My staff had worked out because we were doing a Trivia Night up in Ulverstone the other night that this marks my 32nd visit to Tasmania over the years. Together with Therese and the kids, we keep coming back here in one capacity or another.
A few Christmases ago, I was Prime Minister at the time, we spent several weeks here. We spent some time up at Cradle Mountain. I climbed Cradle Mountain with my kids and the Australian Federal Police security contingent. They had a defibrillator installed on top just for me. The police were the ones that needed it in the end. We then spent the better part of a week or so over in Freycinet. Saffire had not quite been finished but I could see its shape clearly emerging above the trees before coming and spending some days here in Hobart as well before fleeing to the North.
It’s always good to come back to Tasmania to experience afresh what is truly an extraordinary natural environment, a remarkable architectural heritage and to see and experience a State which is carving out its own future in terms of Australia’s Asian century.
This is a state also of course which has known its own share of tragedy over the years and I think it’s important that we reflect for a moment on the tragedy which has been experienced by our American brothers and sisters in the last 24 hours in Boston, where such enormous violence has been metered out on innocent people. It reminds us all of the fundamental importance of maintaining our vigilance on core questions of national security.
So today I would like to talk to you about Australia’s future in the Asian Century and Tasmania’s great potential within that future. I’m going to break it up into about three bits: five core facts about where we stand in the global economy and the regional economy, five core facts in terms of where China is going for the period ahead and then six or seven observations as an outsider, but as someone who has a degree of attachment to this State personally, on how you could shape the future of the Tasmania tourism industry mindful of what China has to offer for us all in the future.
Let’s just go to some core facts on the economy to start with because it’s the foundation of all that we do.
Fact number one: Never lose sight of the fact when you travel in the region or the world that this is a very strong national economy. It is a significant national economy. When you look at the data around the world just recall these key elements because they are the source of some wonderment around the world.
This is the national economy which during the global recession did not go into recession. This is the global economy which over the past five years has grown by 5 percent whereas economies around the world, by and large, have contracted over that period of time. This is the economy which has an unemployment rate of 5.6 percent, half of that in Europe today, two-thirds of that in the United States and frankly, on the employment front, one which has added nearly a million jobs over the last 5 years when the rest of the world has been shedding jobs, most particularly in Europe and in the United States.
So when you put all of that together, our growth, our employment and the question which is often asked of the political debate, but what about the underpinning public financial fundamentals, these are in strong working order as well. When you look at the data and we’re running a net debt to GDP ratio of 9.9 percent against an average across the industrialised economies, the major economies of the world, of some 80 percent plus. When you are looking at the same figure for Japan being 172 percent, when you are looking at the figure for the United States being 62 percent and rising, that for Germany 40 to 50 percent and rising, that for the United Kingdom 60 percent plus and rising and for a compliment economy like Canada with a similar structure to our economy, 30 to 40 percent and rising. When the figure peaks at 9.9 or 10 percent everyone should just take a deep breath before anyone seeks to exhale irrationally-based pessimism about the fundamental strength of this national economy.
If you don’t happen to believe any of the four or five stats that I’ve just read out, have a look at what the three global rating agencies say: Moody’s, Standard & Poor’s and Fitch. These are not sub-branches of the Australian Labor Party last time I looked. These actually have a pretty clinical view of the world. Their mission in life is to make governments around the world look anxious to the point of anxiety-led political depression and these three rating agencies have given Australia’s public finances triple A ratings, each one of them. That’s the first time in Australia’s history that’s occurred. We’re one of only six or seven governments around the world which has a triple A credit rating on our public finances. So the reason I emphasise those points is that when we are marketing this country, this State to the world, be absolutely confident of the fundamental economic strengths of the Australian economy. They are right up in there in the “Top of the Pops” as far as the global economic data today is concerned.
Fact number two: This ain’t a small economy. It’s actually a significant economy. We have 1.3 or 1.4 trillion dollars worth of economic activity in this country. That makes it the fourth largest economy in Asia – China number one, Japan number two, India number three, Australia number four. We are the twelfth largest economy in the world. 192 nation states in the world, this is number 12. That’s why we are now members of the G20. So not only are the economic fundamentals strong, this is also a significant economy by any global economic measure.
Fact number three: Australia’s economic future across the board is inextricably wound up in the economic future of Asia. This is an emerging reality that has now become comprehensive. When you look at Australia’s numbers, eight of our ten top trading partners are from Asia and we also see that most of the world’s growth in the global economy, both in the last five years and out for the next 15, will be generated out of Asia. This therefore has moved from the margins of global economic activity to the absolute epicenter of economic activity. Again, something that should give us collective confidence if we have the eyes to see and the ears to hear.
Fact number four: the Chinese economy, within the explosion we see across East Asia, is the one which is driving the East Asian economic transformation the most.
Most of the growth of Asia is coming out of China, but not exclusively. Indonesia is significant, Japan, possibly with the rejuvenation of its own economy with the actions under the government of Shinzo Abe both on monetary policy and fiscal policy, and the reform of some of its own state-owned enterprise and power sectors, looks as if it could in turn emerge from a decade and a half of sustained inflation.
And never lose sight of where Indonesia will go in the future as well. A quarter of a billion people, next door to us, which by the time we get to the 2030s and the 2040s, will be among the top seven economies in the world and larger than any of the individual economies of Europe in all probability. So, we happen to be located in the growth zone of the world and China within that zone is generating most of the growth.
Fact number five: China’s economy itself. In China, we have seen an economic miracle over the last thirty years for an economy which has grown on average by 8 or 9 per cent every year for 30 years, successfully. A few ups, a few downs on the way through, but averaging out somewhere in the vicinity of 8 or 9 per cent. So that China today stands as the world’s second largest economy. 30 years ago, it was the same size in GDP terms and in market rate terms as the Australian economy. And, by the time we reach another decade ahead, it will be the largest economy in the world, larger than that of the United States.
And the Chinese now, 30 years ago after they began their most recent economic revolution, are engaged in something which is of fundamental relevance to everybody in this room. They are changing their growth model. The old growth model which they have applied since Deng Xiaoping came back into power in the late 70s, is basically reaching its use by date. What was the growth model?
Number one: based on labour intensive, low wage manufactures for export, concentrated in industrial cities along China’s east coast, progressively moving inland.
Number two: These were fuelled by high levels of state investment and, number three by low levels of domestic consumption.
Not just with what has emerged with the global economic recession of the last five years, but for a range of other factors as well, such as the so-called middle income trap in which many developing economies fall, the enormously sensible and far-sighted Chinese economic leaders have decided they need to change the model.
They articulated this after about 10 years of research as only the Chinese can do, put it into the current Five Year Plan, which is there for all to see and read, published in 2011, and the new government of Xi Jinping now has this as his absolute central mission for the decade ahead. So what’s the new growth model and why is it relevant to us all in this room?
The new growth model is along these lines: what it seeks to do is to transfer the traditional dependency on investment into a new dependency on consumption and domestic consumption on the primary drivers of the growth model of the future.
Secondly, to do so also with a large concentration on the growth of the services sector, most particularly concentrated within China’s emerging second and third tier cities of which there are literally hundreds with populations north of a million.
And thirdly, on top of that again, to carve out a much greater space for the private sector in the future because they realise that such a monopolistic hold on growth in the Chinese economy during the first phase of Chinese economic transformation by state-owned enterprises is likely to strangle growth for the future. So, therefore, carving out more space for private firms than has been the case in the past.
So why again is that all relevant to us? Well, it’s relevant in one sense because the Chinese are perfecting an economic transformation which doesn’t cause it to sink into the middle income trap and remain frozen there into the future, as some other developing economies have done throughout economic history. And secondly, they still want to grow, which is good news for Australia and for the world. But thirdly, the growth will be generated in particular through its services sector.
And so the growth sectors for the future are going to be in areas like education services, health services, financial services, construction, engineering design and architectural services, environmental management services and tourism services, domestically and internationally. That is where the growth, given the transformation growth model, is going to occur. And you can already begin to see it unfolding.
So, five core facts about where we sit in the region of the world. Let me just now reflect for a moment on some of the emerging facts about China’s own significance as a source of growth in the global tourism market and our own.
Fact number one: China in the year 2012 for the first time became the largest spender in the global tourism market of all countries. It surpassed in 2011 both the United States and Japan so that, as of 2012, China is now spending on international tourism some $102 billion, with the US and Germany some $84 billion thereabouts at least.
Number two: this figure is projected to grow significantly to the year 2020. And so, now you’re going to see continued significant, probably double-digit, growth of this sector for the half decade ahead.
Fact number three: For Australia, we now have more than half a million Chinese tourists: 573,000 according to the 2012 data.
Fact number four: In 2012 we earned some $4.2 billion in inbound tourism from China as a national economy. It’s projected that number will rise to $7.4 billion by the year 2020. And we’re seeing faster growth from international arrivals coming from China relative to any other country market.
And fact number five goes to not just the quantity of visits which is increasing, it goes to the quality of the tourism spend as well.
On one calculation, which is total inbound economic value, the data as of 2012 was this: a Chinese tourist spending per visit $6,422 compared with the United Kingdom at $4,300, the United States $3,900, Germany $4,850, India again significant but still slightly less than China at $6,247. And, when Chinese travel, they tend to like to travel in groups, not necessarily the large, large groups, but they do like to travel in groups with family and extended friendship groups as well.
This is where the Chinese tourism industry is growing. These numbers are significant. They command our attention, assuming of course we know what to do about it. And that brings me to my final set of remarks today. What should we do and what should we do differently?
I say this advisably because I have never worked in the tourism industry in my life, although I come from Queensland which is highly dependent on tourism like the great state of Tasmania. I’m also in the business of knowing that which I know and that which I don’t know. So these are observations, friendly and from afar, about what I think this State, Tasmania, could do better for itself for the future.
Another set of points.
Number one: Tasmania, Australia is actually, potentially a very good and great brand in China. In China, there are broadly two groups of tourists. There are significantly wealthy, to the point of being super rich – there are more billionaires in China these days than there are in most other countries, something people find remarkable when you are talking about a communist country, but that’s a matter for the theoreticians to resolve at some other point in history. But when you are looking at Chinese tourism, there is an elite market which is exceptionally wealthy, a high level of disposable income and traveling in large numbers everywhere in the world.
There’s also a much broader market who are traveling for the very first time. Those of you who are grey enough in your hair colour and wrinkled enough to remember what it was like when the first Japanese arrived in this country in large numbers – frankly the phenomenon is not all that different. People are expecting organised tours, three star and above accommodation and to come in groups, and then for that to continue until that entire market has had some experience of Australia.
But with both those markets, the high personal disposable income market and the newly emerging lower middle class market, when they think of a place like this, what are those three essential assets? Its clean, it’s green, and it’s blue. That is there is a blue ocean out there. The sky is also blue.
If you live in downtown Beijing, you may have seen in the news the last month it hasn’t been the cleanest environmental experience. In fact the same can be said for most if not all of China’s major cities. Therefore the intrinsic appeal of being able to get out, and to experience a clean environment, with decent first class accommodation, and being able to experience something of the nature, the natural environment of which we have to offer, is frankly up there at the “Top of the Pops”. So, when I think of my own experience of having travelled across Tasmania, I think of south west, wilderness areas, I think most particularly of Freycinet and Saffire in terms of people at the very top of the market in China. I think also of Cradle Mountain, the walks. When I think of the wildlife, I think more broadly across Tasmania as an island with an extraordinary coastline and the ability to see some of these things from helicopter or seaplane.
This represents a pretty attractive package for Chinese seeking to take a week out or ten days out from an otherwise frenetic work schedule. Therefore the natural environment is one to emphasise. I wouldn’t seek to advertise Tasmania’s colonial architectural heritage. People like us would enjoy that; I don’t think the Chinese would give a bugger about it, to be quite honest. I say that having been living in that country since 30 years ago. I enjoy it. It’s part of a Western, shall I say, architectural heritage and a Western historical experience. But frankly it doesn’t actually register much on the Richter scale of Chinese interests. They want hotels to be clean they want service standards to be good, they want also to get a little bit of experience of nature. Not extreme nature – don’t have them tumbling over cliffs with abseiling instructors, I don’t think. Not at first anyway. But nature itself: clean, green, and blue. Tasmania and Australia.
The second thought I have is that Chinese for centuries have valued clean, appetising seafood. They love it. Last time I looked you guys have a lot of that to offer. It is absolutely essential to an effective Chinese tourism experience. What we’ve just eating in terms of a nice lump of steak from somewhere, which again is healthy by itself and I greatly enjoyed, is not all that enjoyable for your average Chinese tourist. They will politely eat such dishes because they think that’s kind of what we do. They don’t wish to offend anybody. Chinese like to eat Chinese food interspersed with large slabs of fresh sea food. So if you are putting together how you would actually entertain group from China – seafood: number 1, number two, number 3, Chinese food the rest. And if you think mum’s home-baked meat pie’s the way through, think again. Does not translate, does not compute.
It might make the cockles of our hearts warm on a deep Tasmanian winter’s evening as we reflect on other centuries and other bygone cultures from which we were once extracted. It doesn’t mean a brass razoo as far as our Chinese friends are concerned.
Three, the standard accommodation – 4 star and above, if you are looking at where Chinese folks want to stay. They don’t want to waste money in terms of this newly emerging middle class. Those at the top of the spectrum weren’t going to care too much but frankly the idea that these folks are simple going to B’n’B their way around Tasmania is not my experience of how Chinese prefer to travel.
Number Four. Broadband, broadband, broadband. If you are the newly emerging Chinese middle class and for the first time you are travelling out of the country, you want to go somewhere safe like Australia. It has the great advantage of also being in the time zone of China more or less and you are going to entrust your assistant deputy factory manager Wayne to look after business while you are away and the 486 employees. What you want to know is when the cat’s away the mice won’t play. So you want to keep an absolutely close eye on what’s going on with the business back home. So high speed broadband is just an essential.
If you speak to Chinese tourists of any level of disposable income who travel around the world they just assume that a place is going to be connected with 50/100 megabits per second, depending on what part of the world you are in. And if you go to the way in which the Chinese have laid out fibre optic cable across their country for the last 15 years, you get better broadband services in Urumuqi out in Xinjiang province than you do in most regional cities in Australia. And so therefore the expectation of high speed broadband being available for everyone is absolutely fundamental. They won’t feel comfortable isolated from news back home, news concerning their business or the intricacies of their business operation. There’s no ifs, no buts, no Malcolm Turnbulls about what sort of broadband you want. Our higher income tourist from China and elsewhere will simply have this as an elementary expectation, and frankly it’s one of the reasons why we are doing it, so regional Australia doesn’t get left behind.
Fifth point, Chinese speaking staff. This is also essential. Think about when you arrive at a hotel anywhere in the world and the folk that you walk into don’t speak a word of English and you don’t speak a word of Italian, French, Japanese, or whatever. It can be a pretty isolating experience. Put yourself in that position. And now you’re a medium to high wealth international Chinese tourist, you’re now the largest volume of international tourist in the world, your spend per day is the highest in the world, and you’re going to be greeted in the Queen’s English. Well frankly we need a bit more respect for their language needs.
One of the reasons I have been banging on about the teaching of Asian languages in Australian schools for the last 20 years is because our economic future lies in a region where English is not the first language, or the second, or necessarily the third and if you hear people say “Yeah, but folk who have made it in life in China who have got disposable income all speak English or partly so” – wrong, wrong and wrong. Most of the Chinese who have made enough money to travel internationally are those who have actually done well in their domestic businesses, where English is basically useless and they have just not learnt it. Maybe for the next generation in 20 years’ time there will be high levels of English language proficiency, but not in this one. Most of my contemporaries from China, the pals I’ve had up there for the last 20 years, don’t speak a word,and so you need to have someone on your staff who is perfectly able to converse. And this means an important investment in your staff resources.
Two final points. I was asked before how best you start getting a message out. Well you’ve already got a whole bunch of messengers here in Australia. How many Chinese students are there studying in Australia right now. Anyone know? About 120,000. Australia is the second highest destination point for Chinese students in the world, after the United States. And there’s not a big gap between the US and here. This is a truck load of potential tourists. Not the students themselves but their families. At the University of Tasmania, my good friend from Qantas here was telling me before that at UTAS there are more than 1000 Chinese students. It’s not just the thousand out here in UTAS but the 120-odd thousand in the rest of the country who in the period of their three, four, five years of study in Australia are going to want the family out here at some stage. Maybe once, maybe twice, maybe three times doing different things.
This is an automatic platform for getting the message out by word of mouth. Which brings me to my last point about the way in which messages are communicated in China today. Mass advertising campaigns, I’m sure, have an aggregate branding value, I don’t dispute. But in terms of advertising a specific product, the Chinese twitterverse is alive and well. It’s called Weibo. There are 350 million subscribers to Weibo. And these are all kids and younger people involved in social media all of whom have parents and are all looking for a deal in terms of, “Well, if I’m going to travel, where can I travel and what can I see?” I’ve been on Weibo myself and it’s all in the Chinese language. None of it’s in English. I’ve been on Weibo for about the last 12 months and I have 700,000 followers. I tap out messages about where I’ve been – I’ll be tapping out a message, in fact I tapped out a message last night about what it’s like being in Tasmania.
So, for the Tasmanian State Government I hope I have provided some benefit on the way through. But these are mechanisms without you engaging a mass campaign or a delegation of 1000 people and heading off to the back logs of China. These tools lie reasonably readily available to you. So long as you have some Chinese language, they’re good stuff.
And then the very final point is this: people will often talk about the problems of air connections, I understand that. I think if you look at it from a national perspective, China is more connected to Australia than it’s ever been.
The data that I picked up on the long drive south from Launceston this morning says to me that we now have 300 flights from China to Australia every month across five different carriers, including Qantas, which means you’ve got about 10 services arriving each day at one Australian port or another. Off the top of my head it’s Air China, it’s Hainan Airlines, it’s China Southern, China Eastern and Qantas and Jetstar maybe. At present we have about 865,000 seats coming into the country. By 2020 we have capacity lined up, I’m told, with the various airline expansion plans, for 2.4 million seats. Of course, the real art here lies in how you get the arrivals into Sydney and into Melbourne to package it up, so once they’ve looked at Sydney, looked at the Gold Coast or looked at Melbourne that the other part of the package is to come here. That’s something which you in the industry of course are best able to attend to yourselves. But what I’m saying is that the sheer capacity now coming out of China is quite large and it’s getting larger.
So there are some observations. Number one, about the strength of our own economy and how therefore it is perceived in other parts of the region, other parts of Asia and around the world – a strong economy and frankly a significant one as well. Number two, China now looms as the big growth driver in global tourism and the big growth driver for Australian international tourism as well. Already number two in terms of a source country. And number three, there is a whole bunch of practical things we can do about it. And a whole bunch of practical things that can be done here in Tasmania as well.
I’m optimistic that we can do these things because the intrinsic nature of the product is good. The people are friendly, the natural environment is great. You build on those things in the manners in which I have suggested – again, simply the observations of a friendly outsider who does not pretend to be an expert in your industry; I think you can then start cooking with gas. Thank you very much.