Speech at 2017 Australian Fintech Awards
22 June 2017
By being here, in my own small way, I’m wanting to pay tribute to the work that all of you are doing in the sector – because I think this is a sector that, for Australia, can be world-leading. We mustn’t underestimate how good we are in financial services.
When we deregulated the financial sector in the 80s, that really I think turbocharged the growth and diversification of our financial services. And when you look back at the regulatory framework that has been developed, that is first class, second to none in the world, in my view. When you look at the diversity of financial institutions we have here, the strength of those financial institutions helped to get us through the global financial crisis and all the rest of it. Allied to that is the growth of this very big pool of superannuation funds, and all the services that flow in and out of that.
We actually have a world-class financial services system. But what you are doing is taking it to the next stage – and that’s what is really exciting. Because you accept and you embody disruption, and disruption is the new constant.
I have a portfolio which is a mixture of activities. I’ve got the big scientific organisations like the CSIRO, the Nuclear Science and Technology Organisation, the Institute of Marine Science. I’ve got a set of industry programmes that are essentially looking after traditional areas like manufacturing. And I’ve got a number of innovation programmes through our Innovation and Science Agenda, which was kicked off by Malcolm Turnbull when he became Prime Minister, which are aimed at really turbocharging what we do in our innovation system – becoming an ecosystem with an innovation mindset across the economy and a global outlook.
You’ve already got that. But our job is to help you go to the next stage. It’s very important from our point of view that you do that. We want to back sectors that are going to be the best in the world; we can’t be the best in every sector. But this is one of those sectors where we can be the best in the world. But the disruption that goes with that gives us the opportunity to create new markets and new opportunities. And that is what is important.
If you go and talk to someone like Warren Buffett, he’ll tell you that what he looks for in a company is: where is there an inherent value premium in the company? What inherent advantage have they got which gives them an edge in the market, or helps keep them ahead over other people?
Now, increasingly for us across the Australian economy, whatever sector you’re in – agriculture, mining, services, financial services, go through the list – you’ve got to have an innovation mindset. You’ve got to be prepared to adapt. That’s why the programmes in my portfolio, the industry programmes, are all about how we transition manufacturing to being smart manufacturing. So in the case of the auto industry, it’s not about manufacturing here so much now, or assembly. It’s about all the front-end stuff, the design and the engineering that go with that. And then having auto component suppliers start to diversify and become global supply chains. In every sector, getting this innovation mindset. You’ve got that already.
Now, one of the things the Government can do is be a good customer when it comes to new products and services. We’ve set up a digital marketplace which is a way of trying to get more and more government services married up with Australian companies, particularly SMEs. We want to make it easier for Australian companies, particularly SMEs, to have access to the Government dollar. In the ICT space, there’s a $6.5 billion prize that SMEs can be a part of. But the reason I mention that is that we also believe our procurement should drive industry development, not just in spaces like ICT.
We’re also doing it in the defence space. We’re spending $195 billion over the next decade; and we’re using that to drive changes in the defence sector, to create more innovative companies and make sure that we capitalise on the spin-offs from that spending. So it’s not just about the defence spending, it’s about the commercial spin-offs that come from that.
The other point I want to make is this: we recognise that the financial architecture of the economy is inherently linked to everything else. When you come up with really good new products, those products are servicing a lot of customers across the economy. So in that sense, you’re an important part of the economic infrastructure of the economy.
But the other thing we’re also thinking about as we go forward is: you’re about to potentially disrupt the financial system big-time. Change is coming in a way – on the surface, a few years ago, it all looked very settled in Australia, with the big four banks, all the other players, the smaller banks. Now, that is changing completely. With disintermediation going on, peer-to-peer lending, all the other stuff that’s going on – the crowdfunding that’s going on; some of these areas we’ve tried to facilitate through our policies.
But I’ve got to tell you, we’re not resting on our laurels. If you think a policy is not going well, let us know, and we’ll want to make it better. One of the things Malcolm Turnbull said when he became Prime Minister and he released the first Innovation and Science Agenda was: if we’re going to fail, let’s fail early, learn the lessons, and move on. And we took that lesson from the Israelis. See, their chief scientist has a venture capital fund, and he or she only has one rule, which is that if we give you money and you fail, as long as you learn from that so that the second or third time you do better, that’s all we ask. We don’t expect everybody to succeed at once.
We are also trying to get that mindset into how government allocates capital in the public sector. So we can actually have a culture which doesn’t fear failure, but sees failure as an opportunity to learn. It’s a bit like what’s important for us as individuals, when you become successful you can also become complacent. But when you fail, you should want to find out not rest until you’ve found out why that went wrong, what did I do wrong? And you learn from it. So for me it’s important for me to inculcate that sort of mindset across the economy, be able to experiment, to innovate and all the rest of it.
When I look across the financial services system here, the thing that strikes me is that for an economy of our size we have a huge amount of expertise that we can actually do better to export as well. To some extend that happens naturally, some great companies get established here, they start up, they get to a certain size and really, to become bigger they have to expand offshore or whatever, that’s OK, as long as they can call Australia home. See the ultimate thing I want is to have lots of homegrown companies that become big companies with a large global footprint. You look at the Atlassians of the world, see around this room I want to find the next one or two or three or four Atlassians, well you might think is that, no, it is not a sort of trivial or frivolous aspiration. That is how we have got to think. I look at areas like financial services, I look at areas like cyber security where for example we have great expertise, we really punch above our weight when it comes to expertise, we can be if not the best, among the best in the world in areas not just like financial services, but in areas like cyber security. So when we pick a sector the job of the government is to help that sector get bigger. Now sometimes that means leaving you alone, because sometimes the worst thing you can do is get entangled with Canberra, with the red tape and the regulations and everything else. But there are times when the might of the federal government, whether it’s through procurement or other ways, can provide the basis to help.
One of the other things we are trying to do across the economy and internationally is ‘The Big C’, collaboration. We punch above our weight when it comes to knowledge creation but we are not great necessarily when it comes to commercializing the outcome. Government, industry, business, academia, publicly- funded research institutions, we want them to be working more closely together. I’ve got a group at the moment putting together a university precinct strategy, because we see those precincts as places to bring industry and academia and research bodies together. Physical proximity is very important in encouraging people to actually do really well, they spark off each other formally and informally, just when you meet over a coffee you start exchanging ideas. So for me we have done some stuff already around collaboration, we are looking to do more, and from my point of view that university precinct strategy is part of the next stage in promoting a more innovative economy.
When I look around the room the other thing that strikes me is the diversity of the people who are here. Not just in terms of their ethnic background, some people are suited up, some people are dressed a bit more informally, one character over here is wearing a baseball cap, right? Now what does that tell you? This tells you that this is a sector that judges people not on what they look like or where they are from, but what they bring to the table. And in the sense what is important is for us to have that global outlook and to celebrate that cultural diversity that goes with it. And having that global collaboration is part of that process, we must have that global collaboration.
I could go through a series of initiatives my colleague the Treasurer has put up around the sector, getting rid of the GST on digital currencies, or relieving that the other day in the Budget, we now have a regulatory sandbox which makes it easier for people to experiment with innovation in the financial services sector, we have put in new laws to try and make it easier for people to do crowdfunding and the rest of it. But ladies and gentlemen tonight is not me giving you a recitation of those things, my main point here is to celebrate the success you have had so far, and you will be seeing tonight people who have gone to that next level, who have brought something to market, have made something work, have been risk takers and innovators.
This is an economy in the future you know, out there, and you know this better than me, out there no one is waiting for Australia to succeed. You have seen the pace of change out there. So we need the risk taking, we need the entrepreneurship, we need the cultural change. And young people, you are role models because if they see these people are prepared to risk these things, they are prepared often to go out there on their own, often maybe not even having a salary to begin with, to live off savings or their parents or someone else, maybe the State sometimes, but the point was they followed a dream and a passion. And tonight those people who are coming up here to receive their awards have worked hard and sacrificed to bring something forward. And there is nothing more exciting for me as an industry minister to see people who are prepared to take risks, who are prepared to be entrepreneurs and are prepared to see something through to the end. You are great role models, it’s fantastic what you are doing, I really hope you get a good celebration tonight and thanks very much for the opportunity to be with you, thank you.