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Thank you for your invitation to address the AustCham Korea Breakfast Seminar.
It was my very great pleasure to officially launch the Australian Chamber of Commerce in Korea back in 2009 in the course of my first visit to Korea as Minister and it's great to be back here with you again today.
Your work helps make a strong relationship even stronger and I applaud your efforts.
Australia and Korea
Australians and Koreans are natural trading partners.
Our societies are vibrant democracies, with transparent and accountable governments.
Our economies are competitive and dynamic, driven by economic reform and productivity growth.
This year, of course, marks the 50th anniversary of the establishment of diplomatic relations between us.
As part of the celebrations, Australia is hosting our two Business Councils’ Joint Meeting in September, in beautiful Port Douglas.
In my role as Minister for Tourism, I encourage you to attend.
Our trade links are strong and complementary.
Last year, Korea was our fourth-largest trading partner.
Korea was also our third-largest export market, worth some $20 billion.
Given the population base, the intensity of two-way trade is very high.
Australia’s strengths in raw materials and services sit well with Korea’s industrial strengths.
Indeed, Korea has one of the most sophisticated engineering industries in the world.
Trade with Australia in this sector alone is worth around $6 billion.
Australia is a safe, reliable and price-competitive supplier of key ingredients for Korea’s economic growth.
Many cars, ships and electronic goods that Korea sends around the world include imbedded Australian raw materials.
And as our economic relationship has grown, Korean companies have also prospered in Australia.
Companies such as Hyundai, Samsung and LG are household names in Australia.
Meanwhile, Korea is one of Australia’s largest sources of foreign students, third only to China and India.
Around 35,000 Koreans are studying in Australia.
And more Koreans come to Australia as young working-holiday makers than nearly any other country.
That’s on top of nearly a quarter of a million Koreans who typically visit Australia each year.
All these links underpin a mutually beneficial partnership.
Yet more can be done.
A comprehensive, high-quality Free Trade Agreement is the next logical step.
Our two leaders reaffirmed their goal to conclude such a deal by the end of this year.
The timing couldn’t be better.
We are G20 economies, members of the East Asia Summit and active participants in APEC.
We are both committed to a stable and prosperous region – one that’s open and free from instability and conflict.
And we’re both allies of the United States, seeing the US presence in Asia as fundamental to stability.
Resources and energy focus
All this cooperation sets the scene for an even closer relationship on resources and energy.
These sectors account for well over three-quarters of total Australian exports to Korea.
In fact, Korea is Australia’s second-largest energy export market and our fourth-largest mineral export market.
Korea’s demand for coal is forecast to continue to increase, and Australia stands ready to increase supply.
Korea was also the lead market for Australian exports of crude petroleum last year, and a key market for iron ore.
Exports to Korea are tipped to expand into 2012.
In an increasingly jittery global market, Korea’s economy remains on a firm footing.
Forecasters expect Korea’s GDP to rise at a healthy rate next year.
And Korean industrial production is forecast to rise by nearly nine per cent this year, and by nearly eight per cent next year.
On top of that, two major customers for minerals – POSCO and Hyundai Steel – are forecast to raise steel output by 16 per cent and 28 per cent respectively this year.
This solid growth will continue to provide very strong opportunities for Australian exports.
So the commercial relationship between Australia and Korea remains strong.
Natural gas
Natural gas is an emerging feature of our trade relationship.
At the moment, Korean imports of Australian LNG are a small part of total Korean imports, accounting for barely three per cent.
But this has started to change, with new long-term supply agreements coming into play over the coming five years.
For a start two agreements with partners in the huge $43 billion Gorgon project will potentially see a further two million tonnes of LNG going to Korea annually.
Then there is the Wheatstone Project, also operated by Chevron, which will potentially supply 1.5 million tonnes of LNG to Korea.
But it's not only the supply contracts with Korea that I welcome, but also Korean investment in Australia's LNG industry.
In Queensland on Australia's east coast we are seeing the rapid expansion of the coal seam gas to LNG industry.
To date, final investment decisions have been taken on two large scale projects, including the Gladstone LNG project in which KOGAS has become a joint venture partner, taking a 15 per cent equity stake.
That project alone is expected to produce nearly eight million tonnes of LNG a year, supplying up to 3.5 million tonnes of LNG to Korea annually.
The CSG to LNG industry in Australia offers great potential and I expect to see more large projects get off the ground in the not too distant future.
Based on current commitments, Australia is scheduled to supply 7.5 million tonnes of LNG to Korea annually by around the middle of this decade – making us a key strategic energy partner.
There is also potential to supply even more to Korea as other new projects create further trade opportunities.
So Australia is ramping-up its capacity as an LNG producer – and its reputation as a reliable supplier.
Total Australian LNG exports may rise from 18 million tonnes to more than 50 million tonnes a year within five years.
By then, we’ll be the world’s second-largest LNG exporter, and the largest in the Asia-Pacific region.
We are the only LNG-producing country that embraces multiple LNG technologies:
- conventional offshore gas with onshore LNG production;
- offshore floating LNG production; and
- coal seam gas-based LNG production.
We welcome our trading and investment relationship with Korea, and take seriously our role as a reliable supplier.
The mutual benefit is clear – certainty for Korean companies needing a reliable, cost-effective supply of energy, and a broader customer base for Australian companies wanting to develop our natural resources.
A vibrant and growing LNG industry in Australia opens up opportunities for Korea from a range of flow on benefits in the services and infrastructure sectors.
Potentially the best example of this is Shell’s Prelude Floating LNG project, which will create thousands of jobs in the Korean shipbuilding industry.
Despite the competitors snapping at its heels, Prelude is on track to be the world's first floating LNG facility.
This technology opens up exciting possibilities for the development of stranded and remote petroleum fields that would be otherwise uneconomical to develop.
As the search for new petroleum resource discoveries intensifies, I see an increasing importance for FLNG technology and great opportunities for the Korean shipbuilding industry arising from this.
Foreign investment
But of course the opportunities do not end there.
Australia's strong economy, bolstered by fast growing resource and energy sectors is fuelling the need for increased investment across a range of sectors.
And as a resource rich, capital hungry nation we welcome and encourage foreign investment.
It gives Australia the opportunity to develop more projects and create employment opportunities which, in turn, helps us to keep up reliable, safe and secure supplies of energy and resources to the region.
Much of that investment also goes towards new infrastructure, which raises productivity.
In just one year, Australia’s Foreign Investment Review Board approved nearly $3 billion of proposed investments from Korea.
And more than half of those were in the mining sector.
By that measure, Korea was our eighth-largest investor for new investment in mineral exploration and development.
Australia's resources industry has achieved far more with foreign investment than it could have done with domestic investment alone.
For instance, our offshore exploration, underpinned by world-class pre-competitive data, presents a wealth of opportunities for investment and petroleum discoveries.
Australia is committed to open and transparent trade and investment frameworks, and I look forward to welcoming more investments from Korea in the years to come.
Carbon pricing
In that context, can I also say that the Australian Government fully understands that investors need certainty.
From a policy perspective one area of uncertainty in recent years has been around the question of pricing carbon.
Reducing greenhouse gas emissions is a global challenge confronting all nations.
While there are differences in approach, the international community largely accepts that we need to reduce greenhouse gas emissions.
Where there is less consensus is on how we do this in the most cost effective way.
It is a question to which each country must find its own answer.
In Australia we have opted to implement an approach similar to the one being pursued by Korea, by imposing a carbon price from 2012 leading to an emissions trading scheme from 2015.
Our system, to be introduced from 1 July next year will involve an initial fixed price period with AUD$23 a tonne starting priced, followed by the move to a floating price from 1 July 2015.
In designing a mechanism to price carbon we have faced many of the same challenges you face here.
We want to play our part in reducing global emissions while at the same time preserving our international competitiveness, particularly for our trade exposed industries.
We want to maintain energy security and the strength of our economy as well as minimising the cost impacts for our citizens.
The final carbon pricing package announced by our Prime Minister just over a week ago contains measures to address these issues.
Along with assistance for households, it includes measures to support our coal, steel and aluminium industries, and provides transitional assistance for other emissions intensive trade exposed industries.
It establishes an Energy Security Fund which will allow us to manage the retirement of some of the most emissions intensive electricity generators and transition to cleaner energy sources in an orderly manner.
And it provides support for investment in clean and renewable energy technologies.
It is Australia's plan for a Clean Energy Future – a goal that I know is shared equally in this country.
Clean energy: Australia and Korea
More than ever, Australians and Koreans are mindful of our impact on the environment.
We share a commitment to developing low carbon technologies.
President Lee has shown leadership in this area, advocating low-carbon development around the world.
I also recognise Korea's membership of the Global Carbon Capture and Storage Institute.
Australia is contributing $10 million to Korea’s Global Green Growth Institute, supporting low emissions growth strategies in developing countries.
Australia will join the Institute as a core partner and will be represented on its board of directors.
Finally, we share a commitment to energy efficiency.
That includes working with industry to improve efficiency standards for electronics, motor vehicles and buildings.
Energy efficiency has a dual benefit – it’s good for the environment and it’s good for the corporate bottom line, as companies save money on their energy bills.
Conclusion
Ladies and gentlemen, the partnership between our two countries is one of achievement in the past, with promise and potential for the future.
As natural partners and close friends, Australia is committed to building on our already strong relationship with Korea.
Thank you