 Well, good morning, everyone. It's terrific to see you all here. My name is Dr. Amy King. I'm a lecturer in the Strategic and Defence Study Centre in the Coral Bell School of Asia-Pacific Affairs. We have an all-star panel here this morning to get us started on the big questions, the political, security and economic contextual questions to orient our discussions today. What we're going to do is have about five minutes from each of our speakers who I'll introduce in a moment. They'll introduce us to their respective areas of expertise. I'll pose a few questions to them, and then we're going to open up for questions from the audience. Having already spoken to a number of you over morning tea and coffee, I know that there are a lot of questions with you all already. So get them ready so that we have time to get all of those questions in. So as I said, an all-star panel here this morning, I'm delighted to introduce three speakers. To introduce us to the political, security and economic context. First on the political side, Kiran Gilbert, who is the Chief Political Reporter for Sky News, and anchors the AM agenda on Sky News Live here in Canberra. He's been a member of the Federal Parliamentary Press Gallery since 2003, and I think has probably covered some of the most significant political issues in this town over the past decade or so. But Kiran is not only sort of exclusively focused on domestic issues. He also is interested in the international context facing Australia. He's got a master's in international studies from the University of Sydney, and won the Department of Foreign Affairs Elizabeth O'Neill Award for Journalism in 2010. To speak to us about the security issues facing Australia, I'm delighted to introduce Brenda Nicholson, who is the Canberra Bureau Chief for the Australian, and the Defence Editor for the Australian here in Canberra. He's a career journalist, and prior to joining the Australian was the Chief writer for Foreign and Defence Affairs with the age for many years. So Brenda, you'll be able to I think speak to some of the sort of the key defence and security challenges that Michael Wesley introduced to us already this morning. And then finally, to provide expert advice on the economic context facing Australia, I'm delighted to welcome Bill Evans, Chief Economist for Westpac. Bill holds degrees from the University of Sydney and the London School of Economics. He's worked as a research manager for the Reserve Bank of Australia. He was Treasurer for the Commonwealth Bank of Australia. And prior to joining Westpac in 1991 was Director of and Head of Financial Markets for Schroder's Australia Limited. So very pleased to welcome this panel this morning. Kiran, I think we might start with you if you could speak to us about some of the political issues. Sure, no worries. Thanks for having me. I would I'd say the word that characterises the political context as we meet this morning is uncertainty. But that being said, I'll go through the various reasons many of you are fully cognisant of them. But I will make the case this morning that Malcolm Turnbull is more than more than likely to serve his term out and to deliver the large bulk of his agenda. And first of all, let's look at the context, the uncertainty within his party. Of course, you've got Tony Abbott. He gave a speech on Friday saying that this is a government in office, not in power, niggling away. Many believe he's still got the leadership baton in his knapsack. And then you've got those around him willing and keen to, you know, make their case and make things awkward for Malcolm Turnbull wherever possible. So there's that issue. Uncertainty in the Senate with the crossbench. Of course, we all know that the makeup of this crossbench in the Senate is going to be difficult to get his agenda through. It's another element of the uncertainty, another plank of that. And then, of course, the lower house, 76 seats. And you have your heart attack away, basically, from losing your majority. But if you compare that to, say, the Gillard period of she had 70 seats served a full term and was very successful at getting the legislative, you know, her legislative agenda through 76 versus 70. The other point I would make is that Malcolm Turnbull doesn't have. There's not an error apparent. There's not someone next in line who you would say they are a clear option if those forces within his party seek to undermine him to the extent that his leadership is is vulnerable. There is not a next in line. Scott Morrison is is damaged from that change to Turnbull. He lost a lot of the support within the right flank of the party. So he's not an option. Julie Bishop is seen as the perennial deputy. I don't think she would see herself in that context as a, you know, an alternative to Turnbull right now. She sees his prime ministership as the prospect of success for the coalition, the best prospect of success for the coalition. So as I say, I don't think there is a next in line. And then if you look at the way that our system works, it's it's always difficult to get things through. Or generally, you don't have a majority in the Senate. I think it's only happened a couple of times in the last 50 years, including John Howard's win in 04 where there was a clear majority in the Senate, and that ended up coming back to to bite him through the work choices legislation. But the point is governing is always about compromise. And I think that Turnbull, if, you know, he can chip away with his agenda in terms of savings this week, he's got 25 measures he's going to put to Parliament. And you get a sense of where he's going to try and drive his government. Savings measures, tax cuts for for companies and IR changes. And that's his first focus. And the reason I point to that is because he's avoiding the contentious issues within his party, like superannuation, like same sex marriage and 18 C of the Racial Discrimination Act. He's he wants to get underway, show his in control of his government and in control of the Parliament. And if he can do that and gradually chip away, get some runs on the board in terms of savings and other wins. I think he's a chance of, you know, a very good chance of serving a full term. And I know that a lot of people are, you know, suggesting that it's a vulnerable government. I disagree. I think that with the support of the other crossbenches in the lower house, Turnbull will serve the three years. And despite the the colour and movement around the Parliament and the uncertainty being the context, I think, overall, he will he will get there. Right. Well, scratching my brains for a theme or an idea Kieran and I obviously drew the same conclusion because in security terms, what I scribbled on my notebook and underlined is the word uncertainty. Sadly, I'm old enough to remember as a little kid, the Cuban Missile Crisis. And when we were urged to walk around our playground at school and pray because the world was facing a massive crisis, we were they scared us out of our wits, I think. And we were all looking over our shoulders, waiting for mushroom clouds to pop up on the horizon. But that's how real the sense of fear and concern was through much of the Cold War. I think that the wall came, Berlin Wall came down. There was a great sense of relaxation and an enormous sort of release of pent up emotion and whatever. And the world thought we were into a golden age. There was great talk of economic cooperation with Russia. There appeared to be an increasingly warm relationship with China. Now, very much has changed over the last 10 years in quite an extraordinary fashion. Now, I'm slightly intimidated by some of the intellect and knowledge that I'm sitting facing here. There's people that know an awful lot more about this than me. And I'm just trying to give you a perspective as a journalist with a broad overview of what's going on. I was asked recently to go and talk to some Chinese officials just after the tribunal tribunal's decision on the South China Sea. And whether it was feigned or genuine, they were reacting with great astonishment that the world would see China as an aggressor. Now, the point that I made to them was that one of the great problems with dealing with China is a lack of understanding on the part of nations like Australia of just what is going on in China. We wind up with this extraordinary paradox where our main trading partner and a country to which our economy is so closely tied that if economic development slows by a fraction of a percent in China, our headlines are full of shock and horror and warnings about recession in Australia. At the same time, we've had three white papers now that identified China as a potential threat to Australia's security in the long term. We constantly hear that in the South China Sea, the South China Sea is crucial to us because 60 percent of our trade goes through that area. Now, presumably one would hope that the people running things in Beijing have more on their minds than pure aggression about all of this. They clearly want to bring their country back to where they see it as a position as a world or regional leader. The Chinese Communist Party very badly wants to stay in charge of China. They're also conscious that they have to keep a rapidly growing middle class happy. Presumably, if there's a war in the South China Sea or even serious fighting in the South China Sea, the consequences for China would be catastrophic just as much as for everyone else. It's hard to benefit from a flow of trade if it stops. While all of this is going on, we've got the uncertainty of the approach of Vladimir Putin in Russia. We've got increasing cooperation in some areas between Russia and China, which were previously very suspicious of each other. There's been some cooperation between warships in both countries in the South China Sea. There's a concern that if Russia does become closer to China and increases the flow of military technology to China, that would enable both countries to close the gap, the technological gap that gives the United States and allies like Australia an edge in this region. We've had the Brexit, which is quite likely to embolden Vladimir Putin. And the pressure he's putting on the Baltic states. I spent some time in Poland recently during a big exercise. They had there, which was clearly directed at fending off a Russian invasion through the Baltic states and down into Poland. And the Polish military commanders quite seriously talk about the possibility of Putin being willing to use a tactical nuclear weapon to stop the NATO nations supporting the Baltic nations if they get monstered by Russia. Now, whether they would do that or whether that's just a threat that's hanging out there is anyone's guess, but there's a very strong fear among military leaders in Poland that that is a reality. And along with that, we've got... Well, Britain's... Well, the Brexit won't affect NATO directly. There is a concern in Central and Eastern Europe that Britain, a more isolationist Britain, would not be as willing to send troops and to support the NATO nations and to encourage them to actually face up to Russia should that be necessary. And then we've got Donald Trump. And Trump has made it clear that he favours a more isolationist policy. That has a serious bearing on House on the strength of NATO. NATO has agreed in recent months to send single battalions into the former Baltic countries and into Poland, which would act as a sort of tripwire. I think if it did come to a serious conflict with Russia, I wouldn't like to be in one of those battalions. And the other, I suppose, the last point I'd make is that, again, with Trump suggesting that the United States is for far too long provided a sort of nuclear umbrella for nations in this region and elsewhere and a sense of assurance and balance, if you take all that away, I don't know that he's thinking through the consequences of countries such as Japan and South Korea, which both have the sort of technological ability to develop their own nuclear weapons, but an American declaration that they will no longer provide a nuclear umbrella for their allies in this region could actually trigger a dangerous arms race and any sort of reaction from Beijing. Brenna, thank you very much. And Bill, over to you on the economic context facing Australia. Okay, so let's just take a step back and look at what's happened in the world since the global financial crisis. Before the global financial crisis, world growth was running about 5% to 6% since the crisis, it's averaged around 3%. A key driver of that has been very weak business investment in the developed world, which has had a spillover effect of bringing down commodity prices, which has weighed heavily on the developing world. Another aspect of the weak business investment has been a massive gap opening up between savings and investment. So central banks decided to try and stimulate investment by adopting what we call quantitative easing policies. These policies are to expand their balance sheets, but indeed all they've done is exacerbate the savings investment imbalance. They don't understand the reasons why businesses globally are not investing and not related to interest rates. We've seen negative interest rates in Europe and Japan, and yet we still haven't seen much stimulus to business investment. The main reason why we haven't seen a stimulus to business investment has been concern about disruption with technological change. Businesses targeting too high a rate of return, fearful that their shareholders won't support them if they adopt an investment process that doesn't return 10% to 15%. Disillusionment with government, no real confidence that government policies are embracing reform and therefore can give them confidence that growth can be forthcoming. Also, putting this hole in this gap between savings and investment has been lack of commitment from governments on the infrastructure front. If governments were more committed to infrastructure, that would boost that investment level and would close that savings investment gap. If we also feel that another major negative response to the global financial crisis has been over-regulation, so regulators have decided that never again will we expose the world to a financial crisis and have over-regulated banks now, whereby even if banks saw lending opportunities, it's very difficult for them to boost their lending and therefore support stronger investment because of the high level of regulation. One country, of course, did buck that trend on infrastructure and that was China. So following the global financial crisis, China adopted what we can only say was a breathtaking stimulus package around 15% of GDP over two years to put that in context. If a country like Australia or the US adopted a 2% stimulus package, that would be considered to be reckless. China did 15. What that did, of course, was to create huge over-capacity within the Chinese economy. The banks were directed to lend directly to the state-owned enterprises who accumulated massive capacity, which, of course, they have not been able to put to work. What that's meant is that these state-owned enterprises are now basically what we call zombie companies, companies that are unable to really perform a meaningful role of borrowing money to finance losses, to pay wages, and are creating a big problem for the Chinese economy because so much of the credit is now being sucked up by these companies that are not productive. However, it has meant that there's been implications for Australia. So when you think about it, if you're a country that has massive over-capacity, one way to get rid of it is to export it. And about a year ago, the world realised that the Chinese currency, the RMB, was actually overvalued. Over the previous 10 years, it had appreciated against its trade-weighted index by over 30%, and the world realised that, hey, this currency that we always thought was going in one direction is actually now likely to be going in the other direction for a long period of time. What that did was that it had led to substantial capital outflow in China as markets started to speculate on a fall in the RMB. And the Chinese reserves have fallen from about 4 trillion down to 3.2 trillion. I think now that they've decided to put a line in the sand on that, that's an important development because it does feed straight back into how Australia is dealing with the rebalancing of the economy in response to the downturn in mining. Now, as we know, the mining downturn has been related to the slowdown in the world economy, which has been related to the slowing in China and the developed world in the aftermath of the big stimulus in 08, 09, 10. So how has Australia rebalanced its economy? Well, its services exports has been a major success story. Two years ago, services exports, that's tourism, education, health, business services sold into Asia were subtracting about half a percent from GDP. It's now adding about half a percent to GDP. When you're only dealing with growth of around 3%, to have a 1% turnaround from one sector is pretty special. It's also supported... We've also seen the boom in construction, residential construction. Now, China's played a role in both of those rebalancing factors with regard to the services, it's been tourism, it's been education, where China has played a lead role, Australia has benefited significantly from that. On the property side, Chinese investment in Australian property has been a key factor in supporting the residential boom. If the Chinese authorities are now committed to drawing a line in the sand on the downturn in their reserves, this does represent some risks from this particular rebalancing of our economy. At the moment, the property market is dealing well with this, to the extent that we've seen Chinese buyers unable to bring their money out of the country because of much tighter restrictions. We've found local investors to support that. But going forward, it's going to be a lot harder for developers to put together realistic deals to continue this construction boom. We have, as yet, not seen any action from the Chinese with regard to the burgeoning services deficit, which they are now facing. But I suspect that given the underlying, I believe, objective to stabilise the loss in their reserves from $4 trillion to $3.2 trillion, draw a line in the sand there, you need a high level of reserves to protect your currency. You need a high level of reserves to protect this model that they have of the banking system servicing the zombie companies. So that may also have some implications for Australia's growth going forward. Finally, let me make some comments on the markets. The most important factor for the markets at the moment is U.S. Federal Reserve Policy. The Federal Reserve, unlike the central banks in Japan and Europe, realise that embracing negative interest rates is very, very damaging for an economy. And so the Federal Reserve has started along the path of raising interest rates. If it wasn't for the Bank of Japan and the ECB embracing negative interest rates and trying to push up the U.S. dollar and push down their own currencies, the Federal Reserve would have been further down the track of balancing their interest rates. However, it's now become pretty clear that this year they will be raising interest rates. And that's going to allow the Reserve Bank of Australia, which has cut interest rates down to 1.5% to take a breather. They are worried about stimulating the Australian housing market. They do have an inflation challenge, but I think they'll start to realise that the 2% inflation that they've now got is quite acceptable in a world where the G7 inflation is 0.7%. So with the Fed raising rates and taking pressure off the Australian dollar, it printed 75.5% today down from 77% only about a week ago when people were expecting it to go to 78%, 79%. I think the Reserve Bank remains on hold for some time. The issues around bond markets are more complicated. The U.S. bond rate is only down at 1.5% now. In a world where we didn't have this huge imbalance between savings and investment, the U.S. bond rate would be around 4%. As we start to correct that imbalance, as I've said, we'll start to see government policies embracing more infrastructure investment. We'll start to see more positive approach from business investment. As we start to close that gap, so we'll start to see those bond rates starting to edge up. And indeed, we may well see the European and the Japanese central banks adopt a more sensible approach, step away from negative interest rates and allow bond rates to gradually edge up. So I think that that change that we're likely to see when these other central banks realize the damage they're doing with negative interest rates could be quite unsettling for world markets. Equity markets, of course, have been booming. Partly on the basis that the risk-free rate in the world, the U.S. bond rate is only 1.5%. But when we start to see that rebalancing and, of course, Australian bond rates will also have to take that heat, then we'll start to see a more normal global environment. But generally speaking, I remain optimistic that Australia can retain its 3% growth rate this year, 3% next year, with that smooth rebalancing moving forward. And although the China policies do represent potential risks, I think there's enough other momentum in the economy to maintain that sort of a balance. Thank you. Bill, thank you very much. So we've had three very wide-ranging perspectives here on the political, economic and security context facing Australia. To try and pull some of this together, I'm going to ask each of you a question that hopefully ties in what some of the others have had to say. Kiran, I might start with you. I mean, as often said that this is true of the U.S. election, perhaps Australians, politicians campaign primarily on domestic issues. They don't really talk much about international issues in the campaign context. You're pretty certain that Turnbull can serve his full term, can deal with the agenda he's set for himself. But how do some of the international, either economic or security issues that Brendan and Bill have talked about, how are they potentially going to play into all of this? Well, first of all, on the economic element and that missing link of infrastructure that Bill referred to within our government. So I think there is massive scope for our government at these very low interest rates to fill that link. And I think that next year we might see a government with a very thin agenda for its next term focus more on that. Even though they're talking about paying down debt, I think in a political sense they'll use, they'll differentiate between good and bad debt and then make the most, it's no brainer to be capitalising on these historic low rates and fill that missing link in terms of infrastructure. I think that that's where they'll probably head next year as a big focus of them domestically. In terms of foreign policy, I think, well, obviously they're praying that Trump doesn't win because if he does, it just blows up the alliance basically as we know it and they will have to make a whole heap of judgements as to just how they respond. In terms of our intelligence sharing, in terms of our military interaction, this is a huge risk, obviously we all know, to our region and the pivot to Asia that was such a big part of the Obama foreign policy agenda. If Hillary wins, well, you guess it's more of the same in terms of foreign policy. I think for Turnbull though, he's got a few questions to answer and one that's been put by many of you in the room would know Hugh White argues regularly that we need to be more proactive in terms of playing a role between China and the U.S. Turnbull is well-versed in Chinese affairs. I think he could see that as an option for him in terms of his foreign policy focus, that he could be more assertive and more, you know, Rudd was obviously made a massive deal of that in terms of his expertise and his focus. I think Turnbull might see that as an option for him, for his foreign policy agenda over the next couple of years to be that mediator of sorts. Doing a bit more in that space. I think so, yeah. Okay, Brendan, coming to you, I've got a bit of a two-part question for you. We've heard a lot about the need for infrastructure in Australia and Bill has talked about, obviously, China's need to access some of its overcapacity. One of the things that we're seeing is huge increase in Chinese investment by state-owned enterprises. That's had an impact on Australia just recently with the Ausgrid decision, for example. How should Australia be thinking about some of these issues, given what you've said about huge uncertainty about where China's going, what it wants to do in the national security space? Well, this is not an easy question to deal with because if you're just working backwards from the tail end of your question. Say with Ausgrid. Ausgrid follows and has to be seen in the context of the decision to lease the Port of Darwin or facilities in the Port of Darwin to a Chinese company for 99 years. Now, that's been the subject of very intense debate from across a wide range of views from educated people who, those views range from, this is a disastrous decision because it gives the Chinese right through to the top access to information and whatever about ship movements and whatever, in and out of a port, which is pivotal to the pivot. Now, on the other end of the scale, there's people who scoff at that and say, it's just money, it's not an issue. We can shut it down if there comes a crisis with China. We've upset the Americans because they want to use the port and they are using the port. Basically, they say they weren't told about it and they're not happy about it. They wouldn't have been happy about it even if they had been told about it. The government then put intelligence security specialists on the FIRB and the next decision that came up, there was a decision on the cattle stations around Womera and the view was they did not want Chinese people owning that because of the high tech work that's going on out there. And there's a lot of work on the areas that the Australia is right up with the best, like hypersonics. And hypersonics is crucial because someone here may correct me on this. If the United States did wind up getting involved in a conflict with someone who was willing to use a nuclear weapon, hypersonics would give the United States a technical edge to allow them to retaliate without using a nuclear weapon, but effectively that I think is part of the thinking. Now, one of the problems with answering your question is we do not know what the reasoning was, what the advice was from the intelligence agencies that went into this decision about Osgrid. Clearly, there was a concern. There are two possibilities. Gareth Evans made the point at the press club recently that he'd asked all his contacts and whatever, what's going on, what were you told? And he said he couldn't get any sensible answer out of anybody. Now that raises the possibility that it was a sort of largely political decision made to sort of appease concerns in Australia. Now, if there are safeguards, Chinese investment is probably pretty important to Australia. It's also a warning to China to clean up its act, to stop being so aggressive with its neighbors. That has worked in some areas with China and with Russia, economic pressure pushing back, which is a peaceful way to deal with coercion. Thank you. Bill, I suspect you may have some views on this particular question about Chinese investment, but I also wanted to ask about the upcoming G20 forum and the extent to which that's going to be an option for wrestling with some of these issues. You've talked about European versus US versus Japanese approach to negative interest rates and how optimistic you are about the G20 and this international forum resolving some of these deep economic issues you've spoken about. Oh, look, I have no confidence at all that a forum of 20 countries would convince the Europeans that having negative interest rates is distorting the world economy and distorting global markets and they would argue that it's probably turned out to be good for Europe, but I would be doubtful if they could really prove that. Japan, I think, is on the verge of doing helicopter money whereby they will actually provide spending that's financed in the credit markets rather than through bonds. That, I think, is about time that we saw that happening. The US will obviously run their own game. They won't be bullied into doing anything, but I think given the momentum we're seeing in the US labor market at the moment and the movement towards the 2% inflation target, I think the US is on track to raise rates and the world will heave a sigh of relief when that happens. Bear in mind that over the last 12 months the US dollar's actually fallen by about 6%. So concerns about raising rates and pushing your dollar too far are starting to be somewhat alleviated. Of course, we can't forget that in 2014 the US dollar lifted by 25% when they moved away from their quantitative easing policies. Would we see some sort of coordinated move towards global infrastructure investment? Leaving China out of course because they're running their own race there and they're back on another infrastructure splurge at the moment. I think the answer to that, of course, is no. The only time G20 really worked was in the aftermath of the GFC when the situation was so dire that they realised that they had to coordinate fiscal policy and that happened. I think we've ever seen any strong evidence of any results apart from that. Ladies and gentlemen, it's now time for you to ask your questions. So I'd ask you to please raise your hand, let us know who you are and who your question is to be directed to. There are mics roving around the room so the floor is open. Yes, over here. David Wade. I'd like to direct your question to Bill Evans, please. Bill, you've been talking about the foreign investment into Australia and yet we've just had the case of Ausgrid which was rejected by FIRB but I believe there were no Australian bidders. At the same time there's around several trillion dollars of superannuation money invested. Why aren't Australian superannuation companies or why aren't Australian organisations allowing small investors to bid into these major Australian asset sales? Thank you. But I think that it's really just a matter of the value they saw in that particular asset and the sort of prices that the two Asian investors were prepared to pay. What we have to bear in mind is that both those investors are very well attuned to that particular sector. They both have substantial holdings in the electricity industries in both Victoria and South Australia and they must have seen higher value in that particular asset than the Australian investors did. Now, we'll be going into a second round now and it may be that we start to see more superannuation funds investing in the second round. One of the things that we have to also bear in mind is that these superannuation funds in Australia do invest offshore because our share market provides limited opportunities, say, to get Australian investors' exposure, say, to the technology sector, for instance. So they have to invest offshore to achieve that particular objective. So the criticism that they're investing offshore, exacerbating the current account deficit, putting more pressure on the banks to fund an even greater deficit, I think it misses the point that they're trying to maximize the return for their share, for their investors and that often means you have to diversify your risk offshore. Thank you. Other questions? Yes. And if you could just say who you are as well, please. Craig Wood. Thank you. I'd like to throw a general question out to the panel and to anyone else who wants to and it's the fourth context, namely, cultural. I believe that we're on the cusp or we are experiencing quite significant cultural tensions right at present. Trump is one example, but more closely to home, we have a large constituency which is questioning things like globalization, the erosion of the nation's state as an entity and those aspects which we used to sweep up and call the national interest without really ever defining those. And I wonder where the panel or anyone else thinks we might be heading in this, I'll call it anti-globalization trend. Thank you. Karen, I might throw that one to you if you're... Sure, yeah. Well, I think it's not just, obviously it's so complex the question you ask, but it's obviously got to do with public policy. It's also got to do, I think, with business leadership as well. The thing that jumped to mind as you were talking then is the disparity in wages from the very top end to the lower socio-economic demographics that we saw the result of the big chunks of their vote at the election with Pauline Hansen and other populists elected to the Senate and various elements to it. But one thing I think that the Prime Minister talks about the social license of big business and I don't mean to bash the banks because it's obviously easier if everyone does it and the bill on the stage is no disrespect, obviously, to the banks, but in the rev, that salary increase last week or the week before did over $12 million. To me, from a journalist's perspective, if they've got any clue as to the perception of their business in the electorate a week after they don't pass on the rate cut for various reasons, that's fine. But then to have a salary increase of that magnitude for their CEO, I think would have fostered some pretty dire reactions in the broader electorate and I think it's that sort of disconnect between the top end, whether it's business, politics and many average Australians that fosters this sort of backlash. That was the thing that jumped to my head when you were talking about that Trump and Brexit response and we've seen the major parties, their primary votes drop. Labor's got a big challenge as well. It was the second lowest primary vote in history. I think personally another point I would make is that I think the electorate is sick and tired of the hyper-partisanship that they want leaders to govern for the national interest not just for their parties or personal interest and I think if leaders start to do that then they might just be surprised that their primary votes will increase. I'm going to ask if anyone else on this panel wants to comment on that particular question but my next question from the floor I'm going to open up to the Westpac students in particular so if anyone here in this front few tables has a question, please get them ready but Bill, yes. I think the point that you're making is partly driven by a global issue of very weak wages growth globally. Ironically with the exception of China which is becoming less and less competitive on a wages front. So why are wages growth so weak? We look at our own country, we're down at 2%. If you look at the US that's had full employment now for about six months they're still struggling to get wages growth in about 2.5%. One of the points I made in my discussion around business investment is that if companies are not encouraged to invest because they don't see clear signals from government on the reform front that gives them a strong feeling towards growth they have to compete in other ways. If you're not investing and raising productivity that's the way we like to see companies compete. If they're not able to do that because they don't feel enough strong signals on the growth front they'll compete on the other side which is to cut costs. And that's this situation that we've got globally where companies feel that the only way they can compete now is not to invest and take risk, raise productivity and grow market share it's to keep cutting costs. And that's now reached the impact as you say whereby people who have been mainly affected by that are starting to get very disillusioned and very with the global environment and we've seen the Brexit and we've also seen the rise of Trump. I think part of it is due to that. Yeah, in fact that's something that I was going to mention was in part, I think in quite significant part the extravagant comments of people like Trump and a lot of the extravagance that actually was evident during the lead up to the Brexit vote found very fertile ground because of a deep resentment at the growing gap between rich and poor and people in the United States sort of salaries haven't moved for very many years other countries are in much the same position and one of the problems with this is that it's easier to fend off xenophobia and concerns and for the more extreme utterances of people like Donald Trump. If people are confident and feel that they are doing well financially they can care for their families if people feel that they are really struggling and that a significant proportion of the population is not because they somehow or other are above the band where there are no pay rises. It becomes right for these sorts of things to catch hold that there's a serious possibility that a lot of the Brexit vote was just driven by xenophobia. People thought they'd wake up the next day and there wouldn't be a foreign face in England and they'd be rich. They wouldn't be paying all this money into the European community and it wasn't anything like that and then a lot of the people actually led the campaign for the Brexit sort of stepped back and said fine, off you go. But I think a lot of that has been driven by the lack of progress financially that people are making. Thank you. So now looking eyeballing our front few tables here does anyone have a question from our Westpac scholars? I'm sorry to pick on you, but... Yes, over here, thank you. Very good, very good. I'm sure that's how it works, yeah. My name is Megan. I'm one of the Westpac scholars and I suppose my question is to the whole panel, perhaps particularly Brendan, in regards to security. Do you think Australia should be concerned about political unrest in some of the smaller Southeast Asian countries? So in Thailand with the military rule and Malaysia the scandal around the PM and with the new President Duterte in the Philippines as well. Thank you. Oh, well, of course we should be. Now there's probably not a lot we can do about it apart from give help where we can. It's much easier to help out in the Pacific in areas like that if they have a disaster. Like I think the recent cyclone that hit Fiji gave an opportunity to sort of repair the damage that was done in the relationship by the coups in Fiji and sort of re-establish it because Australia was able, because of its military resources, to actually provide an enormous amount of help there. When you get into the larger countries, we were able to help after the tsunamis in a very substantial way, but all of these countries are building up their own resources now to the point where I think we're going to have very little influence on them from a strategic point of view. Other questions? I'd say one thing just to respond to that question is I hope that the Defence White, I'm sorry, the Foreign Policy White Paper that the governments announced will provide a bit more coherence to our policy in the region and more broadly, I think it's been too long between drinks when it comes to having a proper roadmap for our foreign policy. I think it's almost transactional if that's the word as opposed to mapping out our relationship with our region and more broadly. I think that hopefully that the Foreign Policy White Paper will give a bit more clarity to it. That was actually one of the striking things about the Defence White Paper is how prominent Southeast Asia was in that and elevated I think in a way that we hadn't seen in previous White Papers. Do you expect to see a bit more focus on Southeast Asia as a result potentially in this Foreign Affairs White Paper? I certainly would hope there would be. It's our backyard, it's our region, it's our front yard, it's everything. We're watching economies grow just so rapidly like countries like Indonesia which we were miles ahead of 20 years ago overtaking, overhauling us rapidly. I think it's a matter of making sure that we're well plugged into communications with these countries with liaison. Back in the days, the early days of the Rudd government, we heard a lot about Australia needed to build up language skills and whatever. Now increasingly you're hearing that people who learn languages like Bahasa and others and Mandarin and whatever are not actually competent of finding jobs in government areas, apart from the military perhaps or the agencies, particularly in the private sector. We seem to have tried to make our own sort of great leap out but we didn't leap very far. I don't think our engagement actually is very strong at all. It's particularly good in various areas like universities like the ANU has got people backwards and forwards to China and various other countries all the time. But I think the concern is actually trying this sort of extraordinary body of knowledge that would be in this room and getting practical effect out of it so that we're seen as a useful ally to all of these countries and then somebody where they can get ideas from. Now there's an awful lot of people from the region come to Australia for education and that can only be beneficial. Opening up the questions from the floor at the back here and then we'll come down the front. There's Howard Bamsey also from ANU. A question for anyone on the panel. In an overview you can't cover everything and so far this morning we've had a very general series of comments about where Australia fares but I'm a bit surprised, even dismayed that we've had nobody dealing with what's one of the major domestic international challenges that any Australian government and the nation faces and that's climate change. It has major implications, major economic implications apart from anything else through investment change domestically and internationally where Australia has recently come in from the cold it offers in my view the sort of opportunity that Michael was talking about in his introduction for more creative means of engagement with the countries particularly of our region on issues that may not at first glance seem to be directly related to climate change but because that issue is relatively higher on the priority list for other countries and because it's deeply economic it seems that to me that there's a way into both the economics and the security of the region if we have the vision in the government and in our community of scholars and commentators on international affairs to be able to discern the advantages that Australia can gain so just any comments at all from the panel members would be welcome. Thank you. Caroline, I might come to you first on this. This morning there's debate about funding for arena and obviously questions about the Greens vote after the last election. What is your take on all of this? Funding for arena we can have a debate around how much money it receives but as Howard knows it's still a prime minister. So there's been a real shift in terms of our support for action on climate change as you know in Paris our government was not playing a blocking role as it would have done if Tony Abbott was still prime minister so there has been a big shift I think this government under Turnbull it's much more supportive of action on climate change but the top is a party which has real differences of opinion there's a big chunk of that party that are climate skeptics including the former prime minister so I think every point you made is right. I absolutely believe there are huge economic gains for us to make if we can start to use our natural environment and better and our innovation our ability for this country but we have been for various reasons the CPRS was delivered then scrapped we had the Abbott period where he's essentially a climate skeptic and now a prime minister with sensitivities to manage within his party but I believe every area you said from foreign policy to the economy there's huge scope for us in that area. Brendan you want to comment on this? I take your point you didn't raise climate change the climate change is an absolutely crucial issue strategically, economically and in every other way to Australia there's no doubt about that you get low lying countries like with massive populations like Bangladesh now if we wind up with sea level rise and large storms hitting places like this you get dislocation of populations and people movements and with wars and relatively minor parts of the world causing a flow of a million people across other borders I think that Malcolm Turnbull from the first time he opened his mouth as prime minister has been talking about harnessing innovation there's areas you can do that you know defence and strategic issues and whatever but you know absolutely crucially Australia is a sort of battery that should be the world leader we have so much sunshine in renewable technology there's a lot of work being done in smaller areas of the country on storage, battery technology and whatever there's absolutely no doubt that we should be up there and I think the point that Kiran made the country for a time was in the hands of climate skeptics and I think that probably there are strong economic benefits in actually developing the technology that we can share with other countries so that countries like China with a massively growing economy, fast growing economy and massive populations can actually use cleaner forms of energy production and not getting into a whole new industrial revolution what should be happening in this space on climate change? I think we all support the concept of climate change and renewables but we have to bear in mind that there are going to be practical issues around the adjustments and South Australia has recently suffered from that they have the highest reliance on renewables I think and the wind blew too hard they allowed their coal facilities to run down because coal requires consistent use and the renewables were so successful that they didn't need the coal but then we had some dislocation from the renewables I think the wind blew too hard and they didn't have correct access to gas and energy prices took off in South Australia so it's going to be a difficult challenge to smoothly organise that movement towards less coal and more renewables and we've seen an example of how it can come unstuck most recently in South Australia We're going to come down to the question that was down the front here as a mic My name is Brittany Laidlaw I'm one of their Westpac scholars as well and thank you for raising the issue on climate change it was actually my issue as well and so some of the things were kind of covered but I really wanted to expand on your thoughts and opening this up to the whole panel that in the coming decade not just how you see climate change affecting the economy and also political relationships with Australia's neighbours but because of that scope or that context do you think the environmental pressures of climate change will force Australia to consider the feasibility of continued growth and how much technocratic optimism affects that given that the research shows that innovation isn't really keeping up with a use of natural resources and population growth Thank you. Who would like to try that question? It's a difficult one Look, I think we've got to try you know, we part of it is political will and leadership Kevin Rudd basically his prime ministership was broken I think he was largely broken by the failure of Australia to make any progress in Toronto there just wasn't the global political will to actually get a breakthrough on climate change there are things that can be done it's um it's a bit like the whole idea of infrastructure you might say do we need a road from here to here do we need a high speed train you look at countries that have got things you've got to analyse just the real cost benefit analysis of whatever you do um I think it is possible for us to do an awful lot more than we're doing at the moment um if there's a perception that the political will is not there to take climate change seriously and to work on alternative technology then it's not going to happen it's got to come from the very top and it's got to come in eloquent speeches from the nation's leaders and there's not been a lot of that sort of leadership the science and the technology does exist in Australia it's a highly educated country um Lockheed Martin Corporation is just busily setting up a laboratory in Melbourne because they say they see that as a major university city where they can harness a lot of ideas from Australian post grad students and others it's also a country where it's secure and safe for them to operate so where the sort of renewable energy technology is not that far removed from military technology a really efficient battery makes a conventional submarine safer to operate and more effective and also will help improve the whole viability of renewable energy and the point that Bill made about South Australia is very valid but what needs to be done is a proper analysis of what happened in South Australia treated as a laboratory what happened, what went wrong what's been exaggerated, what hasn't been exaggerated, how could they have done it better and it would probably make a really good case study that would be useful for the rest of the country because it's undermined our progress in this regard, I've touched on it before but if you compare Australia to other parts of the world be it the United Kingdom Europe the US I guess is the only other one that jumps to mind where there's actually a big cohort of people arguing against the science it's not an issue it's post political in the UK and in Europe they just get it and move on it frustrates me that we've had to deal with that given it's so irrational a lot of what is discussed in this regard and I think it's hampered our progress when it comes to the leadership that Brendan's talking about because you've always got, even though Turnbull gets it and Hunt did they're having to navigate a political climate in which as I said a big chunk of their party room don't believe it a few years ago I used to cover science in the environment in a sort of earlier stage of my life and I can remember I still have at home a copy of the first a report put out by the Intergovernmental Panel on Climate Change and there's been a big hullabaloo over the last two or three years about little errors that have been made levels of melting in the Andes and I heard a scientist on ABC one day pointing out that if you actually if a PhD student came to him with this level of errors in a massive document you know he would pass with flying colors it's a very small thing and I just flicked through this document that I've got at home the other day the actual conclusions about climate change have not varied very much over this was I think 1987 I think the document the basic conclusions were of the possibility of rising sea levels but it was more extreme weather events they talked about various areas getting more rainfall other areas getting less rainfall it's all stuff that we've got to deal with but the main scientific consensus has been on track but it's also we looked at the ozone issue the hole in the ozone layer it was a it was an issue that was going to kill people it was going to burn off crops whatever science was able to identify what was going on work out what the culprits were and then the politicians it was a small enough scale problem though a global one the politicians were able to work out agreements harness the science and do away with the products that were damaging the ozone layer now there was an example of science politics and whatever working together with business and others to actually solve a global problem now it's a miniscule problem by comparison with global warming but it can be done we had a question yes just up here my name is Terry Henderson I'm old enough to remember an American officer whose troops burned down at the Vietnamese village and he got on the media they asked him why they did it it was to save the village I have a feeling he may be an advisor for the Australian government on how to deal with people coming by boats from the north the under Malcolm I in the 1980s accords were drawn with countries like Malaysia and Thailand and the refugee situation was resolved now for the last decade and a half you've had treatment of people a lot of people regard as immoral I don't think I need to go into the details but think that this is still a problem with Australia's neighbors and is there a possibility that Malcolm II can come up with some innovation to actually solve the present boat people situation thank you Karen do you want to try one? the situation at the moment is reprehensible with 800 refugees genuine refugees stuck there for three years it's a blight on our country on our democracy and on our political discourse that it's become so toxic it frustrates to be honest you look back at the last few years and there's just nothing in that debate which gives me any hope unfortunately we will look back at this period I think and be very it's not going to be one of the brightest periods in our political and national history I don't know what the solution is but I hope that this government, this prime minister can see this as a priority to at least deal with these poor 800 refugees in the first place and then beyond that I honestly I don't know I think the coalition in opposition was it was just so politically opportunist to block the Malaysia's option they did that only for political reasons as history has proven and I think sadly we haven't reached a compromise since except the fact that Labor's been so meek in having to agree with offshore processing as well that's the only compromise I've seen I think the outcome of what where we've got to with this is shocking and I think if Australians knew more about what was actually happening and the conditions where people are living there'd probably be there'd probably be more opposition to policies and the way things the policies are being implemented I think that Karen's absolutely right it's become a political football it became a political football that was sort of booted into a crowd and I think the country doesn't have a great deal of control over it the problem is it's easy to say that and I think if the media just shut down for a day or a week and the government plucked everybody out of Nauru and everywhere else and dropped them into the suburbs of various cities and waved a magic wand or took the boomerang down or whatever it might be and the population woke up five days later no one would notice what had happened it's fine but if the other part of the problem is is who's driving this stuff you had people going around villages in Sri Lanka saying to people you go to Australia you get a job even if they throw you out they'll fix your teeth up and give you some money and fly you back it'll be a great trip the rest of it climb on the boat and pay us this and pay us that and you can rack it particularly with the Sri Lankans now you also get people who are fleeing the most dreadful horrors in places like Afghanistan and Syria and others but the problem with it is that if the government announced tomorrow that they were franchising our border protection and issuing of passports to a major corporation or Westpac or somebody like that there'd be an uproar in the country you couldn't possibly do it it's a responsibility of government to do it having foreign criminal gangs actually organising your border your flow of people through your borders is far from acceptable either it just can't be allowed to happen I think there's a lot of crocodile tears about people drowning a lot of people drowned and it's an appalling tragedy but I think people lose sight of the fact that the people who are drowning and putting their kids on leaky boats were doing it because staying where they were in many cases was so much worse there was a suggestion the other day that a combination of things like pushing boats back to countries like Indonesia along with the Malaysian solution which was a sensible idea people could live in a civilised country a trade was done to get everybody settled in the suburbs somewhere that was better than where they'd come from and that was knocked back for purely political reasons and I think it was a serious act of political bastardry it's not done the country any good and it's sort of blocked off in a solution and left us in the situation where we all feel, I think, uneasy and queasy about what's happened Thank you now there's a question over here Thank you, I'm Jack and I'm a student and my question is I think by 2046 my generation people born off the 90s will make up most of the leadership in business and politics but compared to the previous generations what do you think are like L strength and weaknesses and like, of course other than we have very short attention span and we'll actually procrastinate like what advice and tips would you give to us for our journey in this world, thank you Good question, so Bill, why don't I start with you and then we'll move across the panel I usually forecast about one year out what's going to happen to the currency in two months time look, I think it's all about education really I think that's the key to human capital that's why Australia needs to invest more in education and education is what will stand you in good stead to be great leaders in 2046 Brendan, you've been covering political affairs for some time how would you compare this generation perhaps and the next generation as Jack refers to with previous that you've covered look, I think that youngsters nowadays are phenomenal they think they are well educated there's a lot of hang ups they don't have that previous generations have had they communicate constantly they travel a lot probably because of sacrifices older generations made perhaps in the past they've inherited a world that's an uncertain one but I think that they're generally very very tolerant I think it was the younger generation largely in Britain that was most horrified and appalled by the Brexit vote and feel they've been robbed by the older generation there I'd just follow your instincts I've found with young people I've got two sons in my houses was often in their younger days packed with their mates eating huge amounts of food and whatever but they've all gone their different ways and I think they're startlingly smart and startlingly decent and quite courageous in their approach despite the short attention span but I think what Bill says about education is absolutely crucial you can't waste money on education it's just the better it is more people know whether they actually apply the particular degree to earn money when they're out in the workforce or just use it to develop a level of tolerance and understanding of the world it's money well spent I don't have a lot to add the one thing I would say is I'm very surprised by just how much people are willing to share via social media of this generation coming through I think it's extraordinary the advice I would give to anyone is that everything you put on social media is published essentially you're publishing and I am just surprised daily by the amount the lack of forethought that goes into some of the stuff that people put online to girls, toddlers and I will be doing my best to try and protect them from social media as we near that decade you talk about do you think it's fundamentally going to change the nature of politics going forward? it already has absolutely you look at the Arab Spring for example just was so pivotal in that it's changed politics forever I think our leaders are still grappling with how to respond I think they're struggling but it was so pole driven and every day just looking at the weather vane of social media and other streams of feedback and I think our leaders need to elevate themselves above that I think Keating said big ideas can transcend the pace of the cycle the media cycle I agree with that if you have consistency and a vision that that don't necessarily I don't think they've learnt yet how to not become sick offence to social media but you know in terms of this generation they probably know a lot more about it than I do in terms of how to respond but as I say it just surprises me how much individuals are willing to share there's another side of us too and that is the power of social media I speak as somebody from the old media which is suffering badly because of the impact of social and other the broad range of social media but you look at what's happened in the United States where everyone has become a journalist and that extraordinary footage of an African American woman sitting in a car cradling her boyfriend who had just been shot in the basement while running her mobile phone and putting it out into the world and the cop standing there with his gun in his hand and the arguments going on about whether the boyfriend was a threat or not that's all part and we've had several occasions now where the official view of something has been debunked by some private citizen who just stood there with a mobile phone filming going on and proved that somebody was lying well it has changed the world and it's going to change the world so with that note about social media going to change the world and notwithstanding the note of caution from Kieran it's probably a good moment to alert you all to the hashtag A&U Australia 360 Twitter hashtag 4 hour event today if there are things that you've heard on this panel that you agree with that you fundamentally disagree with if there are things that you want to bring up for discussion can I encourage you to please post your 140 characters up there to get our discussions continuing we have come to the end of our panel this morning and I think we've had an excellent start to the range, the wide range of political, security and economic challenges facing Australia so could you please join with me in thanking Kieran Gilbert, Brendan Nicholson and Bill Evans for a fantastic start to the day