Transcript of Question & Answer Session Remarks on Financial Integration in the Asia Pacific

Look I'm going to open the questions to the floor in a moment, I just wanted to ask Guy one question about the RMB clearing bank and the impact that that might have on Australia's, well actually on China's capital account and Australia's trade with China. I'm interested in your perspectives on that Guy and just how significant the RMB clearing process is for Australia.

I mean as a customer – and I don't want to undersell it but as a customer you actually don't notice the difference too much because if you go into a bank they will give you – I mean it's basically a question of when you get value as much as anything, so you get it quicker now than you would have prior to its establishment. But as a customer it doesn't actually make too much difference, I think it's more around just the profile which comes from its existence as much as what it actually does for you. So I don't want to undersell it because it is a reasonably important part of infrastructure. But if you walk into your bank and say here's my account you know I want to pay someone on the mainland then actually what you're talking about is the plumbing behind that and most people don't have any idea about the plumbing behind any of their transactions in Australian dollars let alone RMB and for good reason, they don't need to. But that's what it's about; it's about improving the plumbing behind the front end. But you from a customer point of view doesn't necessarily – you don't see it so much, it's more the bank that you're dealing with that it will matter – it matters to them in terms of them being able to – potentially being able to offer you a better service or a cheaper service potentially but as a customer you're not going to see too much; it's more just going to give you – it's going to be faster speed in terms of and more confidence about being able to see the money in your account basically.

Hi Andrew, Rob Duggal. You made a very interesting remark about the lack of our investment into Asia, and I just wonder whether that's because there's still barriers to entry for Australian companies to invest in Asia? I was particularly aware of a situation when one of the Australian banks wanted to reopen and get a banking licence back into Thailand and they'd been there once before and had pulled out because of economic circumstances and I don't know that we actually get yet the Asian culture, that that was seen as a slap in the face. So the regulatory authority in Thailand decided that they would make that bank wait a bit longer because they'd been there and they'd left and they wanted to come back, they were going to make them wait to come back because they hadn't been loyal and stayed in the country through the tough times. So there's a lot of I think Australian companies learning about the Asian way and the Asian way is really long term relationships. I just thought I'd open that up to the panel, because we've obviously got a – if we're investing in those countries we need to understand the culture that we've got in those countries.

I think it gets to the point also about whether you go in as a joint venture or whether you go in on your own bat. Jeff was talking about this earlier in terms of AMP. If you're going in as a joint venture then it seems to me that's one way you've got more chance of getting around some of those or dealing with some of those cultural issues, because the person you're partnering with presumably has got the culture whereas if you're going in cold then it seems – then it would seem to me that the risks are potentially large. I mean there are other challenges which come with a joint venture but at least if that – you perceive that as a particularly large barrier then that's – you know then going in jointly rather than on your own is one way to get around there.

I have been told that I had a loud American voice and didn't need a mike. Amy you pointed out that China is the most restrictive services market in the world. Who are we benchmarking ourselves against? Is it somebody who is getting it right in Japan or Korea? And move Hong Kong aside because I think that's a special case, and Singapore. So to you or to any of the panel members, is there – in terms of financial integration, who's doing it better than Australia? Who's getting it right? What are they doing and what does it look like?

I mean one thing about the clearing bank and the number – a number of other initiatives over the last year or two in terms of us versus other countries and the possibilities in China is the fact that we have a clearing bank, and the fact that we have the swap. I mean a lot of that stuff looks mostly like symbolism but actually it is a demonstration that the Chinese are interested in our engagement into China as against other countries. So there's – I mean the order in which you get access to those sort of things is an indication of the way they're perceiving you potentially as providing an opportunity.

So if you're trying to stack yourself – you know, as Amy said there are plenty of barriers there, they're being lowered, they've not necessarily being lowered across the board, they're actually being lowered selectively, sort of region by region. And if you're one of the countries who are benefitting from that selective lowering of those barriers and in a number of cases we are, and the clearing bank again is one, that's an indication of providing – that gives you a leg up over other regions in terms of access to that market.

Thank you, Martine Lets from the Australia China Business Council. Good place to finish maybe on the question of governance versus culture. So we talk a lot about the importance of understanding the cultures, mutual understanding of cultures and relationships and yet it is clear that ways of doing business do differ. Is it – does that include an attitude towards good governance? I mean you said that we are a good model for governance but is our governance model too tough? Too restrictive? Are we facing partners who have a looser attitude to that? Is there a possibility that the two cultures could be bridged in any way?

I think the other issue is about what differentiates us potentially from the US and Europe and why this matters much more in asset management than in banking where, no offence to the bankers in the room, but it's not clear that we actually have a particularly different proposition to be offering than any other number of other banks. But in the asset management industry, partly because of our size and partly, as Amy said, because of the different model that is something which is a different proposition we are offering. And also because we're not going to impose it like a US model might and/or it's not going to be a European model which ends up being overly regulated or has the possibility of being overly regulated. The Australian model is somewhere in between those. So we're not going to impose it on someone necessarily and it's more: here's a model which you can adopt, rather than here's something we're going to make you adopt. I think that's partly the difference about where we're coming from as a middle-sized country or smaller country rather than the US or the European approach which may be more saying this is what we expect you to do. We are saying here's what we do, maybe you might be interested in that, and I think that's a different way of going about it. It doesn't mean you have to drop your standards, you're actually just saying here's something which you might want to think about doing, we can do that for you, rather than saying we're going to come into your country and this is the way it's going to be done.

Guy just one final question before we wrap up. It seems timely to ask a question about free trade agreements now as well, you know within the last 12 months three very significant free trade agreements [have been] concluded. You touched on it briefly in some comments you made earlier, but just how

significant should we see those agreements being in terms of our if you like reputation in Asia and the way that governments and companies in Asia might view Australia?

Sorry I'm afraid you have strayed right outside my field of expertise here.

Okay sorry.

Notwithstanding I used to – Chris Findlay was one of my professors back in the day, maybe he was referring to earlier, but so no I'm afraid I'm going to let you answer that question rather than me because I don't know enough about the way that's all going.