18 September 2014
Speech - #2014017, 2014

Keynote Address, Future of the Tropical Economies Conference, Cairns

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Good afternoon and thank you for your kind invitation to speak at this conference.

I’d like to thank Professor Sandra Harding and her team here at James Cook University for producing the State of the Tropics report. I would also like to thank Cairns Council and Mayor Bob Manning for their hospitality.

It’s great to be here in Cairns, a leader in tropical research.

Far North Queensland is a unique part of the globe. It is the only place I can think of where two World Heritage Listed icons meet - the Wet Tropics rainforest and the Great Barrier Reef.

It is where diverse climates and environments coexist. Tropical islands, inhabited and uninhabited, are dotted throughout the Great Barrier Reef.

This region has pioneered tropical agricultural production techniques, including the original research for sugar and other tropical products as far back as the 1890s.

North Queensland produces one in ten of Australia’s agricultural production dollars – including 90 per cent of the nation’s bananas, more than half its mangoes, 94 per cent of its sugar and almost all the country’s pineapples and lychees.

Its food supply will help meet growing demand from Asia’s rapidly expanding middle class of 600 million people.

Cairns is widely recognised as a centre of excellence for the management of tropical diseases.

The Australian Institute of Tropical Health and Medicine, based here at James Cook University, recently received $42 million from the Government to advance their research. This delivers on a key election commitment. 

There is also vast potential here, with sophisticated support and research infrastructure, for the testing of novel drugs and treatments sourced from within the tropics.

In other areas of tropical climate specialisation, Queensland excels. You have the world’s best practice tropical building codes, specifically developed to withstand severe weather including cyclones. Cairns is the home for specialist expertise that makes the buildings not only structurally sound, but also more energy efficient for tropical climates.

So, with Finance Ministers and Central Bank Governors from around the world converging on Cairns, we have a terrific opportunity to promote the work we’re doing on tropical climate economies to the G20 and its affiliated entities.

I understand you heard from Tim Nicholls earlier this morning about the unique circumstances of the tropical economies. Tim mentioned the elements of population, participation and productivity in determining the growth of these economies. He also talked about Queensland’s expertise in making the most of its tropical growth opportunities.

I’d like to build on this by discussing the progress and potential of tropical economies more generally within the G20 framework. 

A lot of the work we’re doing in the G20 will have positive spillovers for this dynamic grouping of countries. And given its experience, Queensland has a leadership role in developing Australia’s relationships with other tropical economies.

Tropical economies

As you know, tropical economies are diverse and are made up of advanced, emerging, developing and low‑income nations.

It is clear that this diversity represents a growing influence in the global economy.  Nearly half of all G20 members are located completely or partially in the tropics.[1] And as we know, the tropical region includes some of the world’s most populous and rapidly expanding societies.

As many of you are aware, the recent State of the Tropics report showed that since the 1980s, tropical economies, when taken together, have averaged higher annual growth than the rest of the world.

But the report also noted that tropical economies face significant challenges. There are threats to environmental sustainability; there is a need for improved healthcare and education; and, the crux of it all, there are substantial risks to growth.

These challenges also present opportunities when dealt with in partnership with the goals of the G20, and that’s what I’d like to talk about today. Our efforts in the G20 this year will have positive spillovers that can deliver benefits for tropical economies through significant increases in investment and resilience.

G20 agenda

I’m in Cairns this week to host the third G20 Finance Ministers and Central Bank Governors meeting under Australia’s G20 Presidency.

The outcomes from this meeting will contribute to Australia’s core objectives for its G20 host year: to promote strong, sustainable and balanced growth, and to build resilience in the global economy.

Growth

We all know the difficulties caused by the global financial crisis and the prolonged recovery that has followed. So at our meeting in Sydney in February, I asked my G20 colleagues to agree to lift global economic growth by more than two per cent by 2018.

In aspiring to this figure, we knew we were taking on a difficult task, with significant economic and political challenges.  But we made this commitment because we all felt strongly that we needed to shake off the lingering effects of the global financial crisis.

To achieve this significant boost to growth, we focused our efforts on four key areas. I expect most of these will resonate with all of you. Firstly, we need to boost private investment, particularly in infrastructure.

Secondly, we need to increase employment and workforce participation.

Thirdly, we must reform domestic areas of competition policy and support deregulation.

And finally, we must address the structural challenges that continue to restrict open and free trade around the world.

We are also looking to implement structural reforms that ensure we have a robust and transparent financial system.

As we deliver our ambitious goal to lift global economic growth, the flow‑on benefits will be felt far beyond G20 countries.

Because the G20 represents 85 per cent of the world economy, the domestic reforms of G20 members will result in stronger demand for new capital.  About one-third of the boost to world output could actually come from spillovers between G20 nations, including those in the tropics.

We know that it’s an ambitious goal to increase global economic growth by an additional two per cent, and we face considerable difficulties.  But without a combination of collective ambition and mutual pressure, how can we expect anything to change?

Meaningful reform is never easy and these are hard processes.  That’s why, to make a real difference to global growth, we will all need to make a sustained effort.  And beyond this year we will need to keep working together

Investment

The G20 recognises that increasing our investment in quality infrastructure is essential to lifting our productivity and increasing our economic growth.

The G20 also recognises that the private sector has a major role to play in infrastructure, and the key to this is for countries to make themselves more attractive to potential investors. 

We know from the State of the Tropics report that foreign investment has been relatively strong in some tropical economies. Even so, the need for broader investment and infrastructure remains – which gives the G20’s work an added relevance in the regions.

To this end, we are developing leading practice approaches in the area of project planning and delivery for major infrastructure projects. These leading practices will draw together the collective knowledge of G20 members, international organisations and business.

It will help countries identify, prioritise, plan and deliver infrastructure projects.

It will provide countries with the direction to increase their infrastructure investment, in partnership with the private sector.

In the case of tropical economies, it will flow through to even better planning and more consistent best practice information about infrastructure like roads and bridges that can better withstand tropical environmental pressures.

Bringing the private sector into the infrastructure program from the very beginning will help us better handle disruptive events. This is particularly important in places like the tourist mecca around Cairns which bore the brunt of the GFC.

Resilience

In terms of the G20’s work on resilience, the focus has been on strengthening the global tax base so that governments have the resources they need to deliver better and more robust economic infrastructure. 

In particular, we are modernising the international tax system to keep pace with changing business models.

We are doing this by combatting the global challenge of tax base erosion and profit shifting (or BEPS) in partnership with the OECD.

To be truly effective, the erosion of our collective tax base needs global solutions. That is why we have been focused on ensuring that developing and low‑income countries are actively engaged on the tax agenda and that they contribute to the policy debates. 

Addressing BEPS and improving tax transparency can help shore up the revenue bases in all countries, but in developing and low income countries the benefits of building and maintaining a sustainable tax base are essential.

Conclusion

The G20’s work is by no means the cure to every ill.

But I am convinced, and I know many of my G20 colleagues agree, that tropical regions have huge economic potential.

And I am sure that our efforts to boost global growth, facilitate greater investment and fortify the global economy against future shocks can become the proverbial tide that raises all boats.

With the combined efforts of G20 members, we can implement changes that will resonate globally.

And on the home front, the Australian Government is preparing a Northern Australia White Paper that will set out a clear, well defined policy platform for promoting growth across our very own tropical region in order to realise our enormous economic potential.

In many areas there is much work to be done. I congratulate you on holding this conference which presents a unique opportunity to highlight links between the G20 work program and the benefits for tropical economies.

Thank you.

[1] According to the countries defined in the State of the Tropics report, 2014 (Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia and the United States (Hawaii).