ADDRESS TO THE ADVANCE 100 GLOBAL AUSTRALIANS SUMMIT

AUSTRALIANS IN THE GLOBAL ECONOMY

SYDNEY

TUESDAY, 19 DECEMBER 2006

Seventy five years ago in this city an elderly woman by the name of Helen Porter Armstrong passed away. Born in Melbourne in 1861, the daughter of a builder, she took to singing. In 1886 she went to Paris and sang under the name “Melba” in honour of her home town.

Despite going on to fame and fortune in the opera houses of Europe and America, Dame Nellie Melba maintained her love for, and loyalty to, the country of her birth. She returned to her homeland for a triumphant tour in 1902, when the new nation was barely a year old. In 1927 she sang the national anthem at the opening of the first parliament house in Canberra.

Dame Nellie Melba reached for the world stage to fully realize her talent and develop her ability. Her international success was a source of great pride for her fellow countrymen and her country was a great source of pride for her.

There are many Australians who live overseas because their talent or ability or drive has taken them to the world stage. The sportsmen and women we admire so much want to compete against the world’s best. Our artists and entertainers want to work with the best in the great entertainment centres of the world – LA, Broadway or the West End. In doing so they stretch themselves and their abilities. This does not mean they have turned their back on their country. For many of them the love of country grows stronger through this process. Most Australians only begin to really value the benefits of this country when they are able to compare it with others.

Our Ambassadors around the world are not just those employed by the Department of Foreign Affairs. They are the Australians who live and work in foreign countries who can explain what Australia is like; who demonstrate the warm hearted nature of the Australian character.

Sometimes you will hear criticism that talented young Australians go overseas to work. This is nonsense. There are some skills they can only learn through international exposure. They want to be the best. And to be the best they have to mix it on the international stage. Talented young Australians around the world are not a loss to our country they are a great national asset.

If we are promoting tourism to Australia it helps to have Australians who are well known in foreign markets doing that for us. If we are promoting inward investment, it helps to have Australian business leaders who are known and respected to tell the story of Australia’s economic achievements. There is a great deal of advantage in a diaspora.

The Jewish diaspora, in the United States is one of the great strengths Israel has in generating international political support. The Irish scattered around the world have endeared themselves and their country to millions. Ireland is a small country of around 4 million people. For a hundred years its principal export was its people. And not by choice. The Irish diaspora is far greater than the population of Ireland itself, and is generating a massive flow of investment back to the ‘old’ country.

The diaspora and its benefits

Estimates of the size of the Australian diaspora are imprecise, but there are at least three-quarters of a million Australians living overseas on a permanent or long-term basis.¹ Around one-quarter of Australia’s expatriates are in the United Kingdom and Ireland, another quarter are in continental Europe, and around one-seventh are in North America.² Most of the remainder are in Asia and the Pacific.

Relative to Australia’s population, Australia’s expatriates are disproportionately young, highly educated, and highly skilled. Most of our expatriates are of prime working age.

The most frequently cited reasons for leaving Australia are the employment opportunities overseas or the professional development it opens for them.

Sometimes it is claimed that the emigration of skilled labour causes a ‘brain drain’ in Australia. In fact, Australia has a ‘brain gain’, in net terms, due in large part to our skilled migration programme. In 2005-06, Australia had a net gain of over 57,000 people with a skilled occupation.³

A very high proportion of Australians living overseas return. Most expatriates who leave when they are young, come back to Australia at significant events in their life – when their children enter education, when a parent enters care, or when they retire. Recently, the Productivity Commission noted: ‘The overall rate of return of skilled Australian residents, who indicated that they were leaving permanently or on a long term basis, was around 75 per cent (when returns two years after departure were compared).’⁴ The rate of return of skilled Australians from the United Kingdom was around 85 per cent.

Those who do not return of course, are emigrants rather than expatriates.

Australia is an immigrant country. Apart from the indigenous inhabitants we are all either migrants or the sons and daughters or descendants of migrants. 40% of the total Australian population have at least one parent born overseas. Migrants are generally highly motivated people. To uproot yourself and to leave friends, family and home usually requires a great deal of motivation. And most migrants have a burning desire to succeed in their new country. Australia is a country of choice, because it is a country of opportunity.

Migration is in many respects an investment decision. Those who migrate do so because they believe they will make a short term sacrifice for a long term gain. While some may immediately gain through higher incomes, others measure the benefit against a wider set of criteria, for example education or opportunity for their children, or a standard of living and acceptance that will make them better off in the long term.

Whilst we are a country of immigrants there are those who will emigrate from Australia. But overwhelmingly the movement is our way. Australia cannot complain about the movement of highly skilled labour around the globe. We are the beneficiaries.

Backing our diaspora

Organisations such as Advance are useful networks for the talented people of the diaspora to keep their connection with Australia. In this way, Advance is serving the national interest by keeping Australia connected with this valuable resource.

Government can also play a role in linking with the diaspora, particularly through our embassies and consulates.

Australia’s tax laws recognise that people going overseas to work who become a non-resident for Australian tax purposes, are only taxed on their Australian sourced income (such as interest and rent). If the person remains a tax resident, exemptions from Australian income tax may also be available for foreign employment income where the person is either engaged in foreign service or working on an approved project for more than 3 months.

These tax laws are complemented by Australia’s network of bilateral tax treaties. The objective is to relieve double taxation and provide certainty of taxation treatment. They remove potential tax barriers to working abroad by including rules about which country can tax a person’s income where the person is working overseas, and rules for tax relief where the person is living in one country and receiving income from the other.

Australia currently has 42 comprehensive tax treaties in force, including treaties with those countries where many of our expatriates are located, such as the United Kingdom and the United States.

In addition to tax treaties, Australia has an ongoing programme of entering into and revising social security agreements with other countries. Such agreements enhance social security for individuals who have lived and worked in both Australia and another country and reduce costs for businesses operating in both countries by addressing ‘double superannuation coverage’.

Perhaps most importantly of all, however, the Australian Government can assist the diaspora by maintaining Australia as an attractive place to return.

Just as immigrants are attracted to countries that offer social and economic opportunity, expatriates are more likely to return home when society and the economy prosper. International experience shows that countries at risk of genuine ‘brain drain’ are those with declining economies, unstable political systems, or major public health problems. None of these failures apply in Australia.

Australia is a very attractive destination to skilled workers. Australia has a stable political system, a strong economy, with the unemployment rate at a 30-year low and a very positive investment climate. Migration to Australia, both of people from overseas and Australians returning home, represents a vote of confidence in our economy and our way of life.

Global economic and demographic trends

Currently, Australia’s largest diaspora communities are in the United Kingdom, Europe, and the United States. With around one-in-six members of the Australian diaspora in Asia,⁵ an Australian expatriate community is emerging there, reflecting our increasing integration into the region as well as wider global economic and demographic trends.

As a result of these trends my view is that Australians will increasingly be living, working, and studying in countries other than the traditional destination countries.

The growing cultural and economic linkages between Australia and Asia partly reflect the economic re-emergence of the Asian region. Twenty-five years ago, Asia⁶ produced only around one-fifth of the world’s output, measured in purchasing power parity terms, yet it accounted for over half of the world’s population.⁷

Today, Asia’s share of world output has risen to over one-third, while its share of world population has remained much the same. This is largely the result of the rapid development of China and India.

This trend is set to continue. Over the next twenty-five years, Asia’s share of world economic output should approach its share of world population. By 2030, Asia’s share of world GDP is projected to reach around 45 per cent, compared with its share of global population, which is projected to remain around half. Again, this will be largely due to the continued rapid growth of China and India.

However the demographic trends for these two countries are radically different. China will be one of the few countries to age before it is fully developed, due in part to its one child policy. China’s working-age population is projected to begin to fall around a decade from now.

Offsetting this to some extent is the huge pool of labour moving out of agriculture to more productive sectors of the economy. Based on the experience of Taiwan and Korea, it has been estimated that China can expect about 1 per cent of its rural population – about 7 million people – to move out of agriculture every year for the next forty years.⁸

In contrast, India’s population is expected to grow strongly and overtake China as the world’s most populous nation in the 2030s. This ‘demographic dividend’ is one of the key reasons why India has the opportunity to outperform most major economies, including China, after the year 2015.

The economic and demographic transition occurring in China and India is exemplified by the rise of two of the region’s mega-cities – Shanghai and Mumbai. In both these cities we are witnessing an unparalleled pace of development – what normally took decades is being compressed into years.

Since the early 90s, Shanghai has grown at a phenomenal rate with the population almost doubling from around 8 million to around 14 million now, making it the seventh largest city in the world. The city skyline has also been transformed, with just one skyscraper in 1988 compared with more than 300 today.

Mumbai, India’s most important financial capital, has also seen impressive growth. It has a population of 18 million people, up from 12 million in 1990, making it the fourth-largest city in the world, after Tokyo, Mexico City, and New York-Newark. The UN projects that by 2015 Mumbai will be the second-largest city in the world with a population of almost 22 million.

Mumbai has emerged as one of India’s leading commercial and cultural centres, home to the country’s hugely successful film industry, which produces more films than Hollywood, and a booming stock exchange. The city alone pays almost 40 per cent of the nation’s taxes and accounts for a similar proportion of India’s GDP.

Beyond our economic ties, our people to people ties are growing in Asia. More than 1.3 million Australians claim Asian ancestry. According to the 2001 Census, more Australians now describe themselves as of Asian background than of Greek, Italian, and Maltese combined.

Asia now buys around 60% of Australia’s total merchandise exports and supplies around half our merchandise imports.. Australia with its highly skilled, adaptable, and multicultural workforce is well placed to participate in and benefit from the emergence of Asia just as we have participated in the growth of major financial and business centres such as London and New York.

Conclusion

These days when families talk about their children doing well overseas they do not only mean New York and London, but also Shanghai and Hanoi. In future it will be Mumbai and Jakarta and throughout the Asian region – the fastest growth area in the world.

Australians speak the world’s language of commerce – English. But as a smaller nation we are used to participating in the cultures of others and adapting to them. We do not carry the insularity which sometimes comes from being born and raised in a globally dominant culture.

Australians have a reputation as hardworking and enterprising. We are one of the few developed countries where average working hours have risen in the last decade.

The Australia of today is very different to the Australia of a decade or two ago. The composition of our population is more diverse.

After dismantling tariff walls we are more outward looking and international in our perspective. After more than a decade of continuous economic growth we have a great deal more confidence about ourselves, our skills and our place in the world.

Sometimes our expatriates, fully aware of developments overseas, do not keep up with developments back in Australia. I have heard some recount to foreigners a picture of the Australia they left – closed, insular, union dominated, fearful. This is not the picture of Australia today.

Australia is a small country by population with less than 1/3 of 1% of global population. But we are the 16^th largest economy in the world.

We have substantial respect in global fora. Last month we Chaired the G20 summit representing 2/3 of global population and 85% of global GDP in Australia. By acclaim it was the best summit to date.

But our most important asset is our people and amongst them our expatriate community makes a major contribution to promoting our country and explaining it to the world. A world where Australia makes a proud and positive contribution.

¹ Report of the Senate Legal and Constitutional Reference Committee 2005, They Still Call Australia Home: Inquiry into Australian Expatriates, May, Canberra.

² Fullilove, M and Flutter, C, 2004, Diaspora: The World Wide Web of Australians, Lowy Institute Paper 04, p. 7.

³ Department of Immigration and Multicultural Affairs.

⁴ Productivity Commission, 2006, Public Support for Science and Innovation, p. L.11.

⁵ Fullilove, M and Flutter, C, 2004, Diaspora: The World Wide Web of Australians, Lowy Institute Paper 04, p. 7.

⁶ Asia includes Bangladesh, Bhutan, Cambodia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Maldives, Myanmar, Nepal, Pakistan, the Philippines, Singapore, Sri Lanka, Thailand, and Vietnam.

⁷ US Census Bureau, International Data Base.

⁸ Holz, C 2006. ‘Why China’s growth is sustainable’, Financial Times April 2006.