Address by The Hon Tim Fischer MP, Deputy Prime Minister, Leader of the National Party, Minister for Trade, to the Australia-China Chamber of Commerce, Beijing, 9 September 1997.

I am delighted to be back in Beijing and with you this morning.

The success story of our economic relationship with China is something of which the Australian business community can be proud - particularly, may I say, those of you who are on the ground here in China, making the contacts, building the relationships, and doing the business that generates income and jobs for Australians.

I'd like to talk first this morning about the Government's approach to building our relationship with China and, as part of that, to make a few points about economic reform in Australia itself. Because only when we have that right can Australian business be in a position to seize the great opportunities there are now in our region including, of course, in China.

I'd then like to say something about what the Government is doing to assist Australian exporters build on their already impressive achievements.

Last month the Government released Australia's first ever White Paper on Foreign and Trade Policy. That document is, first of all, a declaration of commitment to the Asia Pacific, for it is in our own region that we must make our future. In this we are fortunate - we are in a region of tremendous dynamism and opportunity.

The White Paper clearly identifies China as one of Australia's key bilateral relationships - as the world's most populous nation, and a country of growing economic stature and influence, China will be a country of critical importance for Australia in coming decades. The Government's approach to China is based on shared interests and mutual respect.

We have important economic interests in common, and seek to build a "partnership in growth" into the twenty-first century. Australia will continue to be a long-term and reliable supplier of the mineral and agricultural commodities which are crucial to China's continuing economic growth.

The Government also seeks to work closely with the private sector to diversify the economic relationship, particularly into services trade and investment. Merchandise trade exports will continue to grow as China's economy expands, and as Australia's manufacturing and technological capabilities become even better understood in China.

My discussions with Premier Li Peng and Vice Premier Zhu Rongji lead me to believe that China will be able to maintain average annual growth of 8-9 percent a year to the end of the century. As you see it daily here in Beijing, China's transformation to a market economy is well underway. In fact it has acquired a logic and momentum of its own.

With a large proportion of China's population better off today than a decade ago there seems little doubt that the vast majority of Chinese support proceeding with economic reform. Vice Premier Zhu mentioned the forthcoming Party Congress and - while we didn't discuss personnel changes - he told me the Congress would endorse the reformist approach of recent years.

The Chinese economy's sustained vitality, generally pragmatic government policies of economic management, and a large and fast-growing market for consumer goods, services, and infrastructure give me confidence that China will remain one of Australia's major markets.

Let me turn now to the economic situation in Australia, and the policies the Government is pursuing to create an optimal environment for our economy to grow and to expand further into our region.

The first message here is a simple piece of good news: Australia's economic prospects are very positive. The Budget forecasts are for strong growth - with the lowest interest rates for decades - negligible inflation, and faster employment growth. Real GDP growth is forecast to accelerate to 3.75 per cent in 1997-98, up from 3.25 per cent in 1996-97.

Moreover, the Government is establishing a framework for continued strong economic growth by tackling the impediments to greater competitiveness. We are doing this in three ways:

First, we have established a responsible macroeconomic policy framework. Second, we are accelerating microeconomic reform and, third, we are reducing the regulatory burden on business.

The key aim of our macroeconomic framework is improving public and private savings. In our first term of government, we will have turned an underlying budget deficit of more than $10 billion into a surplus of $1.6 billion. By 2000-2001, that surplus is projected to grow to more than $10 billion. In other words, we are accumulating the savings which will underpin sustained strong growth in our economy for years to come.

Equally importantly, this is being achieved without increasing existing taxes or introducing new taxes. And the private sector is responding: the June quarter ACCI-Westpac survey showed business confidence is strong following the May budget and cuts in official interest rates.

At the same time as we are getting the fiscal fundamentals right, the Government is also pressing ahead with reforms to sharpen Australian competitiveness. We are taking forward:

. vigorous microeconomic reform to increase productivity, including in key sectors such as telecommunications, transport and energy

. labour market reform for a more efficient and flexible labour market; and

. regulation reform to reduce the compliance burden and costs for business.

To give you one, very important example: just last week the Government announced further reforms to the regulation of the financial sector in its response to the Financial System Inquiry, otherwise known as the Wallis Report.

The proposed reforms will:

. encourage greater competition and efficiency in the Australian financial system;

. provide a more efficient and cost effective regulatory structure; and

. facilitate the entry of new players into deposit taking and other markets;

. but will not compromise the safety and stability of the Australian financial system and in many areas the level of safety will be strengthened.

The Government has also welcomed a recent review of Government Business programs, the Mortimer review, as providing useful input to developing a more efficient and effective industry policy to underpin Australia's economic growth and prosperity. A response to the Report will be announced later in the year.

Our reform efforts are paying off: OECD forecasts for the next two years for real economic growth, employment growth and business investment growth are higher for Australia than for any G-7 nation. For 1998 they are also higher than the OECD average.

Pushing ahead with further microeconomic reform is a matter of hard, sustained work. As what we have already achieved shows, it does deliver net gains for Australia, but there are also difficult adjustments to make in the process. I can, however, assure you, that the Government will not resile from the task.

A leaner, more efficient domestic economy is making Australia a more internationally competitive exporter. Here, too, we can already see results. Last financial year Australia achieved a surplus of $2.8 billion on the balance of trade in goods and services, compared with a deficit of $0.8 billion in 1995-96: this was the first time Australia has recorded a surplus in both merchandise and services exports. Exports now account for 15 per cent of GDP, compared to 10 per cent a decade ago.

Exports are thus making a significant, and growing, contribution to Australia's growth, and generating more, better-paid jobs for Australians.

As our exporters put runs on the board, the Government is also doing its part by working to ensure that their increasingly competitive goods and services gain fair access to overseas markets.

In February this year the Trade Outcomes and Objectives Statement I delivered to Parliament set out a detailed strategy for further improving trade performance this year. The Statement highlighted priorities across a number of markets, and gave emphasis to bilateral market access issues in addition to our ongoing efforts in regional and multilateral forums.

At the regional level we are working with other APEC members to achieve progress towards free trade in the region. The recent APEC Trade Ministers meeting in Montreal gave new impetus to this process, with Ministers agreeing to push ahead quickly in identifying priority sectors for early liberalisation. Partly under the auspices of APEC, we have also seen tremendous tariff reductions in recent years. China, for example, has cut its average tariff rate from 35 to 23 per cent, and will reduce the rate to 15 per cent by the year 2000.

As you will be aware, we have also been working closely with China on its accession to the WTO. Chinese membership on the right commercial terms will provide a tremendous fillip for Australian exporters, and the Government is doing all it can to ensure this happens as early as possible.

In conclusion, let me express again my admiration for what Australian business has accomplished in the region, and particularly China. Your achievements to date promise a lot more to come. The private sector and the Government, working together, have created the right economic climate in Australia, the right strategy for deepening and expanding our integration with the region, and the right approach to ensuring a fair-go for Australian exporters.

I salute your success, and look forward to continuing close cooperation in order to achieve even more for Australia.