1. Setting Priorities for Services Trade Reform - Financial services priorities The Australian National University: 30 November 2008 John O’Shaughnessy, Deputy CEO, IFSA

3. The agenda o Understanding financial service exports o The global and Australian funds industry o The opportunity o What’s a ‘funds hub’? o Why Australia? o Recent activities o Next steps

4. Understanding financial service exports The Four Modes: o Cross-border supply Management / administration and advisory services provided by Australian enterprises o Consumption abroad Australians consuming abroad o Commercial presence Establishing subsidiaries / branch offices / joint-ventures o Movement of natural persons Exporting talent

5. The global and Australian funds management industry o Global FM growth is being driven by ageing populations in mature and developing economies. Accelerated by commitments to properly fund DB schemes o Australia has the 4th largest funds pool (now $1.3 trillion). It grew 32% in ‘06 o Australia is being outpaced by Lux (38%), Ireland (60%), HK (54%). Singapore (32%) o Regional growth estimate by Cerulli is 14% for next decade. Much greater than Nth America and Europe. Highest growth to 2010 is China (60%) and India (70%)

7. …despite the fact that over 20% of funds are invested overseas by Australian managers

8. Trade balance in managed investment US, UK and Australia

9. The opportunity o Managing Australian / regional / global funds o Fund administration services o Professional services o Advice services o Capital to stimulate new and growing business opportunities o Employment opportunities

10. Extract from Access Economics – The Export Potential of Australian Funds Management Services, July 2007 Access Economics estimates

11. Typical funds management revenues as a % of FUM

12. Funds under management as a % of GDP, 2005

13. What is a ‘funds hub’? A centre of expertise and that provides regional and global services including: o Asset management o Custodial services o Investment consulting o Platform delivery systems, wrap accounts and master trusts o Financial service IT (including software development) o Actuarial services o Legal and accounting services o Complience and risk monitoring services o Investment performance and research o Education and training services o Portfolio administration services o Distribution and advices models and services

14. ‘Hub’ competition - the alternatives?

15. Why Australia? o Strength and stability of our economy o Strength of the industry – high domestic growth – scale is important 4 th largest Finance & Insurance = 7.2% of GDP with growth 40% faster than nominal GDP (to Q4 ’06) Well respected industry that includes most leading global players o Expertise and innovation Experienced managers of global portfolios – Dec ’06 Chant West Multi- manager report shows 38% of funds invested in global portfolios Portfolio diversity, REITs, infrastructure funds, financial planning, hedge funds, private capital, investment platforms, retirement savings, etc Continued…..

16. Why Australia? ……continued o Well respected regulatory system Integrity, transparency and efficiency Corporations Act, MIA, FSRA ASIC, APRA, ATO, Austrade o Talent pool Highly skilled and multilingual o Good exec and specialist training ground o Right time zone / technology reach o Quality of life

17. Some recent activities o Established industry focus group in 2005 o Engagement with interested stakeholders ASR, Regulators, DFAT, Austrade, Invest Australia & Axiss Raised financial services opportunities as part of trade discussions / developments o Assessment of recent and activity and future opportunities Identifying data and information gaps o Led off-shore delegations and encouraged on-shore delegations o Published specific policy recommendations Refinements to Managed Investments Tax and International Tax arrangements o Commissioned studies on ‘export’ potential and recommendations on the issues More info at: http://www.ifsa.com.au

18. What next? o Contribute to and participate in AFMET “And for this reason I can announce today that Labor in Government will establish an Australian Funds Management Export Taskforce (AFMET) with costs to be absorbed from Departmental resources.” Kevin Rudd, ‘Australia as a Funds Management Hub for Asia’ 3 August 2006 o Simplify and get more certainty into taxes on managed investments, including FIF, foreign sourced income, withholding tax, etc. o Gain higher profile in multi-lateral and bi-lateral trade agreements o Ensure that DTAs include negotiated positions on cross-border taxes o Better promote Australia’s capability and competence o Better understand the competitive landscape o Encourage further studies into the financial services sector trade potential and issues

19. Kevin Rudd at the National Press Club – 21/11/07 “I was just having a conversation with someone before, I'll leave them unnamed in case it embarrasses them, but they were from the National Australia Bank [laughter] that's a big bank, could be anybody, about this simple proposition, which is, you've heard me speak quite a lot, and the Treasurer has taken objection to this, about how you go about transforming our financial services sector into an export platform to the rest of the world. Now it's a very sophisticated sector, our funds management sector is particularly of great depth and breadth and density, and I've always asked myself the question, why can't we project this into the region as a major new export business for the nation? In taking that further, both in terms of the taxation arrangements, which we've already indicated, the reduction of the foreign withholding tax, but also in how we re-badge and re-brand Australia as a funds management capital for wider East Asia. We've just been talking about how we'd do that consultatively with the peak bodies, like IFSA, the Bankers' Association, and the other peak bodies. The only way you deliver good outcomes here is if you do it consultatively, and I very much believe in a Team Australia approach.” Some recent quotes ………..

20. Kevin Rudd on Australia as a financial centre – 19/11/07 JOURNALIST: “Mr Rudd, on costing, will you do more on financial services? That’s a very modest proposal of $15 million withholding tax total. You want to create an export industry, how will you do that? What else will you do?” RUDD: “There’s about three things you can do. You say it’s modest, but my experience was based on long conversations with IFSA, the Financial Services Association, and particularly the funds management section within it - on what they needed in order to become globally competitive and becoming a new export platform for the country and that’s what I’m interested in. So we have actually developed that proposal in close consultation with the funds management industry and it’s benchmarked against parallel withholding taxes around the world.” “So you know what I’ll be doing? Putting together the funds management industry and the financial services sector and delegations to the region with me and relevant Ministers leading those delegations to market ourselves as a funds management capital in east-Asia into the future.” Some recent quotes ………..

21. Thank you