The 2018 Lowy Lecture
On 13 September Sir Frank Lowy AC delivered the 2018 Lowy Lecture at Sydney Town Hall.
Ladies and gentlemen
It’s an honour to speak to you in this wonderful hall, which has been the venue for some of the most important moments in my life.
It was here that during our courting days my wife Shirley and I attended Youth Concerts back in the ’50s.
And it was here, just a few months ago, that I chaired the final Annual General Meeting of Westfield, and said farewell to that enterprise.
My family and I are enormously proud of the Lowy Institute’s achievements over the past 15 years and I thank everyone who has contributed to our success, including current and former Board members, Executive Directors and staff who are here this evening.
Yesterday I visited the Institute and spoke to the staff about how impressed I am with their work. I said to them: the Institute bears my name but the Institute is you.
Let me also thank Julie Bishop for her generous introduction.
Julie has a lot of friends in this room. As foreign minister, she promoted Australia’s interests with great passion and professionalism. And she has always been a good friend of the Lowy Institute. Thank you Julie.
When I established the Institute, I made it very clear that it would not be a platform for my own opinions.
I have kept that commitment.
I think a great strength of the Institute has been that it has maintained a separation between its governance on the one hand and its output on the other.
But, as my colleagues pointed out to me, this is, after all, our fifteenth anniversary.
If I am ever to speak at a Lowy Institute event, then this is the time.
I have often said that my life has been blessed.
I have reached this point in my life content with my lot.
I’ve worked hard.
But I don’t underestimate the degree to which luck, a supportive family, and this wonderful country, have all played a part in my success.
And whilst I’ve been lucky, I think I can also say that over the course of my life I have seen the world as it is.
Not as it should be. But as it is.
As a child I learned what it meant to be persecuted.
But even then, at the worst of times, I knew there was good in the world.
I saw my mother share our meagre food supplies with neighbours.
I saw her risk her life, and mine, to practise our religion.
As a boy I stood at the doorway of our hiding place in Budapest and watched Russian troops fight house by house to liberate the city and therefore rescue us from certain death.
I was also aware back then that Britain and the United States were forces for good in the world.
I remember huddling around the radio with others, waiting for the chimes of Big Ben to signal the start of the BBC broadcast that would tell us what was happening in Europe.
I knew that Britain and the United States were beacons of freedom and democracy at a time when my life – and Western civilisation itself – was at grave risk.
As a teenager I became a boat person – a refugee – as I made my way to Palestine.
There I fought in the War of Independence that followed the creation of the state of Israel.
And finally, I made my way to Australia in 1952, at a time when Australia was being challenged to “populate or perish.”
Since then, I have been fortunate to play a part in the development of this great country.
All of these early experiences shaped my world view.
If I am forced to define myself, I would say I’m an “idealistic pragmatist.”
In business you have to be pragmatic.
Much of the commercial environment is shaped by the actions of others.
But that doesn’t mean we should regard that environment as unchangeable.
At Westfield we constantly challenged the existing order to move towards a better outcome.
It is this theme – a mix of idealism and pragmatism – that informs my comments tonight.
There are many aspects of the international order over which we have little influence.
But there are also actions we can take abroad, and things we can do at home, to advance our national interest.
I want to speak about these tonight.
Ladies and gentlemen
I believe that Australia has never been in a better position to influence international events, and to benefit from them.
Australia too often sells itself short.
The list of our blessings is long.
Our democracy. Our strong economy. Our social harmony. Our education system. Our natural beauty and abundant resources, not just those that come out of the ground but the human resources – the wonderful people who inhabit this continent.
One of our advantages is our location in Asia – which will be the most important region in the world in the decades to come.
I look at all this and ask: “Why are we so timid? Why are we so quick to assume that we cannot have an impact?”
This is the idealistic element of my make up.
But common sense – yes, pragmatism – tells us we need to think clearly about our key international relationships.
For seven decades, the cornerstone of Australia’s strategy has been our relationship with Washington.
Our alliance has increased our influence and strengthened our reputation.
And we have always paid our dues.
But we cannot deny that President Donald Trump is making things more complicated.
This year’s Lowy Institute Poll found that just 55% of Australians trust the United States to “act responsibly in the world.”
Only three in ten Australians have confidence in President Trump to “do the right thing regarding world affairs.”
Yet despite this, Australians continue to support the US alliance.
I find myself in agreement with my fellow Australians.
I was not so surprised that Donald Trump won the 2016 election.
I could understand that many Americans felt they wanted a change from the status quo.
But I regret that Mr Trump does not see the great advantages that flow to America from its alliances and the global trading system.
And personally, given my life experiences, I feel more comfortable when the president of the United States is an advocate of democracy, not a friend of authoritarians.
But whilst he is the President, Donald Trump is only one man – he is not the country.
Our alliance is not with the Trump administration, it is with the United States.
Australia would be mad to walk away from the alliance. And where exactly would we go? We have to be pragmatic.
I do think it would be prudent to strengthen our relations and cooperation with other Asian regional powers: Japan, India, South Korea, Vietnam, Indonesia and others.
Like us, they are concerned by the direction of both American and Chinese foreign policy towards other countries in Asia. And they worry about a worsening US-China relationship. Our region is changing fast. It is better for us to be on the front foot, rather than the back foot.
In the end, though, I remain an idealist about the United States. All countries go through difficult periods. If nothing else, America is resilient. America will be back.
I should also say something about another great country that will be very important to our future – China.
As China becomes stronger it is only natural that it looks for new ways to advance its interests.
But we have our own interests, too.
Canberra should work hard to develop a cooperative relationship with Beijing.
But there will also be occasions on which we disagree with China. And on those occasions the best approach is to be forthright.
I know that some people in the Australian debate have a different opinion.
They say that China is so important that we must go along with its view of how the region will work in the future.
In fact some even suggest we should encourage the United States to do less in Asia.
I am not a China expert. But I have had some experience in negotiations.
And my experience tells me that if you don’t look after your own interests, the person across the table certainly won’t.
Our interests lie in having a balanced region – with the United States actively engaged – in which Australia and other countries are able to make their own independent decisions.
And we should be clear with Beijing about that.
As a European by birth I have always felt that Australia has too little appreciation for Europe.
Europe is a vital economic partner for Australia.
And political developments in Europe also matter to us – take Russia, for example. In her 2014 Lowy Lecture here in Sydney, Angela Merkel spoke more forcefully than ever before of her concerns about Mr Putin and Russia.
Or take the example of Brexit.
I won’t venture a view on whether Brexit is right or wrong.
But I will say that in the long term I don’t believe it will substantially alter relations between Britain and Europe.
Again, I look at this as a businessman, not as a politician or a diplomat.
Even though it doesn’t look like it at the moment, both sides have an interest in striking a reasonable Brexit deal.
And perhaps Brexit will have one positive unintended consequence.
Perhaps it will demonstrate in stark terms the choice between participating in globalisation or instead turning inwards.
Perhaps all the time and effort wasted on Brexit will show other Western countries that we should just get on with things, rather than blaming others for our difficulties.
So instead of weakening the West, perhaps Brexit will actually strengthen the West.
I certainly hope so.
Ladies and gentlemen
Tonight I do not want to speak only about Australia’s relationships with other countries.
I also want to speak about the kind of Australia we want to be.
Let me start with one of my most strongly held beliefs: that Australia is an outstanding international citizen. And it has been – over and over and over again.
Over the past century Australia has given an enormous amount to worthy causes, in both blood and treasure.
In the First World War, our population of fewer than five million saw over 400,000 Australians enlist.
More than 60,000 were killed and 156,000 were wounded, gassed or taken prisoner.
And in that war, and ever since, the Australian digger and the famous slouch hat, has come to represent the best of Australia.
The Australian forces were led by a remarkable man, Sir John Monash.
A civil engineer from a European Jewish family, Monash was not the most obvious candidate for command.
But the British Prime Minister, Lloyd George, believed that if Monash had been in command of all British armies on the Western Front, the war might have ended a year earlier.
After the War, Australia played a significant role in forming the League of Nations and later the United Nations.
And of course we have continued to contribute to the world ever since, through ANZUS, by helping to bring peace to countries such as Cambodia and East Timor, and with our work in the Pacific.
But I am afraid that in the future Australia may have to pay an even higher price to contribute to peace and stability.
This is why I want to focus tonight not just on matters of grand strategy.
I also want to speak about Australian domestic policies.
In order to be strong abroad, Australia must be strong at home.
We need to be strong on what I call ‘the three I(s)’ – immigration, innovation and infrastructure.
First, let me be clear: I believe in a big Australia. I am an advocate for an ambitious immigration program. I always have been.
In 1999 I gave a speech to the University of New South Wales in which I made the argument for increased immigration. Arthur Calwell had warned we must “populate or perish”. Half a century later, circumstances had changed. I argued we should “populate and prosper”!
The arc of my own adult life has followed the arc of Australia’s transformation since Calwell’s day.
We are all familiar with the differences between the Australia of the 1950s and the Australia of today.
We are richer, more productive and more interesting now than we were then.
This change would not have been possible without a big immigration program.
The act of migration is an act of ambition, imagination and bravery.
To imagine a better life for yourself and your family and to leave behind all that is familiar requires a special kind of courage.
Australia needs more of that courage.
In 2013 Rupert Murdoch made the same point from this very podium.
‘The nations that lead this century will be the ones most successful at attracting and keeping talent,’ he said.
I am a believer in an ambitious immigration program.
But I note that for the first time in the history of Lowy Institute polling, I am in the minority.
In the 2018 Poll, 54% of Australians say the total number of migrants coming to Australia is too high.
There is a rising crescendo of opinion from columnists and politicians saying we should reduce our immigration intake.
And in the past year our immigration intake has declined. We have gone from migration targets to migration caps.
I think we are moving in the wrong direction.
We should bend that curve back upwards. We should be talking about targets, not caps.
I have also been disturbed by the negative tone of the debate over immigration.
We are focusing too much on the problems and forgetting about the opportunities of immigration.
Let me say that I accept that our country is right to take measures to prevent illegal immigration.
But now that our borders are secure, I believe we can afford to be ambitious on immigration and generous towards refugees who come through the established processes.
Let’s learn from our history. Immigration has been great for Australia in the past. I believe it will be great for Australia in the future.
We can’t talk about immigration without addressing the related issue of multiculturalism.
I believe that despite our chequered past – including the White Australia policy – we have the best-functioning multicultural society in the world.
I don’t underplay the social problems we have from time to time, but we have fewer problems than most other countries.
When I arrived in Australia I felt this country regarded me as a future citizen.
I wasn’t seen as a guest worker or a potential source of cheap labour. Cheap, I certainly wasn’t!
I was an Australian in the making. I regarded the phrase “New Australian” as a welcoming term.
No-one asked me my religion. No-one displayed any prejudice.
I was treated fairly by my fellow workers in my first job in a tool making factory in Alexandria.
The challenge now is to give new arrivals that same sense of a personal stake in this country.
Of course, new arrivals should be grateful that Australia has opened its doors to them.
But we don’t need their gratitude. We need their hard work and their belief.
I am confident we will get that, if we make them welcome.
Let me make one other point. As a nation we have prospered. But our Indigenous people have never shared fully in the blessings this country offers.
I share the view of those who believe this is unfinished business.
Ladies and gentlemen
Everything we do, everything we might achieve depends on having a strong economy.
In recent years, Australia has had a remarkable economic run. We have gone for more than a quarter of a century without a recession.
This success was enabled by political leadership, healthy population growth, our location in Asia, and the strength of our national institutions.
But to continue this economic performance we need to view our economy through a different lens.
The annual Budget obsession, for example, belongs to another age.
Economies do not run from year to year – we should shift the focus from managing the Budget to managing the national economy.
The avalanche of commentary and focus on the Budget is a distraction from longer-term issues.
Of course, we need annual accounting and discipline, but let us talk more about the future.
In the same way, I think we need to lift our eyes when talking about business.
It’s not fashionable to speak up for business – but I always have, and I always will.
In recent times there have been some examples of poor business practice. I recognise that this affects people’s daily lives and financial security.
So, where problems exist they should be fixed. No question.
But a disciplined yet dynamic business culture underpins our national prosperity, our wonderful lifestyle and ultimately, our national security.
It is also essential to work on the second “I” – innovation.
As many of you know, I have an emotional attachment to Israel.
There are many things I love about that country and some things I wish were different.
One aspect of modern Israel that particularly impresses me is its culture of innovation.
Israel spends more on research and development as a share of GDP than any other developed country.
This began when Israel turned a disadvantage into an opportunity.
In 1967 France imposed an embargo on arms transfers to the Middle East, which mostly hurt Israel. Israelis had no choice but to provide for their own needs.
An important relationship developed between compulsory military training and the culture of innovation in business.
At eighteen years of age, young Israelis undertake two or three years of national service. They have to make hard decisions. They are managers and commanders.
When they emerge, they are mature beyond their years.
Six out of ten workers in the Israeli high-tech sector learned their tech and business skills serving in the Israel Defence Forces – the people’s army.
In other words, the training that the IDF gives its soldiers to prepare them for the battlefield also prepares them for business.
Now, I’m not suggesting that the experience of Israel is easily translatable.
And I’m not arguing for reintroducing national service in Australia – although personally I think it has some big advantages.
I know that the Australian Government, including the defence establishment, is working hard to improve Australia’s digital capacity.
But I would like Australia to go further. I would like to see the government develop a technology-focused national program which is linked to our defence needs.
This would create a cohort of young people with outstanding technological skills.
It would benefit both our security and our prosperity.
Finally, to the third “I” - infrastructure.
As some of you know, the need for better infrastructure is an obsession of mine. If you believe in immigration, you have to build infrastructure!
Two and a half years ago I wrote an op-ed on this subject for the Australian Financial Review. I called for a massive boost to our infrastructure investment.
I am glad to say that since then there has been a substantial lift in infrastructure spending to a level more appropriate for our needs.
But I think we can do even more.
The current infrastructure boom must not be a one-off. It shouldn’t even be called a boom. It needs to become our new baseline. We do not want to fall behind.
That means we need a robust national plan and good project selection to make sure we invest wisely.
We also need to be more open minded about how we fund our infrastructure investment.
Infrastructure is an asset. It should be moved to a capital accountand separated from the annual budget obsession. We should remain open to using private sector resources. We also need to be open to the careful use of debt.
We need to insulate infrastructure planning and development from the ebbs and flows of the economic cycle.
You might think this is more idealism. I promise you it is pragmatism.
Large scale investment in roads, rail, airports, housing, energy, agriculture and digital infrastructure will make a huge difference to our future.
This is what nation-building is all about.
Ladies and gentlemen
Allow me to make one final point.
Nation-building is a tough job. But at the moment, being prime minister of Australia is even tougher.
I’ve always admired Australia’s parliamentary system. But having five prime ministers in five years is not acceptable. Democracy needs to be nurtured and treated with care.
We need to give the prime minister of the day a chance. If he or she cannot win an election, so be it. But no prime minister can push through the reforms we need if they cannot even finish a term in office.
Ladies and gentlemen
A few months ago in this beautiful Town Hall, at my final Westfield AGM, I said this:
“I fundamentally believe that Australia's future depends on its people being open to the world. To new ideas, and to new people. And it depends on us being ambitious – as individuals and as a nation.”
I have watched with admiration how Australia has changed over the past seventy years.
Australia was open to people like me. It was open to new ideas. And there was a tangible sense of ambition about the place.
I want Australia to be even more successful in the next seventy years.
That means recapturing that sense of openness and ambition.
It will involve growing as a country – not just in terms of population but in terms of the impact we make on the world.
It will require deft diplomacy abroad and ambitious policies at home.
But even more than all that, it will require self-confidence, and faith in Australia.
In my experience, that faith has always been repaid.
Ladies and gentlemen
I am not a politician. I have not served this country in uniform. I am not a policy expert. But I am a passionate Australian.
And I believe in an ambitious Australia.