Acknowledgements

It gives me great pleasure to be here today, so please let me express my thanks to the Forum’s patron, Mr Anthony Pratt, and to our two co-hosts, Professor Jennifer Rubin and Mr Ross Fitzgerald.

Let me also acknowledge the presence of Ministers from both our countries, other government colleagues including our respective High Commissioners, and of course you, the distinguished colleagues and participants whose involvement will determine the success of our gathering.

​Introduction

As you know, the flight from Australia to the UK is something of a test of endurance.

But the long time in the air at least affords one some space to think.

When looking out the window to the earth below, you could be forgiven for wondering what’s happening with the tectonic plates beneath the surface, given how frequently we seem to refer to ‘tectonic shifts’ these days.

The UK Geological Society’s website assures me that the UK is not located on a plate margin and is therefore not tectonically active.[1] This may come as a surprise to anyone with even a passing interest in current political events!

The Society also points out this current state of relative stability was not always thus.

It was thanks to a turbulent tectonic past that the UK’s land mass gradually drifted from somewhere near the South Pole to the position where we find ourselves today – admittedly over a lazy 700 million years or so.

And as much as we Australians love to critique the British weather, imagine how much more annoying we’d be if you were still stuck down near the South Pole – so I guess tectonic shifts and turbulence aren’t necessarily all bad!

Today I thought I’d reflect a little on some of the more contemporary tectonic shifts.

In doing so, I hope to highlight some questions that both Great Britain and Australia need to ask ourselves, and to identify some areas where we might work together.

But, here’s a spoiler alert – there won’t be any answers at the end of this speech, but hopefully some food for thought for the Forum.

Many of us have been talking about one of the great tectonic shifts for some time now – the transition of economic weight from the trans-Atlantic countries to Asia.

By 2030, Asia will account for around two-thirds of global economic growth, and will produce more than half of the world’s economic output.[2]

China and India are on track to be two of the world’s largest economies, Japan will remain a leading high-income economy, and countries in South East Asia will continue to be amongst the fastest growing in the world.[3]

A critical element for this success though will be strengthening market-based rules, institutions and governance.

Yet over the last decade we have seen pressure from emerging market economies to “rewrite” the rules that have underpinned past economic performance and create new institutions for global or regional economic governance.

Of course, the global rules are always being rewritten. But as I have said before[4], this challenge now goes to the heart of who writes the rules, not just the rules themselves.

In part, this reflects an ongoing problem – the inability of some existing institutions to adapt to the new economic realities. When combined with the failure of some Western democracies to acknowledge and plan for the impact of an increasingly globalised economic system and rapid technological change on various groups and regions, the result has been a loss of support domestically and internationally for the system that has delivered such dramatic economic progress over the last 50-70 years.

In such a world it is imperative for countries like the United Kingdom and Australia to be even more strategic in identifying our core national interests and to be even more agile in responding to events. 

As Joseph Nye presciently cautioned, in the context of the US, ad hoc reactions will not be enough; success means the US needs a “smart power strategy”[5], a message that applies equally to the UK and Australia – in short a strategy that brings all the levers of our societies to bear, working with allies and friends, to protect, sustain and deliver on our core national interests.

Uncertain rules-based international order

So let me fast forward to right here, Lancaster House.

This historic venue witnessed another sign of the seismic shifts when British Prime Minister Theresa May outlined her vision for Brexit at the start of last year.[6]

Brexit is a frequently cited example of contemporary disruption, along with various election results in Europe and across the Atlantic.

Australia’s Foreign Minister Julie Bishop alluded to this global uncertainty last month when she addressed the Australian British Chamber of Commerce in Sydney.

She said: “With the US fighting Canada and making friends with North Korea, who can make sense of what's going on?”[7]

Indeed.

Voltaire said the Holy Roman Empire, at its end, was neither Holy, Roman nor an Empire.

Today some question whether our system is still truly “international”, “
rules-based” or “ordered”.

Politics in many countries is more fragmented. Nationalism has become a stronger political force and protectionist sentiment is thriving.

We’re seeing the rise of illiberal democracies and strengthening autocratic governments, while there are increasing calls for state interventions even in our own economies.

Not too long ago we thought that the Chinese Communist Party’s governance model was not exportable – theirs was a “market with Chinese characteristics”. 

But both the high growth rate and the sheer size of China’s economy – by the most meaningful measure, already the largest in the world – mean others now seek to emulate what China has done right economically.

China’s growing economic weight was also destined to lead China to developing and using serious geostrategic heft. China’s current approach to the world reflects its national interests and aspirations and brings opportunity and challenges for Australia and the UK. The issue for the rest of the world, and again I refer to Joseph Nye, is how we “shape the environment for China’s decisions”[8].

While it was inevitable that emerging market economies would move from challenging existing economic institutions to a rapidly growing geostrategic assertiveness, the speed and nature of this change has been surprising.

After all, it was only in 2015 that President Xi Jinping assured President Barack Obama the Chinese Government had no intention to militarise features in the South China Sea.

And only in the last handful of years have we seen the nakedness of Russian meddling in Western democratic elections, to say nothing of the audacity of its actions here in the UK and elsewhere in Europe.

All this highlights the challenge to Western liberal democracy, whether here in Europe or in the Asia-Pacific.

Challenge is not new, of course.

We’ve been challenged before and dealt with it – even if it sometimes took time. The West eventually emerged from the Great Depression, saw off fascism, and prevailed over Cold War communism. 

But this challenge is different.

For starters, the threat is multifaceted and is not all from outside. Indeed, arguably the biggest challenge to liberal internationalism seems to have originated in a place where some of us were least expecting it.

As Princeton international relations and politics Professor John Ikenberry puts it, it had previously been assumed that the threats to the established norms would come “from rising non-western states seeking to undermine or overturn the postwar order. In the face of hostile, revisionist states, the United States and Europe were expected to stand shoulder to shoulder to protect the gains from 70 years of cooperation. But, in fact, liberal internationalism is more deeply threatened by developments within the West itself.”[9]

And this fall from assuredness has been rapid and unexpected.

It was only 19 years between Francis Fukuyama’s 1989 article imagining the triumph of liberal democracy as “the end of history” – an intellectual exercise that admittedly seemed wildly exuberant even then. That exuberance was even less well placed in light of the GFC.

Today we find ourselves grappling with the aftermath of that crisis – dissatisfaction with the political settlement and doubts about economic openness, and the mistrust of traditional institutions, both public and private.

This highlights a fundamental challenge for us.

In many ways, there has been an artificial, even forced, bifurcation of national interest discussions between the economic/social and geopolitical/geostrategic.

This distinction has never made sense and it makes none now.

The two “spheres” are utterly entwined but the proponents of the different perspectives lack a shared appreciation of the challenge we collectively face.

Indeed, a critical feature of strategic competition in Europe and the Indo-Pacific turns on differing models of regional economic integration.

Yet very few countries do joined-up government at all well, reflecting recurring lack of coordination between the military, economic and socio-cultural institutions across countries.

In doing so, we fail to acknowledge the truth – as clear to Henry Kissinger when he studied the Congress of Vienna and post-Napoleonic European relations as it is today – that state power is intimately linked to its military capability and economic resources, and the quality of its political leadership.[10]

That’s why I’m watching with interest the development of the UK’s Fusion Doctrine, by which it deploys all its capabilities in pursuit of its national security interests.

This raises a challenge Australia knows well, but one a post-Brexit Great Britain will need to confront.

As the former Secretary to Australia’s Department of Foreign Affairs and Trade, Peter Varghese, has noted, Australia belongs to no natural, regional or cultural grouping, and “cannot bully or buy its way in the world”.[11]

This has made us firm advocates of multilateralism – of rules, institutions and forms that temper coercion – alongside our bilateral relationships.

In the case of the United Kingdom, Brexit is a conscious decision to renegotiate its relationship with a grouping in which you have wielded disproportionate weight.

The United Kingdom’s challenge is to make the best possible transition: to sustain or indeed strengthen, not diminish, both its polity and its economic and strategic relationships in Europe and beyond.

As our Foreign Policy White Paper makes clear, Australia is – in the face of present challenges to the rules-based order in the Indo-Pacific – consciously investing more in our regional relationships.

For the UK, the counterpart would be to ensure that, post-Brexit, you remain committed to fostering key regional economic and strategic relationships while at the same time looking to deepen relationships beyond the region.

Such strategies also highlight how disappointing the US decision to reject the Trans-Pacific Partnership was, which was as close to a combined economic and strategic approach as has been seen for some time.

However the coming years play out, there is a renewed imperative for Australia and the United Kingdom to prioritise working together, bilaterally and multilaterally.

Australia’s $35 billion program to build one of the world’s most advanced anti-submarine warships, in partnership with the United Kingdom’s BAE Systems, which we recently announced, will be central to this.

Technological disruption

I turn now to the turbo-charged technological revolution that will fundamentally affect both our international and domestic environments.

Just over ten years ago, Apple launched the iPhone, a revolutionary device yet one that – remarkably, given the capacity of current generation smartphones – offered no third-party apps, no GPS and no video recording.

There were six billion connected devices online in 2006. Today there are 15 billion.[12]

Development in technologies like artificial intelligence, robotics, materials science and bio-tech are already starting to revolutionise the way societies create and distribute wealth.

These technologies offer us an almost unparalleled promise in lifting individual wellbeing, provided we reap the productivity gains and distribute these reasonably equitably.

They will create new industries, new jobs; and they can sweep away barriers to workforce participation for people with disability or responsibility outside work.

Of course there’s a flipside. Indeed, part of the fragmentation we’ve seen in the West is due to technological change, both the economic disruption and the impact it has had on the nature of our political debate.

While technology and automation can make jobs better, incomes higher, and productivity greater – while it can entertain, inform and connect us in remarkable ways – we need to ensure the rising tide lifts all boats and strengthens our societies, rather than fomenting inequity and division.

Uncertainty about whether governments recognise this and are capable of responding is engendering anxiety in some regions and industries that feel the brunt of its effects. And we’ve seen this anxiety translate into influential counter-movements in the US and elsewhere.

Australian perspective

What is the Australian perspective on all this disruption?

Well, we’ve had 26 years of uninterrupted economic growth and we’ve generally avoided structural rises in economic inequality while maintaining steady (if recently tepid) real wage growth.

You’d think that might hold us in good stead – and it does – but we’re not immune to the winds of uncertainty.

Despite our impressive economic performance, the political discourse in Australia echoes that in North America and Europe.

There’s an underlying anxiety in our populace about what the future will bring, and a dissatisfaction with the results of our long-standing social compact.

This shows up in the fragmentation and atomisation of our politics, the embrace of the outsider, and the rejection of “supposed expertise”.

There is a strong geographic element to this fragmentation and embrace of the outsider. In our most recent Federal election, the share of people voting for “fringe” candidates – defined as those not associated with any of our four major parties – was quite small for voters living near the centre of our major cities, but rose steadily the further one moved from those city centres.[13]

Moreover, in both our countries voters are willingly do things that “experts” say will be counter-productive to their own interests. This certainly throws up challenges for those of us charged with developing and communicating public policy.

This phenomenon cannot be divorced from the ongoing erosion of public trust in traditional institutions. 

Weakening social trust

There’s rising dissatisfaction with government around the developed world.

This is driven partly by mistrust of our beneficial intent – doubts that we in fact intend to do the right thing.

But it’s also driven by mistrust of our competence. There’s a risk that governments will fail to bridge a worrying gap between the sort of services, interactivity and engagement citizens now expect, and that which they receive.

Don’t misunderstand me – whether in Australia or overseas, governments are doing much to improve. But incremental improvement may not be enough, and that is why I recommended the Prime Minister commission an independent review of the Australian Public Service to determine how we ensure we’re fit for purpose for the next quarter century.

I keep talking about governments, but mistrust is undermining other traditional societal structures – whether it be big business or regulators, the media, religious or community institutions.

But the public is not losing trust in institutions per se – they willingly place it in newer institutions such as social media communities of interest. The challenge is not so much trust in and of itself, but trust in the institutions that people like us are most associated with.

This is a big challenge for all of us, whether in government or outside it.

It is these sort of concerns that led my predecessor at the Department of Treasury, Ken Henry, who is now Chairman of NAB, to state recently that “it is time we got really serious about the social purpose of business”.[14]

Where does this leave us? With some big questions to ponder.

Although I’m not offering any answers today, I would like to offer a series of questions that may help focus the sharp and brilliant minds here at this Forum – and, indeed, offers areas for fruitful cooperation between our countries.

1. What do we mean when we say we have a shared interest in a rules-based international order? Do we really believe we are trying to sustain the rules that have existed for the last half century given how much has changes economically, technologically and strategically? And if not, how do we modify those rules, knowing this is not a decision of ours alone. Indeed, how do we respond if the rules-based order breaks down in our regions or globally?
2. How do we respond to efforts by others to reshape our strategic space by directly interfering in our democratic institutions?
3. How do we ensure technology helps lead to better jobs, incomes and lives for all parts of society – a more ambitious aim than merely thinking about how to “manage industry transition” or provide a “basic income”?
4. How do we rebuild and reconceive lifelong learning to support all people thrive in a changing world?
5. How do we develop and build support for big reforms in the social media age, where Twitter and Facebook are the modern equivalents of the agora and the forum?
6. How do businesses retain (or earn back) their social licenses to operate?
7. And how do we manage our new goldmine of data – an incredibly new and terribly sensitive asset – while protecting security and privacy?

However we plan to manage these challenges, our response needs to be well-informed and evidence-based. And it needs to be reflective not reactive; farsighted not myopic.

Conclusion

I appreciate that this is pretty heavy stuff. But I want to make sure that we all bring the proper perspective to these challenges.

Just as Francis Fukuyama called the “end of history” too early, those now proclaiming the “death of democracy” and the “end of openness” will hopefully be proved wrong by the coming decades.

“Erosion” does not necessarily mean “destruction”.

There’s no doubt that current events and long-run trends pose a significant challenge to western liberal democracies.

But democratic capitalism contains within it the seeds of renewal and innovation that have helped us face challenges of the past. 

As the Australian Prime Minister, Malcolm Turnbull, said in Berlin earlier this year, “to meet the challenges of our times – the threat to openness, to freedom and to our individual humanity – democracies must rediscover their power and their purpose”.[15]

Liberal democracies encourage, nurture and reward innovation, respect and the contest of ideas – concepts we need more than ever in a changing world.

We now live in a contestable multi-polar world. Our challenge is to shape and influence it, to support security, prosperity and opportunity. To succeed, we need to harness the collective power of our military, our polity, our economy and our citizenry.

With our shared values and history I cannot think of two countries better placed to work with one another on these issues than the UK and Australia.

I look forward to our discussions over the coming days.

Thank you.