Speech - The Story Behind The Budget Part Five: The Budget And Beyond




"The Story Behind The Budget Part Five: The Budget And Beyond"




It is great to come out to Perth after spending days on end stuck in Budget preparations over the past few months. In putting the Budget together I have drawn on the many conversations I have had with people in this room and at events similar to this in Perth in recent years. It is impossible to spend time here in Perth and not be an optimist about the Australian economy - and it's this optimism that was central in our thinking as we put the Budget together.

Tomorrow I'll be visiting Rio Tinto's Operations Centre near Perth Airport. I'm told the control room is akin to something you'd see in a NASA control and command centre. From this one point, they operate 12 mines, three port terminals, 1,400 kilometres of rail network and utilities - all from 1,500 kilometres away. This is mining boom mark II in the raw. It's the time spent at mine sites and operations centres like this or visiting places like the Bowen Basin and Gladstone that you fully appreciate the scale of what is going on here in WA and in my home state of Queensland.

In fact, I've spent quite bit of time over the past week visiting our resource regions starting with Hay Point Coal Terminal just outside Mackay and ending here in the resource rich state of WA. I've been talking to people right across the country about how we can turn the opportunities of the mining boom into enduring prosperity for the nation.

In Brisbane, I spoke about the importance of getting back to surplus, so we don't compound the price pressures that will come with mining boom. In Sydney, I talked about what we're doing to invest in the skills and training that our economy needs. In Melbourne and Adelaide, I spoke about how we spread the benefits to all corners of our patchwork economy.

I believe that we're on the cusp of something great, if we are willing to put the right policies in place, and today I'd like to bring these threads together. Fundamentally, what pulls all of our efforts together - through the Budget and all the Government's work, more broadly - is our optimism about the future. We think that the longer-term challenges Australia faces - the challenges of prosperity, of a boom that comes from the transformation of our region - are good ones to have. Seeing our future for the opportunities it brings, not just the challenges it will pose. So tonight I'd like to put the Budget in the context of our broader reform agenda. But first I want to say something about the economic climate that we framed the Budget in.

A World of Opportunities

Our economy is experiencing some short-term softness as a result of the summer's natural disasters and the hangover of the global financial crisis. Even here in Perth you still find plenty of examples of our patchwork economy with a cautious consumer and high dollar impacting on many businesses. But our economy has not been knocked off course.

We have strong growth prospects, low and falling unemployment and an unprecedented investment pipeline gearing up. For the first time in our history we are situated in the right part of the world - with global economic weight moving towards us. In 1990, China accounted for 4 per cent of world GDP. Today, it's 14 per cent. In 2030, it is projected to be 23 per cent - nearly a quarter of all economic activity around the world. And we know this is a broader Asian story, not just one about China and India, it is just as much about countries such as Vietnam, Indonesia, Korea. And we also know this does not stop with a mining boom.

What we're starting to see is the development of an emerging Asian middle class. By the end of this decade, Asia is projected to have more members of the global middle class than the rest of the world combined. Think what that means for Australian education, for Australian tourism, for Australian services. There are a whole range of new industries that can grow up on the back of that demand. So our success, in the Asian Century, is a story about mining, but it will also become a story about education, tourism, services - about any Australian industry that can innovate and grow with these opportunities.

We've seen the impact of the Asian Century so far most clearly here in WA, through both higher prices for our resources and the investment that flows from that. Mining investment this coming financial year is expected to be eight times the level it was before mining boom mark I. We have a $380 billion investment pipeline and around $130 billion has received a final investment decision - with 70 per cent of that, or $93 billion, located in WA. This includes Gorgon LNG - the single largest private investment project to be undertaken in Australian history.

As you know, this means very big opportunities for WA and national economy. That does not mean that every business is finding the going easy, including some in this room. The higher dollar, competing for labour with the big mining companies, and the hangover from the GFC, are all making it tough for some businesses. That's why we're investing in measures to make life easier for small businesses across the country and helping Australian manufacturers link to the supply chains of mega-resource projects.

These are important measures, but they do not alter the need to get the broader policy settings right so that we can maximise the benefits for all businesses that will flow from the mining boom. And that was the very focus of this Budget.

Policy Response

First and foremost, that means returning the Budget to surplus in 2012-13, so that we do not compound the pressures that will come with the mining investment boom. We don't want to be chasing the same resources as the private sector when this investment boom hits top gear. So we did the hard yards in the Budget - putting in place $22 billion in savings and restricted real growth in spending to just one per cent a year on average. The savings measures in this Budget will deliver ongoing improvements to the Budget, not just for the next four years, but for the next forty years. And they will make room for the necessary investments in our economy's capacity - in the nation's infrastructure, in the skills of our workforce, and in getting as many Australians as possible engaged in our economic life.

We're also reinvesting the money from the Minerals Resource Rent Tax, agreed with the big miners, in critical infrastructure and a tax cut for all companies. Here in WA we've almost doubled road and rail spending delivering a total investment of $3.7 billion over six years. We're investing in projects up north, like the Great Northern Highway ($154 million) in Port Hedland, in mid-west projects like Oakajee Port and Rail ($339 million) and projects down south, like the Perth Gateway ($480 million), and Perth City Link Rail ($236 million) around the CBD and airport.

Putting in place modern infrastructure and better linking our key supply chains is critical to avoiding the bottlenecks that bedevilled our economy during mining boom mark I. The other lesson we learned is the need for a flexible and highly skilled workforce so that businesses can find the skilled workers they need to grow and succeed.

We want to make sure we're harnessing the talents of all of our people, putting more Australians into better jobs. This has been a key focus of this Government from day one. That's why in March of this year, the Government announced that it accepted all of the 31 recommendations in the National Resource Sector Employment Taskforce Report. And now we are building on those measures with the $3 billion skills package announced in the Budget.

We're putting industry at the heart of our training effort so we get a training system that matches the needs of our future economy. We'll invest $560 million for a new National Workforce Development Fund which will deliver 130,000 quality training places over the next four years. We are investing $100 million to boost apprenticeship completion rates through mentoring services and better career guidance. And we are investing $100 million to streamline apprenticeships - so that apprentices progress as they learn, rather than serving out their time.

The taskforce report also identified a need to improve participation to deliver the labour the resources sector needs. We agree that we need to lift participation to meet workforce demands and spread opportunity, which is why this Budget invests in new measures to encourage single parents, the very long term unemployed and young Australians into work.

 Another key recommendation of the Taskforce report was to introduce Enterprise Migration Agreements for ‘mega' resources projects. The Government announced in the Budget that we will offer Enterprise Migration Agreements for resource projects with capital expenditure above $2 billion and with more than 1,500 workers. Enterprise Migration Agreements will offer custom-designed 457 visa arrangements to assist in meeting peak labour demands during the construction period, while also encouraging investment in local skills. It will allow major projects to plan their workforce needs up front, so they can get on with the job of construction.

The Budget also included measures to boost regional migration, and to halve processing times for 457 visas. And all resource projects will have access to expedited processing for 457 visas. This isn't about replacing Australian workers. This is about filling the skills gaps that would otherwise constrain growth, opening up new opportunities and providing better jobs for Australians.

All of these investments in our national infrastructure and our workforce will not only build capacity now, but build productivity for the long-term. They are part of our broader reform agenda that will ensure we are better positioned to make the most of the opportunities that will flow from the transformation in our region.

Ongoing Reform Agenda

I also want to touch today on three key areas where we are undertaking fundamental reform of the Australian economy, to better prepare it for the opportunities ahead.

First, we're investing in the National Broadband Network to give businesses and households access to high speed broadband and the knowledge economy. There are a range of businesses represented here today - and I'm sure you understand just how crucial improved internet connections will be for your operations.

Western Australians have as much, if not more, to gain than other states from the rollout of the NBN. In the most isolated capital city in the world, in a state that spans thousands of kilometres, it's not hard to imagine the opportunities high-speed broadband will bring. Victoria Park in Perth, Geraldton and Mandurah are three of the second release sites where the NBN is being rolled out. Construction on all of these sites is scheduled to begin later this year. The NBN could help improve the education of a kid living up in Exmouth through tele-education or open up new customers and business opportunities for a small company in Geraldton.

But one of the remarkable new technologies I've been learning about recently that is particularly relevant in WA is what the NBN can do for the mining sector. There's some mining companies that have started to use high speed broadband to remotely operate machinery thousands of kilometres away from the mine. They are also using high-speed broadband for real-time map generation and navigation which will improve decision-making and information flows in the mining sector and ultimately increase productivity in the sector. Fundamentally, this is a piece of infrastructure that will transform the Australian economy, open up our businesses in ways it is difficult for many to appreciate.

The second reform agenda I'd like to touch on tonight is tax reform. This will continue to be an important part of our agenda as we look to take maximum advantage of the opportunities presented by mining boom mark II. We conducted a thorough tax review and have progressively been working through the issues it has raised. This includes the introduction of the Minerals Resource Rent Tax, a lower company tax rate, a simpler system for small business, and boosting super while making it fairer. And we've delivered a further 12 measures since the last Budget that deliver on reform directions identified by the tax review.

The Tax Forum is the next step and will play a crucial role in our ongoing reform agenda. It will ensure that business and the broader community are fully engaged in the debate about whether there are further ways we can encourage participation and investment, and make our economy even stronger.

The third reform agenda I'd like to touch on, is of course putting a price on carbon. This is a fundamental economic reform, as the world moves to tackle climate change. As a result of the Copenhagen and Cancun conferences, all major economies have pledged to reduce their pollution, or reduce the emissions intensity of their economy. It is clear that we are moving to a carbon-constrained global economy. This means that Australia needs to begin a steady transformation to cleaner energy sources, if we are to preserve our future economic competitiveness.

There is an overwhelming economic consensus that the best way to manage this transformation is by putting a price on carbon through a market mechanism. Imposing a carbon price will harness the energy of the market to drive new investment in cleaner energy like natural gas, solar and wind power. I don't for a second underestimate the fact that this will be a challenging process. We are working closely with the business community to make sure we get this right - for example through the Business Roundtable on Climate Change, which I chair with Greg Combet. This reform is the right thing to do for the economy, the right thing to do for the environment, and the right thing to do for our kids.


These reforms are critical if we are to get our economic settings right and take hold of the opportunities the mining boom presents. I have learnt a few things as Treasurer, but three things in particular stand out.

First, never rest on your laurels. While our economy has been amazing in terms of jobs created - more than 700,000 jobs since we came to office - there is so much more work to do. That's why I am focused on the next half million jobs and the skills and training that our economy needs.

Second, there's never unanimous agreement to the big reforms that are needed to get the policy settings right. That's why I am committed to the reform of our economy, but also listening to business as we go about it.

And third, the possibilities for us in the Asian Century are limitless if we keep getting big calls right. That is why I am focused on getting our budget back in black, and investing in infrastructure and skills. It is why I am focused on the next generation of reforms, to lift the productive capacity of our economy. And in doing so, to let you do what you do best: grow your businesses and this great economy.