By John Fraser, Secretary to the Treasury
As a small, open economy, Australia – and the lives of its people – are very much affected by international developments. Australia’s economic fortunes are inextricably linked to its ability to optimise the benefits of trade and international investment. And Australia’s continued prosperity underpins its capacity to preserve its sovereignty and sustained security.
For this reason, Treasury has a strong interest in the Foreign Policy White Paper. Treasury has a diverse international agenda across issues such as global financial regulation, foreign investment and addressing international tax avoidance and prosecutes Australia’s interests through our network of posts in the world’s most significant economies.
Today the international outlook is uncertain with ever more complex connections to economic developments. This underscores the importance of longer term policy settings, providing reassurance in a world of heightened political risk. It also highlights the need to build upon Australia’s demonstrated capacity for economic reform to preserve and enhance the strength and resilience of the domestic economy.
The lingering effects from the global financial crisis (GFC), accelerating technological change and the uneven effects of globalisation have contributed to a rising sense of economic vulnerability. For many countries, the past decade has been characterised by low income growth and rising inequality. A resurgence of narrow nationalist sentiment is fuelling doubts about the benefits of globalisation.
We must not lose sight of how important openness to trade and investment has been in underpinning improved living standards around the world and at home. The reality is that more people have been lifted out of poverty than at any other time in human history.
For Australia, a commitment to an open economy has increased standards of living by lowering the cost of goods, making our economy more efficient and opening up export markets, thereby contributing to higher productivity and real wages. We are the only country to survive the Asian Financial Crisis, Dot Com Crash and Global Financial Crisis without a recession. Indeed, Australia has now completed its 26th year of uninterrupted economic growth.
This track record owes much to our floating exchange rate, independent monetary policy, flexible labour markets and world-class financial institutions – all essential underpinnings of our openness to trade and investment.
High levels of immigration have also been a significant contributor to Australia’s sustained economic success. Australia is well placed to benefit from the continuing economic rise of Asia. China’s extraordinary run of economic growth helped fund a mining boom that, together with the strength of domestic institutions, saw us through the GFC. Its tourists and students now flock to our shores. Together with China, India and Indonesia have extraordinary catch-up potential and their collective middle class promise to reorient the global economy and Australia’s place within it. In the 21st Century, we will also have to be open to the reality of technological change that will reshape our economy and society.
Australia’s interests firmly lie in resisting efforts to reverse global integration, while pursuing the structural reforms at home that will help us adapt to our new international environment, and ensure that the benefits of globalisation are shared appropriately across society. This remains true, irrespective of the extent to which others may choose to deny themselves the benefits of globalisation.
Australia’s productivity performance will be a key ingredient in economic growth and improved living standards for Australians. And it is Australia’s economic performance that will provide the means to pursue our foreign policy objectives. In the long term, neither our prosperity nor our security will be served by policies that turn inwards and weaken the underlying drivers of our economic success.
Mr Fraser was appointed Secretary to the Treasury effective 15 January 2015. Based in London, John was Chairman and CEO of UBS Global Asset Management from late 2001 to 2013. Prior to joining UBS and its predecessor organisations in 1993, John served for over twenty years with the Australian Treasury. Follow John Fraser and Treasury on LinkedIn