Chicago Council on Global Affairs

PRIME MINISTER: Thank you very much Ivo and thank you all for coming out here this morning. The Council is a 98 year old organisation, and it’s stood for the opportunity to come and hear from a perspective and today I come from the Australian perspective and to contribute some of our thinking on what is a very complex world at the moment and where Australia sees its role in it and particularly our relationship with the United States. And so this is a great opportunity, there’s a whole bunch of things going on in New York at the moment but I know there’s a lot of things going on here in Chicago so we wanted to be here in Chicago to be part of this discussion here as well and it’s wonderful to be here and to address this body. I want to thank Ambassador Hockey for being here and Ambassador Culvahouse for being here, they’ve been doing a great job in managing the relationship that we have with AB down in Canberra and Joe who’s been here now for some years and he’s been doing a great job. And David Bushby who’s our new Consul-General and he’s just taken up the role here very recently in Chicago and looking forward to the great work he’s going to be doing.

It was a little over 120 years ago that Teddy Roosevelt gave a memorable speech titled ‘The Strenuous Life’, many of us in politics know it well. It was done at the Hamilton Club, which is just a few blocks from here in Chicago. And on that day in April 1899, he told his audience that “the twentieth century looms before us big with the fate of many nations.” He said that “if we are to be a really great people,” the United States, “we must strive in good faith to play a great part in the world.”

He added: “Far better it is to dare mighty things, to win glorious triumphs, even though chequered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the grey twilight that knows not victory nor defeat.”

Now he preached not a life of ease but one of strenuous endeavour. In Australia we put it this way, “If you have a go, you should get a go” and that is a theme that I have used to describe my own Government’s approach to encouraging Australians to pursue their own individual aspirations. I am sure TR would probably not mind that reference. Without a spirit of enterprise, of endeavour, of aspiration, no nation will deliver security, economic prosperity and national unity to its people.

And a guiding principle of mine is that regardless of our ability, our size or our circumstances, we are here to make a contribution, not just take one. That is actually what fairness means in Australia. The principle of mutual obligation and it applies at nations’ levels as well.

It’s also how we approach our alliance relationships, how we build a strong economy and a secure nation, how we provide for our families and enable them to contribute to their communities as well. So against that backdrop, I want to cover three themes.

First, I want to spell out what our approach as a nation is of strenuous endeavour – and what that means for the great alliance with the United States.

Second, I want to explain what it means for the approach that we will take to the new and more challenging global environment that confronts us all.

Third, I want to talk about Australia’s place in the global economic landscape; how we are ensuring that Australia is well-positioned to succeed in what is a rapidly changing global economy.

Now the importance of our alliance on this first point was set out in 1908, when our nation as a Commonwealth was only 7 years old, Australia’s second Prime Minister Alfred Deakin defied our principal ally, Great Britain at the time, and wrote directly to President Roosevelt, inviting the Great White Fleet to visit Australia. Deakin wrote that “no other Federation in the world possesses so many features [in common with] the United States as does the Commonwealth of Australia”.

President Roosevelt’s Secretary of State Elihu Root, strongly recommended that Australia be added to the fleet’s itinerary. He told the President: “The time will surely come, although probably after our day, when it will be important for the United States to have all ports friendly and all causes of sympathy alive in the Pacific”. That was a long-sighted view and it’s proved to be true.

The fleet certainly received a friendly welcome in the port of Sydney which is Joe and my hometown. On 20 August 1908, it is said that well over half a million Sydneysiders turned out to watch the arrival of the fleet. We saw at the Pentagon just this week a shot of that scene. Now that is quite a turnout for a city whose population at the time was only 600,000. That’s a big crowd. It was the largest gathering yet seen in Australia, far exceeding the numbers that had celebrated even the foundation of our Commonwealth as a nation just seven years before.

That visit was the beginning of a strong and enduring partnership between our nations and we have been alongside the United States in every conflict since.

We have always been prepared as Australians to make a contribution to that alliance, not just take one. You do that over 100 years and more and your alliance only gets stronger and stronger to the point where it is today. And public support for our alliances is incredibly strong. Your Council’s own survey as we were just discussing outside, of public attitudes to foreign policy published earlier this month found support for America’s security alliances has never been higher. And we welcome that.

You can be assured that we are determined to continue to expand and strengthen our alliance. On this visit, we have agreed to increase our co-operation in space research. Now this isn’t about writing cheques to NASA or anything like that, this is about Australia as a Commonwealth investing in our own businesses in Australia, our own capability in Australia, to create jobs in Australia, in our space industry so our space industry can participate in the noble and visionary project of the return to the moon. Not about writing cheques to NASA, NASA’s got plenty of cheques, but the Australian industry needs to develop and frankly it’s about 20,000 jobs in Australia and turning an industry into Australia into a $12 billion industry by 2030. And so that industry in Australia can partner and participate with commercial partners here in the United States.

We are also working together to build an integrated supply chain on rare earths and critical minerals; this is both a strategic as well as an economic issue for Australia, essential for our defence and high technology applications. And we are deepening co-operation on so-called frontier technologies that will shape the global economy for decades and beyond. Very much in both our national interests.

We are substantially increasing our economic, security and infrastructure co-operation in the South West Pacific. We are modernising our alliance cooperation arrangements. The bottom line is that when we made a commitment to the alliance, we meant it and we will never take it for granted because there is a temptation and a great danger in complacency around alliances. To welcome the protections provided by them but not necessarily the obligations. It is a temptation that our nations have meticulously resisted and continue to.

We are committed to working with the US internationally because we agree it has borne too many burdens on its own. Australia will continue to pull its weight. We look to the United States often but we don’t leave it to the United States. We do not opt for the grey twilight. We do not shrink from strife. The challenges of a changing world are things we confront.

Ladies and gentlemen, we are grappling with the end of one era now and really what is the dawn of another.

Like TR more than 100 years ago, we confront a changing economic order and transformative technological change. This isn’t fresh news. Like TR, we should approach this challenge with confidence, resolve and clearly articulated principles to guide us. And this is the central focus of what my Government and Australia is doing in the Indo-Pacific.

It is the region where we live, it’s our neighbourhood. It’s the region that will continue to shape our prosperity, our security, our destiny and, increasingly, our global balance of power.

Our engagement with the Indo-Pacific will be shaped by five key principles. Firstly, a commitment to open markets and the free flow of trade based on rules, not power. Respect for sovereignty of nations, their independence, irrespective of their size. From the smallest Pacific nation to the largest economies in the world.

A commitment to burden-sharing with strong and resilient regional architecture. Respect for international law and the peaceful resolution of disputes. And a commitment to work together to resolve challenges of common interest including particularly on our oceans – we’re the biggest island continent in the world, our oceans impact heavily not just on our economy, on our security, but how we do life in Australia and always have not just in modern times but going down in over 60,000 years of the oldest living culture in the world, our Indigenous Australians. Oceans, climate, illegal fishing and plastics pollution. Practical issues that need addressing.

We also need to work together to find ways to reduce trade tensions that have developed over recent years.

China’s economic growth is welcomed by Australia and we recognise the economic maturity that it has now realised as a newly developed economy. This was the point of the world’s economic engagement with China. Having achieved this status, it is important that China’s trade arrangements, participation in addressing important global environmental challenges like the ones I just mentioned, that there is transparency in their partnerships and support for developing nations, all of this needs to reflect this new status and the responsibilities that go with it as a very major world power.

The world’s global institutions must adjust their settings for China, in recognition of this new status. That means more will be expected of course, as has always been the case for nations like the United States who’ve always had this standing.

So it is also true that China’s economic expansion was made possible by the stability underwritten by US strategic engagement and the international community who built the global trading system and welcomed China’s accession to the WTO.

We should remember that it was 75 years ago – at Bretton Woods – that the United States led the way in the creation of financial institutions and economic forums that established equitable rules to stabilise the international economy and remove the points of friction that had contributed to two world wars.

That was the dividend of peace. And investing that dividend of peace in a new world order. And I agree with the assessment made in the President’s 2017 National Security Strategy that while the global economic system continues to serve our interests, it needs some reform. We cannot pretend that rules that were written a generation ago remain appropriate for today. Why would that be true in this area and not in any other?

It is clear that global trade rules are no longer fit for purpose. In some cases, the rules were designed for a completely different economy in another era, one that simply doesn’t exist any more. In other cases, our rules are not comprehensive. And it is clear that our rules are not keeping pace with technological change that is happening at an unprecedented pace. But we do need the rules, we do need the rules. A study by Accenture estimated that digital commerce now drives 22 per cent of the world economy, you know these figures. A separate study by McKinsey Global Institute showed that data flows grew by a factor of 45 in the decade to 2016.

But there are many existing obstacles and many emerging barriers to the expansion of the digital economy. Left to proliferate, such barriers will distort and choke the global economy and the great benefits that have flowed to all nations. That’s why Australia is taking a leading role in developing e-commerce rules at the WTO. That’s a practical thing to do.

There is a broader imperative at work. We must demonstrate that collectively we have not lost our ability to adapt and adjust our trading system to new realities.

When there were 144 members of the WTO, the Director General at the time likened the WTO to a vehicle that had one accelerator and 143 brakes.

We cannot allow that to continue. We can no longer move at the speed of the lowest common denominator. It is time for the system to catch up with the world. And we intend to help that process in a practical way, making our contribution based on our experience and I’ve got to say we’re positive about it. The world has just reached a change point, that’s all. There’s no need to catastrophise it, there’s a need to understand it to adjust the institutions and the rules to accommodate it. There’s no need to engage in a heavily polarised debate on this issue, there’s a much more practical issue at the heart of all this and we just have to reset to ensure that can provide the same peace and stability and prosperity that will last. We’re totally up to it, we still have the wisdom and capability to achieve it and so Australia won’t be a bystander in that process, we’ll be involved. We’ll be rolling our sleeves up, we’ll be playing our part and just in case you think we’re doing that because we’re terribly friendly and wonderfully affable people, which we are, the real issue is it’s in our national interest.

The reason we’re here today is it’s a great Council, it’s a great institution, I’m here today because one in five Australian jobs depends on trade and our connection with the rest of the world depends on that. I’m here today because of what’s happening with plastics in our oceans is bad news for our local environment in Australia so we need to do something about it. I’m here today because of our friends in the Pacific, our family in the Pacific, people are stealing their fish, that’s got to stop if they want to have a secure future for their families and their people. And these issues are the things we need to move the dial on.

Ladies and gentlemen, moving onto the third point I want to talk about today, TR was right when he said in this city 120 years ago that “no country can long endure if its foundations are not laid deep in the material prosperity that comes from thrift, from business energy and enterprise.”

The Australian government understands this point very acutely. My government is unashamedly pro-growth. Every time the issue of inclusive growth comes up I say we’ve got to have growth first for it to be inclusive.

And there is a simple reason for it. Without a strong economy you cannot provide your citizens with the living standards they aspire to, the essential services they rely on, the protection and conservation of the environment they live in and the security under which they wish shelter.

That is why my government will always seek to promote and reward enterprise and aspiration and I think this is one of the great connections between Australia and the United States and we’ve talked a lot about growth on this trip.

The Australian economy is now in its 29th year of uninterrupted economic growth, that’s a world record. I think it’s one of our nation’s greatest achievements if not our greatest achievement. Since 1992, Australia’s economy has grown faster than any other developed country.

We are determined to build an even stronger economy. Most recently we have legislated A$158 billion in personal tax cuts because we believe Australians should keep more of what they earn and that acts as an incentive for them to get out and realise their aspirations.

And record tax relief for small and medium businesses similar to what you’ve achieved here in the United States.

This year our budget will be in surplus for the first time in 12 years. The Ambassador knows a lot about that too he did a lot of the heavy lifting as part of our government in its early days. We will eliminate net debt within a decade. Our AAA credit rating remains in place despite the tremendous shocks we’ve had to our economy. The most significant, and I’m not talking about the GFC, I’m talking about the end of the mining investment boom ripped $80 billion of capital investment out of our country and that sent a shock through the system far greater than the global financial crisis which was of more acute effect in the north Atlantic. In Australia the big hit to our economy actually came through that event and we retained our AAA credit rating through that process, one of only ten nations in the world to achieve this outcome from all key rating agencies.

We are pursuing the most ambitious trade strategy in Australia’s history. In the last six years we have secured duty-free or preferential access to an extra 1.7 billion consumers. Seventy per cent of Australia’s two-way trade is now covered by free trade agreements, up from 26 per cent when our government came to office in 2013.

We have concluded or are negotiating trade agreements with 17 of our top 20 trading partners. Australia gets it. You don’t get rich in Australia selling things to yourself, you’ve got to take it off shore, you’ve got to take your economy off shore and you’ve got to look out for prosperity and we’ve been doing that for a long time. That’s why we’re negotiating an ambitious FTA with the European Union, and hope to commence negotiations with the United Kingdom as soon as it leaves the EU.

These efforts are paying dividends. In the year to June 30, Australia recorded a record trade surplus of around A$50 billion, that’s three times larger than the previous record. Despite global headwinds, Australia has recorded 19 consecutive monthly trade surpluses and I hasten to add the United States continues to enjoy a healthy bilateral trade surplus with Australia of some A$29 billion in 2018 and just in case you were wondering, the US has had a trade surplus with Australia since the Truman administration. So there is no better deal than the one the US has with Australia, not a tariff on anything that comes in, that is the gold standard of trade relationships that set out I think where Australia sits in the economic landscape in the United States.

So ladies and gentlemen, our strong economy means we can plan for the future and we will maintain a defiant optimism in the complex and often confusing world that is out there. Why? Because we know who we are, we know what we’re about, we know what our principles are, we know who our friends are, we know who our partners are. We’ve got a clear plan and we want to work with everybody but we’re very clear and consistent we hope in our communication and in the way we follow through and how we live out our values and our relationships with other nations.

This investment means we can continue to meet commitments to our alliance partner. That we can play our part in particular.

We are building a stronger Defence Force by restoring Defence funding to 2 per cent of GDP by 2020-21. That will make us, by the way, the second of all five eye countries, it’ll make us greater than the United Kingdom and will make it also greater than Japan and it’ll also make us greater than Germany. And we embarked on the largest regeneration of the Navy since the Second World War, investing A$90 billion to invest in 57 new vessels mainly in Australia. And this is part of a broader A$200 billion defence capability upgrade that we’re doing.

We rely on the United States for a large share of this equipment. Australia spends over $A4.4 billion on US military hardware annually. That’s more than $A12 million per day. It means we are one of America’s most interoperable allies and most trusted I would say.

We are modernising our national infrastructure to ensure our economy is even more efficient and more productive. We are investing A$100 billion in nation-building infrastructure over the next decade. That’s a plan that others can invest in as well. Our plan will bust congestion, improve the lives of Australians, speed up supply chains and ensure our products reach global markets on time. We are building a new Inland rail network and a new airport in Western Sydney. And co-located with the new airport, the new Western Sydney Aerotropolis will become a global hub for sectors including defence and aerospace, freight and logistics, agribusiness, pharmaceutical industries and biotechnology.

As we expand our economy and make it more productive, we will continue to be open to foreign investment. The United States is by far the largest source of investment in Australia and the largest destination of Australian investment.

More than a quarter of all investment in Australia originated in the United States – nearly A$940 billion. US majority-owned affiliates in Australia employ 310,000 Australians, paying nearly $30 billion in wages and salaries annually. That’s why we’re here – it’s about jobs, it’s about wages for Australians.

It’s not one-way traffic. Australian investment in the United States is also growing strongly. Yesterday, with President Trump, I participated in the official opening of a new Pratt Industries manufacturing plant in Ohio – the largest new factory in the United States since President Trump was elected. And last month, Bluescope Steel, a great Australian steel company, announced a $1 billion expansion of its North Star steel mill in Delta, Ohio. These projects are the practical evidence of an ever closer economic relationship between our two countries. And there’ll be more as there’ll be more investment from the US and Australia.

So our great partnership, ladies and gentlemen, was started and cemented in the presidency of Teddy Roosevelt. A presidency that left an indelible mark on America and defined its place in the world. Our shared temper of mind and our capacity for strenuous endeavour have consolidated that friendship.

We think in similar ways. We share an instinct to ‘have a go’. And a reflex to support those who have that go so they get that go.

It is evident in the strength of our alliance. It is evident in the strength of our shared commitment to embracing the challenges of the new global order. And it is evident in the strength of our economies and our determination to improve the lives of our peoples. Thank you so much for your kind attention.

MODERATOR IVO DAALDER: Well thank you that was terrific. It’s refreshing to start a Monday morning with defiant optimism, we’re not used to that these days, but it’s great to have. Also we really appreciate what you said about the alliance, it’s important to note our forces have been fighting alongside each other for over 100 years in every single war including for the last 18 years in Afghanistan, a remarkable testament to the strength of the alliance.

We have about 10 minutes so I’ll get to some of the questions from the audience, the first one though I want to get to is Ohio, we’re in the Mid West we’re in Chicago, it’s important the trade relationship you mentioned with the United States is really important, where do you see the future growth potential in that relationship between the United States and Australia, in particular how do you see the Mid West playing a role?

PRIME MINISTER: Well I think in the two examples I outlined in terms of Australia’s big investments whether it’s Bluescope or what Anthony Pratt has been doing down there in Wapakoneta, there you go I got it right this time, that speaks I think of the ingenuity of Australians to understand where the opportunity is. You know I talk about Anthony’s business, they’re in 27 states now, what Australia has done in the recycling of paper and the mills process and the technology they built there through Pratt Industries in Australia, he’s basically brought that model to the United States where the level of recycling is much, much lower. So his business in Australia is probably about half the market in Australia [indistinct], in the United States it’s about five. But they have the technology and the know how to turn that into something much greater than that and they’re doing something much different to everybody else but they’re also doing something quite important environmentally as well. I think Anthony wouldn’t like me to describe him as a sort of environmental warrior although they’re the outcomes they’ve achieved, but his business model is just good for the environment, that’s where I think he’s really merged these things/

So why am I telling you this story? I’m telling you this because Australians are quite innovative investors, we deal with great technology in Australia to solve some of these big challenges. My own government is going to focus very heavily on the technology around waste management. It’s our waste it’s our responsibility, it’s a very practical that I want our government and our country to pursue but it’s going to create a lot of jobs too, it’s going to create lower cost industries for Australia and it’s going to create a clear environment so it’s just win win win.

So where we can see those opportunities, and I think there are a lot of those across the United States and we can bring a lot of that know how from what we’re doing in Australia here to the United States, and similarly I think the partnerships we can have in the agriculture sector, the ag tech sector, the fin tech sector, I mean the entire Mid West so much of its primary industries depends on this new technology, I mean technology is going to shape a lot of the opportunities here. Farming practices are going to change.

In Australia at the moment we are going through one of the worst droughts in memory but the resilience…drought is not a new thing in Australia and so our farmers have had to, by sheer will and necessity of the environment they live in, have had to develop some of the most advanced farming practices in the world. So there’s a great deal to learn off each other and I’m sure David will be exploring all of this in his new role as Consul.

MODERATOR: You talked about China, you described China as a success in fact off our policy, I think most people would agree with that but we are at a stage where there is debate certainly in the United States about the meaning of that success. So in our own opinion polling we find a very divided public between those who think China’s role and emergence in world power represents a critical threat to US security and those who say no actually it’s something that we can deal with. How would you describe the future strategic relationship [indistinct] China?

PRIME MINISTER: Well I think the first thing to do is acknowledge that Australia and the US come at this from a different perspective. We have a trade surplus with China, you have a trade deficit, and quite a significant one and so that is I think going to affect the lens through which you see China and its economic success, I suppose. From Australia’s point of view, the engagement with China has been enormously beneficial to our country and that’s what led us to develop the Comprehensive Strategic Partnership we have with China, the China-Australia Free Trade Agreement which was quite revolutionary [indistinct] and we want to see that continue.

The fact, as I was arguing in my presentation, has taken us to a place where China has a resource and capability that it never had before and it has invested a great deal of that in its own strategic defence and its capability and that obviously presents a different calculus to the Indo Pacific than existed 30 years ago. And so that’s why I just encourage everyone who’s engaging in this issue to sort of step back and appreciate the history of what’s happened here and to have a bit of, I think, confidence and optimism that there are options and there are ways that we can manage this into the future. The world can have two very large economies and they can be mutually beneficial but the point is we’ve got to go for the gear change now. It won’t continue to work if we try to force it into the old model and the old rules and understandings that have been there before that have led us to this point. They have served their purpose and now we need to find a new way of this working. So that’s why I’ve been quite supportive of the President trying to strike a new deal with China, there’s some serious issues which have to be addressed in that trade relationship. Issues which once addressed will also benefit Australia. Issues on forced technology transfer affect Australian companies too. IP issues affect Australian companies too. And there are global responsibilities on the environment and the other things which Australia is very invested in and everybody needs to pull their weight on that so with great economic power comes great responsibility and we need to step up and gear change.

MODERATOR: You described the centrality of Australia in at least the bilateral relationship, maybe together with Japan, one of the countries that has an extraordinarily important relationship with China and an extraordinarily important relationship with the United States. Is there a role for Australia either alone or perhaps together with one or two other countries to try and figure out a way that we can build a relationship between the United States and China that benefits both and also Australia? Is there something that you can do proactively?

PRIME MINISTER: Of course, and we’re doing it. It’s part of the reason for being here but it’s also important we work through things like the East Asia Summit, the close relationships as you say with Japan, with Indonesia with whom we’ve just completed a comprehensive partnership with them, and also with India as a major and a strongly emerging economy in the Indo Pacific region. So [indistinct] a small country, but one that is greatly respected and has I think very interesting insights into this [indistinct]…gave a very impressive overview when he spoke at the Shangri-La Conference earlier in the year. But the thing about the Indo Pacific, and Australia is no stranger to this either, our objective here is pretty straightforward, we want to be independent sovereign nations and to be able to get on and do what we do and run our countries the way our people choose to and that’s what is prized. And I find there a great complementarity of nations in the Indo Pacific. We all have our different histories, we all have our different ideologies or philosophies or systems of government, this is why I’m always encouraged by the ASEAN nations – a more eclectic group of nations you couldn’t find but we’ve been working pretty closely together for 45 years and I think that shows the attitude of the Indo Pacific and that is why ASEAN has been very much at the centre of how we look at the Indo Pacific and we enjoy that relationship.

So understanding that nations in the Indo Pacific who simply want to be independent and sovereign I think is the basis for great engagement and a coalition of positive intent.

MODERATOR: I know we’re out of time so I’m going to ask one soft ball question, which is coming at you from our audience, what do you believe Australia or Australians do better than any other nation or that the United States should bring into this country?

PRIME MINISTER: What do we do better? Look there’s heaps of things we do better. We’re going to have to push our flight back.

I’ll tell you what’s most important I think, I think what Australia really brings to the table is we’re a massively optimistic people. We’re a glass half full country. We’re a country that has achieved amazing things and we tend not to crow about it, we’re quite understated. But we’re a very strong and resilient country proud of what we achieved and what we’re doing in the world and most importantly to lift living standards for our own people.

We’ve got our challenges as I said, the drought at the moment is breaking the nation’s heart and while I’m a long way away from home this is something I’m getting regular reports on and I’m looking forward to getting home and getting out in those rural communities where they’re really hurting. But despite droughts, despite floods, despite wars, despite economic challenges, despite being a long way away from the rest of the world where [indistinct] has catered for centuries, we have prevailed and succeeded. And why? Because we have a go, and we get a go and when we do that I think we add something very special to the world.

MODERATOR: Mr Prime Minister I can’t think of a better leaving point than that optimism, that’s a great way to end, we really appreciate you coming.