Foreign Correspondents Association
Thank you very much Hiroki, for that warm introduction.
It’s wonderful to be with you, more than happy to take questions at the end of my address.
Can I say what a pleasure it is to speak with the members of the Foreign Correspondents Association today.
You’ve asked me to speak today about developments and emerging issues in Australia’s trade and related industries with the countries of the Indo-Pacific and further afield, which I’m more than happy to do.
COVID-19 has had a profound impact on health, societies and economies.
On almost every significant indicator, Australia has been among the leading countries in terms of its COVID response.
Our economy has grown steadily since June last year, the first full quarter to bear the impact of the economic shockwave.
Through 2020-21, we’ve had positive economic growth in each quarter.
Our economy grew by 0.7 per cent in the June quarter, up 9.6 per cent over the year.
On a financial year basis, real GDP grew by 1.4 per cent in 2020-21.
Strong exports, driven by iron ore, helped support economic activity.
Overall, Australia’s economy performed relatively well compared to other advanced economies during the pandemic to date.
The IMF estimates that in 2020, economic output fell on average of 4.6 per cent across advanced economies, yet our reduction in Australia was only 2.4 per cent.
The Government provided $291 billion in economic support related to COVID as part of its May Budget.
And we’ve seen some positive results, keeping unemployment at significantly lower levels than would have been the case without support, and helping many businesses survive.
Private business investment grew by 2.3 per cent in the June quarter, up 6.2 per cent over the year.
Dwelling investment grew 1.7 per cent in the June quarter, up 15.7 per cent over the year.
In July, unemployment fell for the ninth consecutive month, down to 4.6 per cent.
This year the Budget deficit is forecast to be $106.6 billion, $52.7 billion lower than we expected in 2020-21.
Australia’s international trade picture has also been affected by the pandemic, like our domestic economy.
COVID had a major impact on our trade in 2020, with the total value of our two-way trade falling 13.4 per cent compared with 2019.
But in aggregate, our exports, like our economy, have bounced back.
Goods and services exports in the first half of this year totalled $243 billion, which was up $21 billion on the first half of 2020, and on par with the same period in 2019.
Goods exports have been supported by strong iron ore exports, which hit a record $152 billion in 2020-21, on the back of higher prices.
Obviously, unavoidable border restrictions continue to have significant impacts travel-related services trade.
Very pleased to know that Tourism Australia is a sponsor of your association. They do a wonderful job and we will need them more than ever as we come out of this pandemic.
Services exports were down 34 per cent to $61 billion in 2020-21, compared to the previous financial year.
Small amounts of business travel have resumed – but it is still less than 10 per cent of pre-COVID levels.
Overall, the WTO estimates that global trade in goods fell 5.3 per cent in 2020.
Australia’s goods exports fell 7.9 per cent last year, but that was less than we saw in many comparable developed countries:
- US goods trade fell 16 per cent
- The Euro area was down 9.2 per cent and
- Japan goods exports fell 9.1 per cent.
Our trade with many of our major trading partners has remained healthy, despite demand and price impacts related to COVID, as economic recovery in those markets has supported trade.
- Our (goods) exports to China grew by 10.2 per cent to $165 billion
- Our (goods) exports to Japan fell by 17.7 per cent to $43 billion
- Australia’s exports to Korea grew by 5 per cent to $26 billion
- Australia’s exports to the EU were up 9.9 per cent to $12 billion
- Goods exports to ASEAN were up 12 per cent to nearly $44 billion
- And our exports to the United States fell by 3.7 per cent to just under $17 billion.
Investment has been affected too, although again on this front Australia has been relatively resilient.
In 2020, FDI flows into Australia fell by 48 per cent, which is a very significant fall, that’s nearly half.
But the average fall across advanced economies was 69 per cent.
And despite the decrease in inflows, the total value of the stock of foreign investment in Australia grew by 2.5 per cent in 2020, to $4 trillion.
In such a challenging context, Australia remains absolutely committed to the multilateral trading system, with the World Trade Organization at its heart, and to continuing to work towards greater global trade liberalisation.
Through this crisis, respect for the WTO’s rulebook has largely kept protectionist instincts at bay, ensuring trade kept flowing during the pandemic.
During my recent travels I met with counterparts in Singapore, Vietnam, Japan, Korea and the United States to emphasise the need to revitalise the WTO’s core functions and deliver outcomes at the 12th WTO Ministerial Conference later this year, it will be held at the very end of November, beginning of December.
This includes tangible progress in sectors of utmost importance to Australian exporters, such as agriculture, services and e-commerce.
We need to make progress on fisheries, too.
At the July WTO Ministerial meeting, there was broad agreement that the WTO fisheries subsidies negotiations were long overdue to be concluded ahead of MC12.
This will deliver a result for the health and sustainability of the world’s oceans, and future livelihood of fishing communities around the world.
We’re poised to deliver an outcome – but the negotiations are tough – and we are facing those major fishing nations that heavily subsidise their distant water fishing.
In Washington I discussed with USTR Katherine Tai the importance of renewed US leadership in the WTO and in reform efforts, while welcoming the US decision to formally join negotiations on service domestic regulation, which should pave the way for conclusion of this important negotiation for our services exporters.
Across the board, Australia is offering its leadership, negotiating energy and compromise to achieve results in the WTO.
At the same time, over the past few years the Government has successfully expanded our network of free trade agreements and thereby delivered new trade and investment opportunities for Australian businesses and consumers.
Last year alone, four free trade agreements with Indo-Pacific economies entered into force, including a new agreement with Indonesia – one of our closest neighbours, a country with a population of over 265 million people.
After eight years in negotiations with the monumental objective of tying the economies of the three Northeast Asian giants with the growing ASEANs and with Australia and New Zealand down South, the Regional Comprehensive Economic Partnership Agreement was signed in November last year..
RCEP – led by ASEAN – will be a key part of our post-COVID economic recovery in the neighbourhood.
It will be the world’s largest free trade agreement and will bring together nine of Australia’s top 15 trading partners into a single economic framework.
This is why I welcomed the Joint Standing Committee on Treaties’ recommendation for Australia to ratify this important, historic deal, and the Government is progressing implementing legislation in Parliament.
And we hope to be one of the founding member countries when it enters into force, 1 January next year.
Since becoming Trade Minster, I have actively focussed on various ways to further expand and strengthen Australia’s network of free trade agreements, so that our nation maximises the potential benefits on offer from wide-ranging trade and investment opportunities.
Two prime examples are the progress made in separate negotiations with the United Kingdom and European Union for new free trade agreements.
I was very happy to play a key role in finalising an agreement in principle on the core elements of the Australia-UK FTA in June – which sets out the terms on which these negotiations will be concluded later this year.
I can also advise that ongoing engagement with India on a new trade agreement has made progress in recent months.
Our work does not just stop at signing a deal.
Where possible, the Government is working with our FTA partners by reviewing and upgrading existing agreements to ensure they continue to deliver mutual benefits.
Australia is, for instance, currently participating in upgrade negotiations with other parties to the ASEAN-Australia-New Zealand Free Trade Area.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) continues to expand, through Peru’s recent ratification of the Agreement, and the commencement of accession negotiations with the UK.
The CPTPP remains the most comprehensive regional FTA, with high-standard market access commitments and forward-looking rules.
Expansion of the CPTPP will further promote regional economic integration and provide opportunities to expand trade and investment for Australian businesses, including as we work to recover from COVID-19 impacts.
Australia’s place in the region
As the pattern of our FTA negotiations and reform agenda shows, Australia is deeply committed to our Indo-Pacific region.
With key partners across the region – the United States, Japan, India, ASEAN and others – we are working hard to build a region that is open, transparent and resilient to future economic shocks.
We want our region to be run according to mutually agreed and respectful rules in the same way as the international order at large.
This is hard work, of course, but I know this is a shared ambition and many are working to the same goal.
President Biden’s elevation of the Quad partnership between Australia, the United States, Japan and India to a leader-level forum has sent a great signal through the pandemic...
…with the focus during the pandemic naturally moving to supporting vaccine delivery across the Indo-Pacific.
I know Prime Minister Morrison was very glad to take part in the agreement through the Quad to provide a billion doses of vaccines to developing countries in the Indo-Pacific.
Continuing to build and develop that shared vision for the future of our region has involved a lot of work on a range of fronts, all going to knit our countries closer together and build habits of cooperation.
Specific opportunities for Australia
There are significant opportunities out there for Australia – even in a time which brings with it its own risks and challenges.
Particular areas of focus are clean energy, digital trade and tourism.
In July, for example, I visited Singapore, our largest trading partner in ASEAN, where I talked with my counterpart Trade and Investment Minister Gan about a potential Green Economy Agreement.
This negotiation has huge potential to open up opportunities for the Australian energy export sector.
I was also pleased to discuss with Singapore the implementation of our landmark Digital Economy Agreement – this is an area where Australia is literally leading the way, to ensure our businesses and consumers can take full advantage of emerging technologies – and I also met with Singaporean investors with a significant presence in Australia.
In visiting Korea in July, I built on our agreement to elevate the Australia-Republic of Korea relationship to a Comprehensive Strategic Partnership and also talked about concluding a Low Emissions Technology Partnership.
I met with senior business figures in Seoul looking to trade with and invest in Australia in our agriculture, critical minerals and energy sectors, and I emphasised Australia’s potential to be a key partner with the Republic of Korea in achieving a low carbon economy.
When in Japan in July, I was working closely with Minister for Foreign Affairs and Minister for Economy, Trade and Industry on the implementation and operation of RCEP and the CPTPP, we also committed to work with Japan on hydrogen, critical minerals and the diversification of supply chains through our Decarbonisation Through Technology Partnership.
Further afield in Germany, which I visited earlier in the year, discussions were held on the potential for Australia to become a hydrogen supply partner for German industry.
Clearly there are challenges in our relationship with China but they shouldn’t over-shadow our strong mutual interests in the bilateral trade and investment relationship.
Despite the trade disruptions, China remains Australia’s largest export market – with our goods exports to China in Q2 of 2021 increasing by 29 per cent (or $12 billion) compared to the same period in 2020.
China will remain an important market for Australia and, in particular, we look forward to welcoming students and visitors from overseas, including from China, once our borders re-open.
Across the region, pressures to modernise energy – specifically, to accelerate the switch away from fossil fuels towards renewables and a range of low emissions technologies – are gathering pace.
Australia has a unique opportunity to meet the world’s growing demand for critical minerals over the next decade and beyond.
We are the world’s largest producer of lithium, and the forecast for lithium by 2030 is some $400 billion.
Australian company Lynas Corporation is a major supplier of processed rare earths.
Australia already produces nine of the ten minerals used in lithium-ion batteries and has world-class resources for the tenth (graphite).
Scaling up the critical minerals industry to support new energy technologies is fundamental to addressing the global challenge of climate change, and Australia can support countries seeking to deploy renewable energy and low emissions technologies to decrease their emissions.
Getting these critical minerals out of the ground, developing Australian expertise and capability to process these raw minerals into carbonates and oxides so that we retain more of the economic benefit, and ensuring our products integrate into global value chains – that is the Government’s objectives.
This will create jobs for regional communities, support advanced manufacturing and sovereign capability in Australia, and provide new export opportunities for our commodities as the world transitions to cleaner forms of energy.
Just last week, we welcomed the deal between Australia’s Renascor Resources and South Korea’s POSCO as another example of the opportunities for Australian companies to supply critical minerals – in this case purified spherical graphite – to the world.
We have also welcomed the signing of a US$250m agreement between a consortium of South Korean investors and Australian Strategic Materials for an equity interest in its Dubbo rare earths project
We are also encouraged by the recent 100-day review of US supply chains which identified the key role Australia plays in developing secure, diverse critical minerals supply chains.
On climate change at large, Australia is committed to an effective global response through domestic policy action and international cooperation.
We believe that the key pathway to an effective global response to climate change is to reduce emissions by lowering the cost, and accelerating the uptake of green technology globally, particularly in developing countries.
We are concerned that unilateral policies, such as the EU’s Carbon Border Adjustment Mechanism, will undermine multilateral approaches to trade and climate change, and risk becoming a new form of protectionism.
Rather, we are advocating approaches that incentivise not penalise trade, while reducing barriers to trade in environmental goods, services, and technology critical for a low emissions future.
All in all, Australia is well positioned for the opportunities ahead of us, notwithstanding the pandemic.
I’m pleased that we’re working as hard as we are to shape a positive, resilient, inclusive Indo-Pacific – and trade and investment is a huge part of that.
Thank you for taking the time to listen today – I’m looking forward to taking your questions.
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