HON. WAYNE SWAN MP
FEDERAL MEMBER FOR LILLEY
ADDRESS TO THE QUEENSLAND MEDIA CLUB
"A Queensland Perspective On The 2010 Budget"
FRIDAY, 14 MAY 2010
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Thanks Chris [O'Brien] for that introduction, and thanks to the Media Club for hosting this lunch today and affording me this chance to talk about a Budget I handed down just three days ago.
It's great to look out on so many familiar faces and so many good friends, including Anthony [Chisholm] here and some of my old sparring partners from The Courier Mail and elsewhere.
Every year I spend the week after Budget travelling around Australia giving speeches about elements of our plans. I've got about ten to do this year and the last two years I did about the same.
What's different about this year is I ensured the roadshow started in Brisbane, rather than ending here at home. I'm off to Perth on Sunday then Adelaide, Sydney, Melbourne and Brisbane again next week.
I wanted Brisbane to be the first stop this year because I think Queensland's economy is arguably the best backdrop for the biggest economic challenges and debates we're having right now.
When you're talking about the challenges of a two-speed economy; when you're talking about the impact of a high dollar; when you're talking about another resources boom and all that means for the demand on infrastructure and skills – Queensland is a great place to start. I can't walk down the street here in Brisbane, the Gold Coast or Cairns, without tourism operators bailing me up about what the high dollar means for their businesses.
I take some pride in being the kind of Treasurer who isn't locked away in a bunker in Canberra or down at Waterfront Place; I promised I'd be open to the business community and I think I have been. So I've been listening carefully to the sorts of things that people from all sectors of our state and national economies have said to me about the challenges of a two-speed economy.
And I've always had in the front of my mind a fairly simple objective of making sure Australia has more to show from the next mining boom than my predecessor did from the last one.
This is a pretty useful backdrop to the remarks I want to make today about the Budget I handed down on Tuesday night. I don't want to run through every number or every figure today. But it's worth me giving you a bit of an overall sense of the Budget, how well our economy has performed and where it's headed over the next few years.
In many ways the centrepiece of the Budget is its fiscal achievements. It's remarkable what we have been able to achieve with our strict fiscal rules that impose a 2 per cent cap on real growth in spending.
We've only been able to hit this target by imposing extra discipline. We have offset all new policy with savings over the forward estimates. That's how we will halve peak debt and get back to surplus in three years, three years early and before any major advanced economy.
Australia has a pretty special economic story to tell. Together, we have fought off the global recession. We have avoided a recession, mass business closures and job losses.
We are now recovering more strongly than any of our peers. We have the second lowest unemployment rate compared with the major advanced economies. And we will be the first among them to bring the budget back to surplus.
We should all be proud of the achievements of the past year. Particularly so, when you consider the challenges we confronted just one year ago. Let me remind you that this time last year we expected Australia's GDP to contract by ½ per cent in 2009-10 and we predicted unemployment would peak at 8½ per cent in 2010-11.
Instead, one year on, our economy seems likely to expand by 2 per cent in 2009-10, and by an even stronger 3¼ per cent in 2010-11. Our economy has created nearly 235,000 jobs and our unemployment – which stands at just 5.4 per cent today – looks set to fall even further, to just 4¾ per cent by mid-2012.
The monetary policy response from the RBA complemented our fiscal stimulus, as did our actions to support the financial system with the bank guarantees. And so too our increasingly important links to China and India, key trading partners that continued to grow robustly through 2009.
Saving jobs and preventing Australia going the way of the rest of the developed world has given the Government an immense sense of pride in our country. As has what we've managed to do in repairing the budget after the $110 billion worth of revenue carnage inflicted on it by the GFC.
The success of stimulus and our responsible approach to economic management means we can still afford to tackle some key policy challenges and priorities.
We are in a position of strength not enjoyed by many other countries. The GFC didn't smash our skills or capital base and we're not sifting through the rubble of recession like most other advanced economies.
This is a wonderful thing for the country – not just in its own right, but because it means we could afford to do some great things in the Budget that marry economic responsibility with investments in the future.
We laid out a pretty substantial policy agenda on Tuesday.
First, we funded the biggest improvements in the health system since the introduction of Medicare, while making important saves to help address fiscal pressures from an ageing population. In Queensland alone this means around $1.3 billion in additional health investments.
Second, we boosted the renewable energy sector, which is why we now have a new $652 million Renewable Energy Future Fund as part of our multi-billion dollar investments in a low-pollution economy.
Third, we're lifting national savings – providing a tax discount on deposits and an historic boost to the super guarantee. Around 1.6 million Queenslanders will benefit from the SG increase, and 700,000 will benefit from our low-income concessions.
Fourth, we're easing the cost of living for families, and simplifying the tax system by moving towards pre-filled tax returns. Here in Queensland that means tax cuts for many of the state's 2¼ million workers, and 1.3 million taxpayers financially better off from the standard deduction.
But it is the two main policy objectives in this Budget – building economic capacity and growing the whole economy – that I want to spend most time on today. That's because they have the most relevance to Queensland and to the debates about a two-speed economy that I referred to earlier.
As a government, we know that different challenges arise in different corners of the country.
The outlook for Queensland's economy has strengthened markedly since the last state budget with growth now forecast to be 3½ per cent in 2010-11. The outlook for resource exports, together with a welcome recovery in residential dwelling investment is supporting growth. But other parts of the state economy, including the retail and tourism sectors, are still feeling the pinch of the global recession.
I know doing business in Queensland has been pretty tough in recent times if you're in the most affected sectors. State Final Demand is still below its levels of late 2008. Sales of goods and services fell about 10 per cent over 2009.
The economy has suffered a larger fall in business investment than was experienced nationally, and business investment hasn't yet recovered. Recent business surveys, like the one released by the NAB, tell us business confidence is only just returning to around the national average, but business conditions are still lagging the rest of the country.
Tougher credit has certainly affected property development in Queensland. A range of indicators suggest that the global financial crisis had a bigger impact on private building activity here than in the rest of the country.
The state unemployment rate pushed up to 6.3 per cent last year, above the national peak of 5.8 per cent, but has thankfully come down to 5.6 per cent, only a touch above the national rate today.
I certainly expect the Queensland economy to recover strongly. And that means we can't be complacent about the challenges of a return to full capacity or the impact on other sectors of the resources boom mark 2.
The next phase of the resources boom presents vast opportunities for us all, and for Queenslanders more than most.
We are all well aware of the exciting new projects converting coal seam gas into LNG which are currently under consideration. Coal seam gas accounts for over 80 per cent of the Queensland gas market. While our production is about 150 peta-joules, we have abundant reserves – estimated at over 15,000 peta-joules.
The boom presents some pretty considerable challenges as well.
With the right policy settings, we can harness the boom to drive improvements in standards of living for many years to come. By this I mean taking steps now to reform our tax system so we can grow the whole economy, and expand our productive capacity through investment in infrastructure and skills.
Our recent tax reforms have a dual purpose. They will ensure the community receives a fair return for its resources, and they will help us grow the economy.
The Australian people own our natural resources. Before the last mining boom, they got $1 in every $3 of mining profits through royalties and resource charges. At the end of that boom, that was down to just $1 in $7.
We simply want to take the Australian people's share of mining profits closer to where it was in the early 2000s – before the long slide.
Every dollar we are collecting from the Resource Super Profits Tax is being re-invested in the economy. We are not depending on the proceeds of the RSPT in any way to achieve a return to surplus in three years. We're undertaking economic reform to ensure that we spread the benefits of the boom across the whole economy.
The noises being made by Clive Palmer and others have obscured the fact that our tax reform package will actually expand the resource sector – providing more jobs, more investment and more mining production.
Think of it as replacing various antiquated royalty regimes that discourage investment with a Resource Super Profits Tax that encourages it.
In effect, royalties impose a tax on wages and investment costs, as well as profits for the mine. The Resource Super Profits Tax only taxes profits. A low profit mine will pay little or no RSPT.
Yes, we will see more revenue from those mining projects earning super‑normal profits, but less revenue from the rest of the industry. When commodity prices are high, taxpayers will gain a fair share of our nation's non-renewable resource assets from highly profitable projects.
Our objective is to use the revenue from an RSPT to provide enduring benefits for all Australians, and help broaden the economy. As I mentioned earlier, the impact of a high dollar and the effect on the labour market of a thriving mining sector throw up challenges for other sectors like tourism.
That's why our resource tax reforms go hand in hand with our intention to cut the company tax rate, with a head start for 145,000 small business companies here in Queensland, helping other sectors grow and thrive. Nearly half a million Queensland small businesses will benefit from the new deprecation arrangements we announced.
We're helping small businesses become larger businesses. We're backing our entrepreneurs and those willing to have a go.
I've already spoken about how this doesn't mean holding resources back, it means trying to ensure all sectors grow together not apart. That is the argument that goes to the core of the recommendations on corporate tax in the independent tax review.
A lower company tax rate is good for investment across the economy. The new company tax rate – 29 per cent in 2013-14 and 28 per cent from 2014-15 – will improve our international tax competitiveness. This can also be expected to increase investment in Australia providing a larger capital stock, higher productivity and higher wages.
Importantly, our business tax reforms favour the small businesses who so successfully kept their doors open during the global crisis.
Independent modelling of the effects of the RSPT and our company tax rate confirms that the economy will be 0.7 per cent larger in the long run. Investment will be 2.1 per cent stronger and real wages will be 1.1 per cent higher right across the economy.
Growing the whole economy was one of the two most important policy objectives of the Budget – the other being building capacity by investing in skills and infrastructure.
This has been a constant feature of our agenda since we came to government, and a key part of our stimulus, so I won't remind you of all the productivity-enhancing benefits of these types of investments.
The whole point of investing in skills and infrastructure is to grow sustainably with low inflation into the future. Our nation building investments are progressing well. Nearly 96 per cent of funds for major building and construction projects have been approved and 55 per cent of approved funds have been paid.
In Queensland, some $5 billion of nation building projects have been approved. The Gold Coast light rail project, upgrades to the Ipswich motorway, the duplication of the Bruce Highway from Cooroy to Curra, and the Northern Link road tunnel are some of the key examples.
This Budget takes our commitment to infrastructure even further. A new infrastructure fund will be established using proceeds from the RSPT, beginning with an investment of $700 million in 2012-13 and inflows of more than $5.6 billion over the next decade. Resource-rich states like this one will receive relatively more from the fund reflecting their larger demands for infrastructure.
In the Budget we also announced $1 billion for the Australian Rail Track Corporation to undertake productivity-enhancing rail freight works. Rail track at seven locations will be improved including along the Brisbane to Melbourne and Sydney to Perth rail freight corridors.
And we've asked Infrastructure Australia to keep developing our National Infrastructure Pipeline to give private investors like super funds the certainty they need to commit their resources to these investments.
As I indicated earlier, we also want to avoid a return to the skills shortages we faced in Australia's last boom, a problem that impacted disproportionately on Queensland. Budget measures, worth $661 million, will boost productivity and participation by increasing the skills base of Australia's workforce.
The Skills for Sustainable Growth strategy will improve the responsiveness of our training systems in three important ways.
First, by responding to immediate capacity constraints. A Critical Skills Investment Fund will encourage industry partnerships with Government to plan for, and to meet, our nation's skills demands. This is estimated to deliver up to 39,000 training places. Increased incentives will apply for small and medium businesses to employ apprentices in traditional trades.
Second, by reforming training systems to boost quality, support participation and strengthen the link with business needs.
Third, by breaking down literacy, language and numeracy barriers for jobseekers and existing workers that might lack these foundation skills.
I don't expect our investments in skills and infrastructure to be controversial here in a state that understands how important it is we address capacity constraints in the economy. But obviously we did know that reforming the tax arrangements for the mining industry would be controversial here in Queensland.
My message to the companies, and to the State Government, is I know how important the industry is to Queensland's prospects and I know how important it is we get the implementation of the RSPT right. That's why I'm putting so much effort into the consultation process and why I'm glad something like 80 companies are taking part.
There will always be people like Clive Palmer who will do everything to protect some pretty hefty profits. It's hardly a surprise that Mr Palmer wants to hoard more of his huge profits and prevent the Australian people from getting a fair share of the resources they own.
And there will always be people who want to pull a swifty in the debate, like one miner who talked about how his business would no longer be viable then turned around and bought a million dollars of shares in it the next day.
I'm not deterred by any of that because I believe we're doing the right thing with the RSPT. It's a key part of our Budget and a key way we can turn the momentum in the Australian economy into enduring gains for Queensland families and families right around the country.
No doubt this will be something you'd like to ask me about so thanks again for having me and I look forward to the discussion.