and the United Nations a year later.

This system has allowed trade and investment to flourish and seen dramatic improvements in global living standards, with more than 2 billion people lifted out of extreme poverty in just the last 25 years.

Australia capitalised on this environment by pursuing hard-won domestic reforms, often enacted with bipartisan support, that opened-up our economy to the world, increasing competition and lifting productivity.

The AFR issued an economic call to arms in the years after the war, saying the time had run out for the "she'll be right Australia," championing the reforms that were needed and strengthening the arm of those pursuing them.

Russia's invasion of Ukraine

Today the global environment is again undergoing profound change.

The repercussions of which we will not be able to avoid or ignore.

As we gather here tonight we are living through a pivot point in history.

No less important than the fall of the Berlin Wall and 9-11.

We are not witnessing a re-run of the Cold War that was an ideological contest between the competing economic models of communism and capitalism.

Rather, in today's civilised and globalised world, we now are being challenged as to what limits we will accept as to the use of brute force.

The unprovoked and unjustified Russian invasion of Ukraine just 13 days ago is the most serious violation of our liberal rules-based order since World War 2.

It has eerie parallels to Hitler's 1938 seizure of the Sudetenland. Which led to anything but "peace for our time".

Putin has been called many things, a gangster, a dictator, a pariah.

But what he is after all is a ruthless exponent of realpolitik and a believer in a Greater Russia and a new imperialism.

That in itself makes him a danger to his neighbours, but in possession of a massive nuclear arsenal, it makes him a danger to the world.

With the US war weary, the French distracted by an election, the Germans passive and China supportive, he saw his chance to move.

But in doing so, he miscalculated and underestimated the response.

Liberal democracies are now awake, inspired by the courageous defiance of the people of Ukraine.

Economic warfare, in the form of sanctions, has been deployed at a speed and scale the world has never seen before.

These sanctions have, in a matter of days, effectively cut Russia - the world's 11th largest economy - off from the global economic and financial system.

Europe is rapidly re-writing its national and economic security settings.

Defence spending is set to dramatically rise as countries from Germany to Sweden dispense with years of pacifism and send armaments into the heat of battle.

And nations the world over pushing back against autocracies who undermine the rules-based order through the use of force and economic coercion.

Some of these trends were evident before the invasion.

It is no secret that Australia has itself been subjected to economic coercion in recent years.

While these acts put the world on notice, Russia's act of outright aggression is ushering in a new economic era.

It is redefining globalisation as we know it.

National security and economic security are now intrinsically linked.

This is the main game.

Liberal democracies respond

In this new era, Australia and liberal democracies must stand up and give effect to their collective will.

We must do this in a number of important ways.

First, we must come together and send a strong signal that the use of military might and economic coercion will not be tolerated and will not be allowed to succeed.

Business must join with the Government in heeding this call.

We cannot accept that might is right - militarily or economically.

It is why Australia stood fast in defending its values in the face of China's punitive trade measures, despite calls from some quarters to make concessions.

It is also why we have joined the unprecedented global effort to evict Russia from the international economy.

This has led to sanctions on hundreds of Russian individuals and entities.

The Central Bank has been cut off from accessing its war chest of foreign reserves and Russian banks prevented from accessing the global payments system.

The Ruble has all but collapsed and foreign capital is fleeing the Russian economy.

This has forced the Russian central bank to dramatically raise interest rates to 20 per cent.

The stock market is closed.

Our Future Fund and superannuation funds are divesting their Russian holdings.

AMEX, Visa and MasterCard have joined Google and Apple in withdrawing their services.

Airbus and Boeing are no longer providing spare parts or maintenance services for Russian airlines.

And global energy companies like BP, Exxon and Shell are substantially scaling back or exiting their Russian operations and ceasing to trade.

Piece by piece Russia is being removed from the global economy and Putin's plug is being pulled from its socket.

What the last two weeks have shown is that the West has united to oppose those that would seek to undermine our liberal, rules-based system.

And, importantly, that we have the financial and economic arsenal to achieve this.

Other countries that may seek to follow Russia's example, must take note.

An act of aggression that was designed to expand Russia's influence, will instead isolate and diminish it, hastening its decline.

As is now evident, Russia did not enter this crisis from a position of economic strength.

It's economy was already more fragile than many appreciated, having never fully transitioned from its Soviet-era dependence on energy exports, heavy industry and inefficient state-run enterprises.

With the prospect of even stronger sanctions and a prolonged isolation ahead, Russia's economic future is bleak.

The message to Russia and others is clear, there will be swift and significant economic costs imposed on those countries that choose to violate our fundamental international rules and norms.

But we must not be naive about the costs these necessary actions will also impose on the West.

These costs will flow initially in the form of higher commodity prices and in turn higher inflation.

Already, European gas prices have nearly tripled, thermal coal prices have nearly doubled and global oil prices have risen by more than a third since the invasion began.

As Putin seeks to weaponise Europe's energy dependency on Russia, it will undoubtedly test the West's pain threshold.

And while Australia is better placed than most to withstand these pressures, there will be costs borne by Australians in defending our values.

For liberal and free nations, this is a price that we must be willing to pay for the right to live free of fear and coercion.

Second, we must strengthen and realign our critical supply chains as we move into this era of heightened geopolitical risk.

As part of globalisation businesses sought to specialise and drive down costs; moving towards "just in time" delivery, often from single suppliers.

Now whether around the Cabinet table or the boardroom table, these strategies are being re-calibrated, starting with critical sectors including essential medical supplies, telecommunications equipment, energy and critical minerals.

This crisis is a wake up call for business.

Just in time, is moving to just in case.

No country or business can allow itself to be held to ransom or leave their supply chains to chance.

This decoupling will have profound implications for business as well as governments.

This is not to say that a country like Australia must be self-sufficient in every area.

That is neither practical nor economic.

However, governments and businesses must price in this new risk and seek out reliable and trusted partners to build more diversified and robust supply chains.

This is a rational economic response to the risks we now face.

It will require new investments like those we've already announced.

Securing new sovereign MRNA vaccine manufacturing capability. Investing $2 billion to secure critical mineral supplies vital for aerospace to electric vehicles.

Across liberal democracies, a paradigm shift is taking place.

Done the right way, this will not come at a cost to our prosperity, but rather help to secure it.

Third, the more dangerous and unpredictable strategic environment we now face will require from liberal democracies, a sustained and substantial increase in defense spending.

It is a trajectory Australia is already on.

This year, as a share of GDP, the defence budget is expected to reach 2.1 per cent up from 1.56 per cent when we came to government.

We are already investing over $280 billion in enhancing Australia's defence capability and the Budget in just a few weeks' time will contain further commitments in this area.

We are also deepening our key strategic partnerships, highlighted by the new AUKUS arrangements and The Quad.

Our vital long term investments in defence capability are only possible if we can maintain a strong economy and a strong budget.

Economic strength is the foundation of our national security.


In conclusion, just a few weeks ago I was planning on delivering a very different speech.

But the seminal events in Ukraine must be understood for what they are and the profound impact they will have both at home and abroad.

The international rules-based order that has underpinned decades of relative peace and prosperity is now under threat.

We cannot pretend otherwise.

Just like the difficult economic reforms, championed by the AFR through its first 70 years, have helped Australia harness the benefits of a more open and connected global economy, we now have a new national project.

One that requires us to stand with our partners against military and economic coercion, where we reshape and strengthen our supply chains to enhance our economic security and where we continue to invest more in the defence of our nation.

These are testing, dangerous and uncertain times.

Guided by our values and working with our friends, we will meet these challenges head on.

We are determined to see freedom prevail.