HON. WAYNE SWAN MP
FEDERAL MEMBER FOR LILLEY
ADDRESS TO THE TOURISM AND TRANSPORT FORUM
PARLIAMENT HOUSE, CANBERRA
TUESDAY, 22 JUNE 2010
***CHECK AGAINST DELIVERY***
Thanks very much, it's great to be here. I was really pleased to be invited to speak today – so thanks to Bruce Baird, Chris Brown and Brett Gale.
I remember Brett from his days working for Chris Bowen. There's no better way to get to know someone's true qualities than spending about 200 hours locked in ERC meetings with them, drinking too much coffee and going blind from reading 100,000 pages of Finance green briefs. I know how sad Brett would be to leave all that behind!
But it's great to have an opportunity to talk to you all about some of the challenges facing your sectors – and about how we start to overcome them.
Of course the debate that's going on at the moment – the debate that's being had across all levels of government, in the business community, and at kitchen tables around Australia – is about our economy's future as a whole. But nowhere is this debate more important than in the tourism and transport industries – which for too long have been up against it because we haven't had the settings right for broad and sustainable growth across our economy.
I'll talk about these challenges a bit later on, but first I'd just like to quickly run through the economic outlook and the strict fiscal strategy we've delivered.
As I'm sure you all know, the Australian economy came through the global recession in remarkably good shape – because of the resilience of businesses like those around this room and the workers you kept on during tough times.
While just about every advanced economy sank into deep recession, we pulled together to keep our heads above water. In fact we grew by 1.3 per cent last year, the best performance out of any advanced economy. While most other nations were rapidly shedding jobs, we were creating them – some 250,000 since the crisis began.
But of course I don't need to tell people in this room that – despite this fantastic result – some sectors of our economy were hit harder than others. There would be plenty here who could describe very colourfully just how hard tourism and transport were hit by the global recession, and the long road to recovery they still face compared to other industries. This is the unfortunate but inevitable consequence of their greater exposure to the changing fortunes of the global economy.
But just like our broader economy, the businesses in this room – together with their workers – showed a huge amount of ticker to push through the crisis and sidestep the very grim outlook that confronted them just one year ago. And it wasn't that long ago that the aviation industry and those of you in tourism were still dealing with the fallout from the swine flu outbreak.
But by facing these setbacks down, I really think the tourism and transport sectors have delivered an impressive performance over the last 12 months. The numbers themselves tell a positive story. For example I'm told that in 2009, international tourist arrivals to Australia remained steady, making it the third-highest year on record for short-term visitor arrivals.
And this outcome is all the more remarkable still given that globally, international tourism numbers declined around 4 per cent. And now we're seeing hotel occupancy yields increasing, airlines reporting the return of business travellers, and tourism regions recording improved visitation rates.
Of course supporting this recovery is the strong demand from emerging markets on our doorstep – from South-East Asia in particular, but also from China and India. And I'll talk more about what this means for us later on.
But this isn't just about our beautiful beaches, natural wilderness and spectacular landscapes – it's about the world-class quality of our tourism services and the people that provide them. This is a tribute to the people in this room – the businesses and workers that are keeping these important sectors growing.
But despite our successes, we know it won't be smooth sailing from here. The situation in Europe and the renewed volatility in global financial markets are lingering reminders that downside risks remain to the global recovery.
But Australia is in a strong position to withstand these new challenges. First, our economy is strong and our unemployment rate today is around half that of the Euro area and the United States.
Second, our budget position is amongst the strongest in the world. Because we kept the economy growing during the global financial crisis – and stuck to our strict spending limits during the recovery – we're on track to restore the budget to surplus in three years. That's three years earlier than previously expected and well ahead of any major advanced economy. We've got government net debt that's expected to peak at less than one-tenth the G7 average and around half the level expected a year ago.
Then third, our financial system is strong and stable. Australia's banks are well-supervised and well-capitalised. And they stayed open for business during the crisis because we acted quickly to support their borrowing.
And finally, as I just mentioned, we're fortunate enough to be located in the part of the world that is recovering strongly. In contrast to the sluggishness we've seen in some parts of the world, Asian economies expanded by 2.4 per cent in the first three months of this year. And the IMF expects the Asia-Pacific region to grow by 7.1 per cent this year. This is good news for our exporters, it's good news for our tourism and transport industries, and it's good news for our economy.
But I think the situation in Europe really underscores the need to keep our momentum on serious reforms to position Australia to stay internationally competitive into the future. It reminds us of the risks we face if we put off the tough reforms now for short-term convenience – which is usually just political convenience.
With Europe facing some very tough times ahead, and anaemic growth in the medium term, Asia will more and more come to drive global growth. And as the global economy climbs out of the crisis and gravitates towards Asia, we'll be one of the biggest winners, if not the biggest.
The IMF expects Asia's economy to be about 50 per cent larger just five years from now. Asia will likely account for more than a third of global output, and be comparable in size to the economies of the US and Europe.
This makes me an optimist about the future of our economy – as I expect many of you in this room are as well – with very good reason. But we have to work together to get the settings right and make the most of our position on Asia's doorstep – and translate it into balanced growth.
And that's what our tax reform agenda is really all about. It's about strengthening and broadening our economy for the years ahead. It's about making resource charges more efficient, and putting the revenue back into building a stronger, more broadly-based economy. But most importantly, it's about making sure all Australians get a fair return from our natural resources – which they own 100 per cent.
So what does this all mean for the businesses gathered here today?
Well those here from the tourism industry would be familiar with the challenges posed by living in a two-speed Australian economy. We need to be mindful that our own recovery is running at two speeds just like the global recovery. Not necessarily across states, but across sectors.
The return of boom conditions in the mining sector makes things tougher for industries like tourism, and others like manufacturing and construction. As you all know, you find it much harder to attract workers and capital, and the stronger dollar makes you less competitive in your own global markets.
So in a two-speed economy it's our responsibility to do what we can to grow sectors like tourism without holding the mining industry back. That's why around one third of the revenues from the RSPT will go to helping these other sectors compete – to support broad-based economic growth.
We're cutting the company rate to 29 per cent in 2013-14 and then to 28 per cent from the 2014-15 income year to improve our global competitiveness, create new jobs and grow the economy right around the country. And we're providing tax relief and simplification for small business – through a head start on the company tax rate cut and a $5,000 instant asset write-off.
But we recognise that to keep the resource sector strong, you need to keep reinvesting in it. We saw what can happen if you ignore this, in the last boom, when capacity constraints constrained growth.
And I firmly believe that our tax package and the investments we are making in export infrastructure will help to create a stronger resources sector, and stronger economy. The RSPT, including effective removal of royalties, and the lower company tax rate will strengthen the business case for new mining investment.
And while the Australian economy is still operating a little below capacity today, we're preparing for the day when it approaches capacity again. Because we outperformed expectations, we'll deal with re-emerging capacity constrains sooner than other nations with weaker economies. And nowhere will this limit our growth potential more than the mining sector.
That's why the Government has announced it will establish a new $6 billion Regional Infrastructure Fund to help build capacity in our mining regions. This fund will represent a massive new investment in rail, roads, ports, and other critical infrastructure to support mining regions and communities.
Those of you from transport businesses across Australia know just how big our national infrastructure deficit was allowed to grow over a decade or so. So I think you'll agree that we have to make these lasting investments now to position Australia for broad-based economic growth with sustainable low inflation into the future. And that's part of what this reform is all about.
It adds to our investment in the Budget of nearly $1 billion of additional equity funding in the Australian Rail Track Corporation to implement a productivity-enhancing package of rail freight projects. In all we're increasing investment in our interstate rail network fivefold, just like we're more than doubling the Commonwealth roads budget.
It's about building for the future, to secure enduring gains for our economy.
I'm asked to say a few things about the politics of this election year as well so I'll finish with a couple of reflections on the upcoming campaign.
First thing I'd say is that we weren't focused on politics when we put our tax package together, we were focused on what's right for the country. We know the big economic calls attract a lot of heat and light and a lot of criticism, even when they are proven to be right.
We saw that with stimulus and now we're seeing it with tax reform. We withstood the criticism of stimulus and got in and did what was right for the economy. And I'm confident, in getting in and modernising the tax system, that we'll withstand the criticism and be proven right as well.
A lot of Australians are struggling to understand this debate, and that's fair enough given the scare campaign from some of the mining companies. But I'm confident that as this debate rolls on, people will see the necessity of replacing a ramshackle royalties system with a better profits-based system.
I'm confident that organisations like this one will help prosecute the argument that we need new and better infrastructure, more national savings, and tax cuts for businesses like yours that employ so many Australians.
And I'm confident enough in our economic record to welcome an election fought on our responsible reform plans versus the economic risks posed by the other side.
Thanks again for having me here.