Australia is undoubtably a nation rich with opportunities, with extensive social and economic infrastructure, stable and responsible government, and abundant natural and developed resources. But Australia also faces some significant challenges, including reducing unacceptably high levels of unemployment, managing environmental concerns, and responding effectively to global competition and structural and regional change. To meet these challenges and make the most of our opportunities, we need to gain further leverage on our resources by improving our nation’s productivity and, importantly, flexibility. Microeconomic reform plays an important role in this regard by improving the incentives, which govern the way we use our resources. While Australia has certainly implemented some significant microeconomic reforms in the last decade or so ¾ the benefits of which are beginning to show ¾ the task is far from complete. For example, further reform is needed in transport, particularly rail and the waterfront; utilities; the labour market; resource access; and our tax system ¾ areas which impact on various sectors of our economy, not least of all our agricultural and resource sectors. But setting the right incentives for the productive use of our resources needs to extend beyond these traditional areas of reform. We also need to be sure we provide efficient and effective education, health care and community services. The management of our environment is also of critical importance, particularly our waterways. How we manage these resources, in both rural and urban areas, needs to be subject to rigorous scrutiny and, where appropriate, reform ¾ in many of these areas the reform process has only just begun.