HOM Speech to President University

10 June 2014

Introduction

Bapak Rector, Dr Chandra Setiawan, yang saya hormati.

Bapak Setyono Djuandi Darmono, yang saya hormati.

Bapak-Bapak dan Ibu-Ibu yang saya hormati.

Terima kasih banyak atas kesempatan ini.

I would like to thank you for the invitation to speak here this morning.

To me, President University demonstrates the strong professional and personal links that join Indonesia and Australia together.

The concept for this university was originally developed by Pak Darmono and Professor Donald Watts, the first rector of Curtin University and one of the founders of Bond University, the first private university in Australia.

Together, they wanted to create a world class university and a centre of excellence in research and education. And just 13 years later, President University is one of Indonesia’s leading universities, producing Indonesia’s next generation of young leaders.

And it is my firm hope that President University will continue to forge close research, education and personal links with Australia, including through the excellent work being done by the Department of International Relations.

Personal connections, whether through government, business, sport or culture, help to build mutual understanding between both of our countries.
Since the 1950s we estimate that hundreds of thousands of Indonesians have continued their studies in Australia.

Many of you probably know family, friends or colleagues who have studied in Australia.

I know that Australian education institutions are delighted to accept thousands of Indonesian students each year.

And every one of them who returns home to Indonesia is making a contribution to advancing this country’s progress as well as being a personal representative of the value of an Australian education.

We’re proud of the alumni we have in Indonesia - from figures such as the Vice President, the Foreign Minister, the Finance Minister, and the Minister for Tourism, to the many business people who are creating value in Indonesia’s economy.

And increasingly, we’re seeing more young Australians identifying culturally with our neighbours and looking to new opportunities in our region to further their education and their careers.

But we still have more work to do to change the mindset of Australian students so that study and work experiences in our region become the norm rather than the exception.

And that is what one of the signature policy initiatives of the Australian Government, the New Colombo Plan, seeks to achieve.

We want young Australians to view study and internship opportunities in the Indo-Pacific, including Indonesia, as a ‘rite of passage’ crucial to their development both personally and professionally.

We want young Australians to recognise that their futures and the future of Australia are closely intertwined with that of our neighbours in the Indo-Pacific region.

By achieving these outcomes at the individual level, we’re laying the groundwork to lift knowledge of the Indo-Pacific more broadly in Australia, to strengthen our people-to-people and institutional links and to create strong and enduring relationships with our neighbours.

Whether it’s more Australians who understand Indonesia, or more Indonesians who understand Australia, building mutual understanding has a positive impact at all levels where Australia and Indonesia engage.

And establishing and building on this mutual understanding and habits of cooperation – bilaterally, regionally and globally – will help make both our countries more prosperous, more secure and more comfortable with each other.

Both our countries are part of a journey that’s being shaped by powerful economic forces.

But with the right choices, we can use these forces to benefit our people and our nations.

That’s my message today: at a time when the world economy is changing, Australia and Indonesia are in a position to shape the future because of our membership of the G20 and the actions we take as part of it.

Australia is chairing the G20 this year.

And we are chairing it at a time when economic and strategic weight is shifting from west to east.

This story of Asia’s emergence is not new. But it is worth standing back a moment and thinking about it.

Back in 1990, the Australian economy was larger than the ten economies of ASEAN combined. And Australia and China’s economies were roughly the same size.

Today, Australia is only about two-thirds the size of ASEAN economies and China’s economy is close to four and a half the size of Australia’s.

This does not mean Australia has been stagnating - Australia has consistently recorded some of the highest growth figures among developed economies.

But it does show just how fast economies in this region are growing.

In 20 years China and India have grown so fast they’ve almost tripled their share of the global economy and increased their economic size by nine-fold.

Asia’s economy already accounts for a quarter of global economic output and is estimated to rise to be over half the world economy by 2050.

This development is being accompanied by a phenomenal rise in the size of Asia’s middle class, which could more than triple from 525 million in 2009 to 1.7 billion in 2020 – and nearly double again to 3.2 billion by 2030.

We’re witnessing a dramatic shift in the global centre of economic gravity back to its historic location in our own region, the Asia-Pacific.
This incredible economic growth in our region is driving global economic and strategic change.

And it is changing the shape of the world’s institutions.

There is no better example of this than the emergence of the G20 as the premier economic forum, one where Asia, including Indonesia, plays a key role.

During the Global Economic Crisis, the G20 helped to coordinate action to prevent another great depression.

Leaders took decisions to shore up international financial institutions.

They undertook concerted fiscal stimulus.

They announced a standstill on new protectionist measures.

And they instituted a series of reforms that have strengthened the financial system.

And importantly, major emerging economies volunteered to take on a significant part of the burden of repairing problems that had originated in the developed world.

This established that G20 members, including advanced and emerging economies, could function effectively as a forum to deal with global economic issues, in a way no other forum could match.

Now, the G20 is shifting its focus to driving sustained global economic growth.

The global economy is still in recovery from crisis.

The International Monetary Fund estimates that G20 output per capita is 8 per cent lower than it might have been if growth trends before the crisis had been maintained.

The International Labour Organisation estimates that 2013 global employment was 62 million jobs lower than it would have been if pre-crisis trends had continued.

The World Trade Organization expects global trade will grow at 4.7 per cent in 2014, below the pre-crisis average of 6 per cent.
Trade restrictive measures are up, raising the cost of doing business.

And despite phenomenal growth in the Asia-Pacific, there are other trends that demand our attention.

The emerging economies, which have shouldered the burden of driving growth since the crisis, are slowing.

Inequality is becoming a growing issue, both politically and economically.

Between 1988 and 2008, people at the bottom of the income distribution have not participated in global income growth, even as the Asian middle class ballooned.

Income for the poorest has stagnated, while there has been very big income growth for the top one per cent.

And productivity growth is also uncertain. In almost every advanced country, growth in GDP per hour worked has slowed over the past ten years. The jury is still out on whether productivity can continue to rise at the rate it has in previous decades.

This economic situation presents challenges for all countries, including developing countries.

We need to remain vigilant in the face of these risks and vulnerabilities.

Australia’s priority in chairing the G20 is to focus on how we complete the recovery from the global economic crisis and address the growth challenge.

We want to promote strong growth and employment outcomes by empowering the private sector.

We want to make the global economy more resilient to future shocks.

And we want to strengthen the G20.

As Australia’s Prime Minister Tony Abbott said in Davos early this year, the G20 is primarily about people, not governments.

Our task is to create opportunities for citizens of G20 and non-G20 economies alike to make better lives for themselves.

The global financial crisis demonstrated beyond all doubt that national boundaries can no longer protect the citizens of one country against the impact of policies and actions in another.

The distinction between domestic and international issues is becoming less clear. More and more, problems are common problems. And countries need to find new ways of working together to resolve them.

The early impact of the G20 summits changed the world.

This is a big legacy to live up to.

The G20 is working hard to build cooperative action between nations to reduce the risk of crisis so we don’t need to take drastic action.

The challenges that confront the global economy now are less pressing and urgent than those at the height of the global economic crisis.

But they are no less important.

As your Finance Minister Chatib Basri likes to say, a crisis is too good an opportunity to waste.

If we want to create opportunity for people to build better lives, there are challenges that must be confronted, and dealt with through international efforts.

So the G20 is moving to address the growth challenge in an ambitious and quantifiable way.

Australia’s firm view is that actions will speak louder than words.

In February, G20 members committed to develop new measures to raise the level of global growth by an additional 2 percentage points over the next 5 years.

This is equivalent to adding more than two trillion dollars to the global economy.

To deliver on this commitment, a key outcome for the G20 Brisbane Summit will be an action plan to boost growth and jobs and build economic resilience both domestically and across the global economy.

This will require individual and collective action by G20 members to improve investment, trade, employment and competition – critical areas where growth can be achieved.

Structural reform is hard, but it is critical.

Each G20 member will need to do their bit.

To reach our growth ambition, we need to remove barriers to private sector-led growth, because it is businesses that drive growth and jobs.

You know very well the positive impact on your lives of a strong private sector in Indonesia.

Thanks to competition in this country’s telecommunications sector more people are getting online and there’s more choice than ever before.

Whether you use a Blackberry, a Samsung, a Nokia or an Apple phone, there’s no doubt that Indonesia’s love affair with social media is being fanned by the forces of competition and capital investment.

More private sector competition was the answer to the problem of how to get more Indonesians connected in the digital age.

In the same way, G20 members are working to identify practical actions they can take by looking at common challenges and solutions as well as the specific situation of their own economy.

As G20 Chair, Australia is leading by example.

We’re focusing on reducing red tape and improving productivity.

We’re improving the ease of doing business and reducing business costs.

We’re boosting workforce participation and infrastructure spending to build the infrastructure a 21st century economy needs.

Countries are working to remove barriers to private sector investment, particularly in infrastructure.

The OECD estimates that the global infrastructure gap will be US$ 70 trillion by 2030, and this gap will continue to grow.

And investment plays a critical role in lifting economic growth and employment.

Developing countries need new infrastructure, developed countries need rebuilt infrastructure and almost every country is struggling to finance the infrastructure it needs.

We want to make it easier to get big new road, rail, port and dam infrastructure off the ground and help countries get access to the finance they need.

The G20 will bring policy makers, financiers and builders together to identify practical ways to increase long-term infrastructure financing.

Individually, G20 members can take action by reducing regulatory burdens and addressing project approval delays.

We also want to make better use of resources from multilateral development banks – including through helping countries to create their own pipelines of bankable projects and identify the right investment to make.

We also want to reduce obstacles to trade.

Trade is vital to driving economic growth. Trade, both within and between countries, increases wealth by reducing costs for businesses and consumers and increasing competition, which drives innovation and productivity growth.

Protectionist measures are on the rise, and we want to reverse this trend. The G20 collectively needs to lead by example.

We want G20 members to take practical action to make it easier for business to trade and increase trade flows.

Actions to reduce global trade costs by 1 per cent could result in a worldwide income increase of US$40 billion, with 65 per cent of the benefits accruing to developing countries.

A more global economy with stronger cross-border investment ultimately helps everyone because it generates more wealth and creates more jobs.

At the heart of the G20’s work is also building the resilience of the financial sector.

Strong and secure financial markets are vital to achieving strong, sustainable and balanced growth.

Through the G20, we want to improve the representativeness of the IMF.

We’re also working to prevent and manage the failure of globally important financial institutions, make derivatives markets safer, and improve the oversight of the shadow banking sector.

Governments everywhere rely on taxation to fund the infrastructure and services their communities need.

Fixing the international taxation system is another G20 priority.

We want the G20 to deliver effective, practical and sustainable measures to ensure profits are taxed where economic activities driving those profits are performed.

And we want to promote international tax transparency and global sharing of information to ensure taxpayers comply with their domestic tax obligations.

Reliable access to competitively priced energy is critical for economies to develop and grow.

As we approach 2035, the centre of gravity of global energy demand will move decisively towards emerging economies, who will account for more than 90 per cent of energy demand growth.

Global energy trade will be re-oriented from the Atlantic to the Asia Pacific.

The G20 is discussing how to strengthen global energy architecture, build the resilience of gas markets, and bolster energy efficiency.

Fossil fuel subsidies continue to distort energy markets. Their global cost ballooned to $544 billion in 2012.

G20 members are committed to phasing out fossil fuel subsidies that encourage wasteful consumption.

Emerging economies contribute more than two-thirds of global growth.

So it is vital that strengthening development remains central to G20 actions.

We want to ensure that development discussions are tightly integrated with the broader G20 agenda.

We want to ensure developing countries can access the finance they need to fund vital infrastructure projects.

We want developing countries to reap the full benefits of G20 efforts to improve the international tax system, so governments can fund the services their people need.

And we want to take action to reduce the cost of transferring remittances into developing economies.

This year, the G20 will launch a human resource development database to help developing countries match education and training with future job markets.

The G20 will also develop practical actions to lift agricultural productivity in a sustainable way.

We want the G20’s actions to make a real difference to people and businesses around the world.

We want to boost confidence, create employment opportunities, lift people out of poverty and build national prosperity.

And we want a global economy that is more resilient to future shocks.

None of this will be easy.

The individual interests of the G20 members are not always aligned.

But the diversity and international standing of G20 members means that if the G20 agrees on something, it has the means to deliver it.

Of course, governments cannot deliver G20 ambitions in isolation.

Engagement and consultation make it possible for us to increase our understanding of how policies affect others.

It is important for leaders that reforms have broad political support, and we’re engaging with civil society, business, youth and other non-G20 member countries.

The G20 brings together the world’s 20 largest economies. It is big enough to represent the world’s strategic and economic weight. But it is still small enough to make decisions and work together.

And we want to work closely with Indonesia, our closest Asian neighbour.

So that is the journey that we’re on together.

It’s not an easy journey.

But as the emerging leaders of Indonesia, you might look back to this time and ask, did we do all we could to set in motion the forces of prosperity and leave our people and our nations better off?

As Australia chairs the G20 this year, I want to be able to say, we did because we made the right choices.

Let me leave it there and I’ll take some of your questions.