Every year, thousands of young Australians jump on a plane to New York or London, keen to work in a large financial centre and build their skills. After a few years, some come back. Many do not.

It's time that there was a real focus on developing a financial services hub here in Australia to ensure all those young Australians overseas have jobs to come back to. And so that not all of them feel obliged to wing overseas if they want to work in a financial centre.

New York and London will always be the world's main financial centres, but many countries have embarked on strategies to attract more investment into managed funds, to boost financial exports and to create well-paid and interesting jobs for their own young people.

Countries as diverse as Ireland, Malta, Luxembourg and New Zealand have fine-tuned their policies to ensure their financial sectors are competitive.

Australia hasn't been one of those countries. The fact that Australia has failed to promote itself as a financial centre is particularly galling.

We have enormous competitive advantages when it comes to managing other people's money. We have a well-respected prudential regulation system. We are strategically placed in an Asian time zone. We have a stable democracy.

And perhaps most importantly, since Paul Keating introduced compulsory superannuation, we have built up an industry that has great skills in managing money. Superannuation means we have the largest pool of funds under management in Asia, and the fourth-largest in the world. We punch above our weight.

But we do not punch above our weight when it comes to exports. Just 2.5 per cent of the money managed by Australians comes from overseas.

The failure to seek out and remove barriers to our competitiveness as a financial services hub is emblematic of the complacency of economic policy over the past decade. The previous government seemed content to ride the commodity boom without improving our competitiveness in key and emerging markets.

There is a river of funds to our north. Funds under management in Asia are growing by 14 per cent a year. But, as a nation, we put a thimble in the river. If we could put a cup in the river and have more of that money invested in Australia, it would be a big boon to our financial exports and help our ballooning current account deficit.

A recent Access Economics report demonstrates the export potential of Australian funds management services. The report found that if the share of exports in the finance sector increased gradually to 10 per cent by 2010, exports would increase by $3.3 billion, contributing an extra $1.9 billion to Australia's gross domestic product and create an extra 25,000 jobs in the economy.

One of the reasons we haven't done well is that we have an uncompetitive tax regime. With the highest withholding tax rate in the world, our tax system has actively discouraged foreigners from giving Australians their money to manage.

That's what makes reforms passed by Parliament last week so important.

Within three years, Australia will go from having the highest withholding tax rate in the world to effectively the lowest. We will move from 30 per cent to 7.5 per cent. No longer will Australia's funds managers be held back by a tax regime which punishes them and shackles their competitiveness.

This is what industry policy is all about under a modern Labor Government. It's not about picking winners. It's about reviewing the competitiveness of government-imposed policies across the board and then letting the industry compete on its own merits.

There's more to be done. The complex tax laws that were written in a time before managed funds became so big need to be rewritten. This has happened in the United States, New Zealand, Britain and Japan for example. But not here. So the new Government is doing it.

And we need to work to identify other competitive barriers. That's why the federal and NSW governments are holding a financial services hub summit this month. The time will come when the commodity boom that Australia has ridden for so long will end. When that happens, Australians will ask what governments did to prepare the economy for the downturn.

Improving the competitiveness of the financial services sector will be one of the Rudd Government's answers.

Chris Bowen is the federal Assistant Treasurer and the Minister for Competition Policy and Consumer Affairs.