Strengths of Australia as a possible international financial centre - Essay Example

Strengths of Australia as an international financial centre Australia’s presence in and geographical proximity to the Asia Pacific region, which has the highest rate of growth in the world and includes China, India, Indonesia, Malaysia, Philippines, Thailand and Vietnam (p6), gives the country a coveted position in international business. Accelerated levels of economic growth means that the region has greater need for financial solutions and services. Furthermore, these economies are now opening up to foreign investment and imports, with liberalized financial markets; Australia enjoys increasing trade integration with these economies.

In this region, Australia has, without a doubt, the most developed financial sector based on the superior and multifaceted financial products, experienced financial human resource and topnotch regulatory framework, which collectively contributed to safeguarding Australian interests when the 2007 economic crisis unfurled. Australia has superior fund management sector, sound banking network and positive macroeconomic factors. Australia has a highly skilled workforce and steady focus on training and education.

The immigration policies of the country are also targeted towards strengthening this HR base. Additionally, Australia has shown innovation and expertise in developing financial products, especially relating real estate and infrastructure financing, which are highly exportable in the region. How do these strengths compare to the attributes regarded as necessary in making a financial centre attractive? The most important characteristics that are necessary in any international financial hub are that it is stable, sound and well regulated; in addition to that, the hub must be able to provide a wide and accessible mix of financial products, services and solutions to customers in an efficient and competitive manner (p8).

The barriers to entry must be low so as to encourage stability and fair competition. All of these characteristics must translate into a centre which supports local and international players to invest, which means that it should encourage cross-border trades in products and currencies. (p10) With regards to some of these requirements such as overall stability of institutions and regulation, Australia is well equipped already. The financial system is well regulated and stable, with assorted interests.

However, most of these interests are local; in other words, Australian as a financial centre is not as international as it should be. Exporting and importing of financial services and products is minimal, even though the system is not a closed one. Australian banking industry is inward focused as well, with limited foreign investments. The Australian personal and corporate tax rates make it unattractive to foreign companies to want to establish their headquarters here, as compared to other Asian hubs such as Hong Kong or Singapore.

However, the geographic proximity to fastest growing nations in the world makes it more competitive to other hubs in say, Europe and North America. Furthermore, the superior fund management practices, high credit rating and banks’ capitalization and soundness of the regulatory framework are advantageous. In conclusion, the key change that is needed to strengthen Australia’s position as an international financial hub are more policy related, rather than economic or financial in nature.