HON. WAYNE SWAN MP
FEDERAL MEMBER FOR LILLEY
ADDRESS TO THE WESTERN AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY
"Nation Building In The West"
THURSDAY, 21 MAY 2009
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Thanks James [Pearson, Chief Executive, CCI].
It's a great pleasure to be over here in the West to address the Chamber of Commerce and Industry.
No doubt you've all had a chance to digest the Budget since it was delivered last week.
It was a challenging Budget to produce. Never before has a modern Australian government framed a Budget in the midst of a global recession this deep. Over the past six months we've witnessed an unprecedented collapse in global economic activity. And that's brought with it unprecedented falls in budget revenues.
That's meant we've had to make room in the Budget to deliver on our key reforms. It's meant some hard choices, not all of them popular. But they were necessary if we were to deliver on our commitments in a responsible and sustainable way.
Our intentions in this Budget are clear. To stimulate the economy to support jobs and small business now. To put in place the necessary investments that position Australia to take full advantage of the global economic recovery that will inevitably come. And to do this in a responsible and sustainable way. That was the central task of this year's nation building Budget.
This morning, I'd like to spend a bit of time talking about how this Budget, and the Government's actions, will help steer Australia through the current global challenges – and I'll do my best to make it relevant to you out here in the West.
Not since the 1930s has the Australian economy been exposed to this degree of turmoil in the global economy. It has swept from advanced economies to the developing economies of our region with unprecedented speed and severity. The global economy which had been growing at its fastest sustained pace in well over 30 years hit a wall. Global trade and production collapsed as virtually every advanced economy fell into recession. While China – the engine room of global activity over recent years – saw its growth rate cut in half.
This dramatic turnaround in the global economy has had inevitable consequences for our economy – for output and for jobs. Our economy is expected to contract by ½ per cent in 2009-10. Still, many times less than what's expected for virtually every other advanced economy. And many times less than what would have been forecast in the absence of our economic stimulus strategy.
But Government action alone cannot completely offset the full effects of this global recession. The global recession and its impact on Australia will inevitably lead to higher unemployment. People will lose their jobs through no fault of their own. Some businesses unable to secure sufficient demand for their products will shut down.
Our commodity exporters of course will feel these effects most directly, given the sharp contraction in global demand. Added to this are the sharp declines in export prices, as the largest commodities boom in 50 years begins to unwind. Together, we expect these falls to wipe $50 billion from export earnings in 2009-10 alone. Falls of this magnitude have not been seen in the past half century.
As our biggest mining state, Western Australia will feel the impacts of this more than any other state. Something like 50 per cent of Australia's mining output comes from WA.
There's no doubt global conditions will be tough for many businesses here in the West for some time, but there is also some cause for optimism. Like many countries around the world, China has embarked on a large fiscal stimulus package. And with a strong focus on infrastructure investment, it will to some extent help support demand for our commodity exports. There are some early sings this is already providing a boost to its economy. China is still expected to be the fastest growing economy this year and many expect that it will be the first major economy to recover from the global recession. And China's expansion still has a long way to run yet.
So there are also good reasons to be confident that growth in China and other developing economies will provide an ongoing source of demand for our exports for some years to come. That's one of the reasons Australia is better placed than other advanced economies to face this global recession. Another is the early and substantial action the Government has taken as this global crisis has unfolded.
When the global financial crisis erupted in September and October last year, it was clear we needed to act on two fronts.
First, we needed to secure the flow of credit to our economy. That's why we moved quickly in October, to guarantee Australian bank deposits and wholesale borrowings. This has enabled our banks to continue to access the funds required to lend to business and households – to keep credit flowing in the economy.
Second, we needed to provide an immediate and substantial stimulus to domestic demand. Our approach here was rolled out in three phases. The first phase was temporary and targeted income support directed towards the most cash-constrained people in the country. This was the only way we could inject stimulus quickly enough into the economy to fill the gap in private demand. The second phase was our investments in shovel-ready infrastructure projects across the country – upgrading our schools, homes and communities. The Budget marked the third phase of our stimulus strategy – larger and longer-term nation building infrastructure. These investments – in roads, rail, ports, universities and hospitals – will support jobs now and position Australia to take full advantage of the global economic recovery.
During the global recession our priority is supporting jobs and small businesses by stimulating the economy and investing in nation building infrastructure for recovery. That's why this year's Budget delivers $22 billion of investment in nation building infrastructure. These investments represent the building blocks for the future economy. They will provide a sustained boost to our economy and support jobs now, and build productive capacity for the long-term.
The Budget includes an $8.5 billion investment in critical economic infrastructure – in roads, rail and port networks. This investment is long overdue. They will better position Australia to take full advantage of the global recovery that will come. And help ensure that when that recovery takes hold, our ports won't be straining, and our rail networks and roads will not be clogged.
A total of $1.2 billion is being invested in infrastructure projects here in Western Australia. This includes $339 million for the development of Oakajee Port common user facilities, just north of Geraldton, subject to the outcome of further work currently underway. The Oakajee deepwater port and rail common use facility will service mining needs in the mid-west. It's a critical trade gateway to this State's growing iron ore industry. The Government is also investing $236 million in the Northbridge rail link. This upgrade will sink part of the Perth to Fremantle railway line and allow the construction of a new rail platform.
These transport network investments will be complemented by a 21st Century communications highway – the National Broadband Network – which the Government will roll-out in partnership with the private sector. This will provide faster and more reliable internet connections across Australia, enabling greater use of e‑commerce. It will position Australian companies and households to take full advantage of new applications and innovations in internet services.
Western Australia will also benefit from additional investments in education infrastructure, including $20.5 million for the Engineering Pavilion at Curtin University and $80 million for high performance computing to support the Square Kilometre Array project.
And in health, Western Australia will also benefit from $454 million of investment over seven years – including upgrades to the Fiona Stanley Hospital in Perth.
Not only will these infrastructure plans address our infrastructure deficit, but importantly they will provide stimulus to the economy when it needs it most. The construction of these projects will support local jobs, but provide lasting benefits as well.
Our nation building infrastructure will benefit small businesses as well as other sectors of the economy. Better roads, rail, port and broadband, along with a well trained workforce, will all help to reduce the time and cost of doing business. This will assist business owners with getting on with the task of managing their enterprises – creating wealth and employment opportunities.
But we understand that many small businesses are doing it tough in the face of this global recession. That's why we are also providing our small businesses with immediate additional assistance.
To encourage small business investment, we are expanding the Small Business Tax Break from 30 per cent to 50 per cent for eligible capital investments made between 13 December 2009 and 31 December 2010. This temporary business tax break will help boost business investment, bolster economic activity and support jobs.
The Government has reduced Pay-As-You-Go instalments in this financial year and the next to provide cash flow relief to small businesses.
And complementing the National Broadband Network investment, the Government is providing $10 million over two years to help small businesses improve their online capabilities.
The Government is also continuing to invest in skills – so that when the economic recovery comes we have the manpower to take advantage of it.
The Budget set the scene for a significant boost in the number of young Australians with degrees. Whereas now, not every qualified student can secure a university place beginning next year, over the next four years, there will be a progressive move to a demand-driven university system. This will mean that an additional 50,000 new students will secure university places in the next four years alone.
At the same time, the Government has put in place a series of measures to support those who through no fault of their own find themselves without work. This additional assistance will help people who need training to avoid long-term unemployment and gain work when the economy recovers. But by investing in skills, the measures will also benefit the whole economy when it moves into recovery.
The Government is investing $1.5 billion in Jobs and Training Compact. The Compact includes a new Training Supplement – which will provide an extra $41.60 a fortnight for eligible unemployed people who undertake training. It also includes a further 81,000 training places. This brings the total number of Productivity Places being offered by this Government to over 710,000 – at a cost of $2 billion.
Like our investments in infrastructure, these investments in skill formation will ensure that Australia is primed and ready to seize the recovery.
These are challenging times for all of us. But there are good reasons to expect we will come through this in a strong position. The Government has acted earlier than most other countries. And as a result, the downturn here is expected to be much less severe than elsewhere. Our financial system is not hampered by the same problems being experienced in other countries. We will benefit from our location in the most dynamic region in the global economy. And the substantial Government investments being put in place now, will not only support demand in the short-term, but position us to take full advantage of the global economic recovery that will come.
We know that the impacts of the global recession are very real for businesses and families across the country. But the message I want to leave you with today is this: we will come through this. We will recover. And we will in fact emerge from this crisis in a stronger position than before. With governments, business and the community all pulling together, we can come through this global crisis with a stronger economic base which will form the bedrock of our future prosperity for generations to come.