Thank you very much, it’s a great pleasure to be here. Can I acknowledge the traditional owners, their elders past and present and emerging. Can I also acknowledge any ex-servicemen or women who are with us today and those who are serving still. Could I acknowledge also Simon Birmingham, the Trade Minister who’s here with us this morning, and Simon is here fresh back from signing the Free Trade Agreement up in Indonesia yesterday. It’s wonderful that you’re able to join us this morning, Simon, and of course Peter Costello, a predecessor of my own Treasury portfolio. Ten surpluses, we’re looking forward to adding to that tally in a months’ time when Josh hands down his first budget, which will be a surplus and that’ll be the first time that’s happened in 12 years. It’s a long way back when the country takes a different course and we’ll be able to say that we’ve righted that course when we set up at the budget this year. I also want to acknowledge the support of BHP for this AFR Business Summit.
This year’s Summit has, rightly, put trust at the centre of discussions. Trust is the currency of a strong and prosperous economy. We all have a stake in ensuring high public trust in our economic institutions and it’s no secret that big business, in particular, finds itself under unprecedented scrutiny. The need to restore trust with customers, employees, the suppliers, the wider community is preoccupying boardrooms all across Australia.
As former Canadian Prime Minister Stephen Harper has written, high trust societies are richer, they’re happier, not least because trust enables efficient trade and commerce by allowing markets to function better and I think Stephen hit that right on the head when he said that. On the other hand, low levels of trust generate pressure for more laws to regulate business activities and practices. Trust is also the currency of politics, our public discourse and our policy decision-making. The public, rightly, want to assess your record. They want to assess your plans. They want to know what you believe. They want to know about what you seek to do in the future and your basis is or your claims to what you want to achieve. And with the election approaching, Australians are beginning to focus on the choice that is in front of them. They are beginning to focus on the records, the beliefs and the plans of the alternatives and what the means, importantly, for the economy that they will live in for the next decade.
I just want to pause on this point. The next election, just like in 2007, will have a profound impact on the economy that Australians and families and small family businesses all around the country, it will impact on the economy they will live in. The economy is not a theory, it’s something that affects every day of your life. And just one term of a Labor Government can change the economic course and the economy each and every Australian will live in.
So, I welcome this scrutiny. I think it’s time for that scrutiny. Our Government, of course, has been under that scrutiny, as it should. We are the Government. But equally, as you go into an election, it’s important that the alternative plans are put under the same scrutiny and an understanding of what the impacts are for the decade ahead. Labor can do a lot of damage. They only need one term – only one term to really stuff it up. We had two terms we’ve had to fix over the last six years and will have a profound effect on the next decade. So, I welcome this scrutiny because the Coalition does have a strong record – a clear set of beliefs and I welcome it because the Coalition has a strong record, clear beliefs and a comprehensive plan to keep our economy strong, to keep Australians safe, and to continue to bring Australians together. Scrutiny will be important more than ever this year because the stakes are higher than ever, as they always are in every election. The contrast between the economic plan of the Coalition and Labor, as I said, is greater than it has been, I think, in 40 years – in a generation and more.
In the past, there was at least some degree of convergence on our economic direction as a country. There was broad recognition about the modernisation of Australia’s economy resting on some key pillars – balanced budgets, competitive tax rates, low inflation, competition reform, enterprise bargaining, trade, opening it up, playing to our economic strengths including, can I stress, our traditional sectors in agriculture, in resources, in forestry, in mining. Things that we don’t shy away from as a Government, that we understand their critical importance to the future of our economy. We don’t think it’s a good thing when any of these sectors face markets with strong headwinds. We don’t think that’s wonderful like the Labor Party does. The dividend for Australian households from this economic modernisation has been substantial over the last 30 years. Between 1960 and 1991, the Australian economy had six recessions. Since 1991, Australia has enjoyed 27 years of uninterrupted economic growth – this is an extraordinary achievement. It is arguably our most significant national achievement. Half the Australians voting at this election – half, more than half – will never have experienced a recession during their working life. They would never have had to face 18 per cent interest rates as they look for a mortgage, as they started a young family. They would have never had been in a job market where there was a recession and looking for a job or trying to keep their job or looking for their wages. It would have never happened. More than half. So, it’s important that we understand the economy is real and it has real implications for every single Australian and if you make the wrong calls, then that will punish Australians – every household, every business, each and every Australian.
Our real GDP has grown faster than any other advanced economy over that period. Real GDP per capita has risen around 60 per cent since the early 1990s. This compares with an average rise of 44 per cent in the US, Japan, Germany, Canada and the UK. We’ve seen strong income growth across the income distribution sector. In the context of globalisation and rapid technological change, this has been a singular achievement of what I have called ‘the modern Australian compact’. A compact where the tax-transfer system reduces income inequality in Australia by more than 40 per cent, according to the official statistics of the Australian Bureau of Statistics. A compact where the top 10 per cent of taxpayers pay almost half of personal income tax and where the bottom 10 per cent of households by income has achieved the highest income growth of any group since the Global Financial Crisis. These are facts about our economy. This is the truth about what is happening in our economy. Not the myths, not the fairy tales, not the sentimental stories, but the hard facts of what is happening in our economy. A compact where, according to Peter Whiteford from the Australian National University, social security benefits are targeted to the poor more than in any other high-income country today.
We have a good system, we do have a fair system and the facts back that up. Over the past five and a half years and in the wake of a massive fall in mining investment, our Government has worked to sustain economic growth and secure a more diversified economy. Let’s not forget that mining investment boom moved $80 billion out of the Australian economy. To fall off the edge of the mining investment boom was a far more devastating factor impacting our Australian economy than the GFC. And over that period of time, as it impacted incomes significantly, we have been able to ensure the economy has continued to grow and, importantly, we have maintained our AAA credit rating throughout that entire period at a time that it has been under greatest threat.
Speaking of trust, we pledged to create one million jobs five and a half years ago. And we met that target before time, and we exceeded it. More than 1.2 million jobs have been created since 2013 in September. Those jobs were created by businesses – by growing a stronger economy, businesses were able to grow and employ people. In 2013 under Labor, unemployment was at 5.7 per cent and going that way, north. Today, it is 5 per cent, what some call the natural rate, and Australia’s jobs growth is now faster than in all G7 countries. Our employment to population ratio for those aged 15 to 64, the working age population, is at a record 74.2 per cent. This is the best result since records began more than 40 years ago. More people of working age are in work than in any other time in our history and as you can see in the chart, it’s been a long way back.
The female participation rate is at a record high. So too is the participation rate for Australians aged over 65. Welfare dependency is at the lowest level for three decades. More people in work, less people on welfare – that’s what Coalition economic policy delivers. Armed with this record, we have now set ourselves the goal of creating another 1.25 million jobs over the next five years – that’s my jobs pledge to the Australian people. And as you’ve just heard from the record, that is a claim, a pledge that we can make with some credibility. At the same time, we have fixed the budget mess we inherited in 2013 and turned the corner on debt and maintained our AAA credit rating. When we came to office, the budget had a deficit of $47 billion, or a 3 per cent share of the size of our economy.
In 2019-20, the Budget will finally return to surplus. It hasn’t been an easy path, it has been a long road back to both fiscally consolidate while at the same time growing the economy when there had been [inaudible] of mining investment in the country. These are the three things that had to be very carefully managed. Our discipline, fiscally, will ensure these surpluses exceed 1 per cent of GDP over the medium term. Real spending growth under our Government is at the lowest level for half a century – more than 50 years of any Government. The hard work of getting the budget back into surplus though is only the start – we need to restore the balance sheet to where it was prior to the GFC so that we’re well placed to handle whatever the global economy throws at us in the future.
The buffers that were created by the Howard-Costello Government, not just the fiscal ones but the regulatory ones around our banking and financial system, were the critical factors that ensured that we were able to move through the GFC at the time. And we need to get back into that space. The Government is committed to eliminating net debt over the next decade and it will take that long and it will be quite a challenge to achieve. This should now be the focus of our government’s fiscal management and it will be, paying down the debts of the past in order to grow the economy of tomorrow. That is our intergenerational pledge – securing our future by keeping a lid on taxes and restraining expenditure to support confidence right across the economy and, in particular, amongst business.
Obviously, the finishing line of zero net debt is in the distance, but we need to stay the course. In the same way, we will steadfastly work toward getting ourselves back in the balance. We will work steadfastly to achieve this goal also. So, this is not a time to experiment with economic management. We has seen these experiments before under Labor. They don’t end well for anybody. Our proven track record on the economy is one that we’ve worked hard to achieve over the last five and a half years. It honours the legacy of that which we’ve inherited from the Howard-Costello Government. And we’ve maintained it, and we need to maintain this course. Why? Because, as we know, in recent months, the global economy has slowed, the risks have risen, at least compared with those we’ve faced in last 18 months or so.
Both the IMF and World Bank have lowered their global growth forecasts since our mid-year update. The World Bank warns of darkening skies given global financing conditions have tightened, industrial production has moderated and the threat of protectionism remains high. There are a few own goals out there in the global economy. It warns that a simultaneous sharp slowdown in both the United States and China could have severe consequences for the global outlook and these are very obvious points. Meanwhile, domestically, we have seen dwelling prices fall in our major capitals, a correction, with prices down 10.4 per cent in Sydney and 9.1 per cent in Melbourne. The Reserve Bank Governor has been able to put these into context. We have been able to achieve, I think, a soft lending to date in the housing market. It was very over-heated, particularly in the Sydney and Melbourne markets, we know that and the measures and factors that have been in play have ensured that softening. Had it been a hard landing, the implications for our economy we all understand would have been quite dire.
This only underlines why we can’t take Australia’s unbroken run of economic growth for granted. Why we must do more to make our economy even stronger. Why we have taken the hard work of rebuilding the Budget position. Prudent fiscal management has allowed us to turn the Budget around while also I should stress investing record levels in defence, in health, in aged care, in education, all essential services that Australians rely on. Our investments in all of these essential services – 2,000 affordable medicines on the PBS without increasing taxes. The investments that I’ll announce today on domestic violence, important, bi-partisan commitments. The only difference is, I’ll be announcing them without increased taxes.
Education funding at record levels, bulk billing for Medicare at record levels without increasing taxes. I believe the way you control expenditure is actually controlling how much you tax. We should only take from the Australian public, from their efforts, as much as we absolutely need to deliver those essential services that Australians rely on. We shouldn’t have to take more in the event that you can’t manage all your other expenditure, which is what we see the Labor Party do. Why are they going to tax you more? Because they can’t manage the budget, so we’ll just tax them to cover up for all the other wasted expenditure.
That’s why we’re not raising taxes because we’ve kept a tension on the cord across all other levels of spending. This has allowed us to unlock the largest infrastructure pipeline in terms of our economic management and what we’ve invested in. Our $75 billion infrastructure plan is delivering much needed growth and nation-building capacity to all parts of Australia. In many ways, it’s been filling the gap left by the retreat in mining investment. That means less congested roads in our urban areas, so families can spend more time with each other, rather than get stuck in traffic. The new Western Sydney International, I’m pleased to say the Nancy-Bird Walton Airport which we announced yesterday, is breaking a deadlock that has eluded governments for generations, decades upon decades upon decades.
Our $5 billion investment in Tulla Rail in Melbourne will transform and reshape that city. A new Inland rail network for Eastern Australia will enhance the national freight network – creating jobs, reducing supply chain costs and connecting cities and regional Australia to markets faster, safer and more efficiently. Snowy 2.0, MarinusLink and Tasmania’s Battery of the Nation will not only create jobs where we need them but it will firm Australia’s record investment in renewable energy for the future so there won’t be dumping and shedding of renewable energy from the grid and will put downward pressure on electricity prices.
A big part of keeping Australians together is opening up new opportunities in regional Australia – through this better infrastructure, digital connectivity and the like. Our Government is determined that Australia grows together, not apart, and the key to that is the strength of our economy. All these investments are being fully funded as I said without an increase in taxes. The Coalition has embedded Australia into the major economic engines of our region through transformational trade agreements with Japan, Korea, China, and 10 other nations of the Trans-Pacific Partnership and we now include Indonesia where Simon has just returned from inking that agreement.
Since the Coalition was elected, the coverage of our free trade agreements has increased from 26 per cent of our total two-way trade to 70 per cent. 26 per cent to 70 per cent – that is a massive opening up of our trade opportunities for small and family businesses in particular around Australia. New export deals have given Australian exporters duty-free or preferential access to an extra 1.8 billion customers in the world’s fastest and largest growing markets. This is the most effective hedge an open trading economy like Australia can adopt against the new protectionist sentiment prevailing around the world. And that I think is where Australia has a story, often going against the grain and ensuring that we’re opening up our opportunities where others might be seeking to close them off.
But there is more to do. As I said, an uncertain global economic outlook means Australia’s economic fortunes will depend even more on the quality of our economic management. We will continue to be an ambitious, pro-growth government, supporting individuals, families and businesses looking to get ahead and prosper. We’re all for that. We don’t think you have to pull some people down to raise other people up. That’s not our view. We believe a stronger economy can raise everybody up and I think that’s one of the key differences between our Government and the Labor Party and what they’re offering for the next election.
We will stay the course with policies that achieve this and we will ensure that those policies, our plan for a stronger economy, is in place. Strong budgets so Governments live within their means. Lower taxes, open trade, backing small businesses, promoting cooperative workplaces based on the rule of law, sensible climate policy alongside reliable, affordable energy supply. Investing in infrastructure, investing in the skills that are necessary, backing all of our industries to be world-class – not just the shiny, bright new ones – they’re fantastic, love them, they’re great, love them, fantastic, Blockchain, high tech, all of them are doing so well – but so is resources, so is agriculture, so is forestry and the jobs that they produce all around the country. It’s an incredibly important part of our economic future.
What we also won’t do is we won’t tax this economy beyond what it can bare. I put in place as Treasurer a tax cap – 23.9 per cent of the economy. This is important. That says that we believe if you go above that, you hold you economy back. It’s a sheet anchor. It holds every Australian back. I urge you to look for a number when the budget comes out and when the Labor Party puts their figures forward. What will be in the share of taxes of the economy under Labor? I can tell you what is was for the last election – it was 25.7 per cent. That meant around $50 billion a year in more tax on the Australian economy – every year, another $50 billion. And whether you’re paying that tax or not, you’re paying because of the impact it has on slowing the economy, the impact it has on slowing wage growth in a country. They have a plan to put $200 billion of extra taxes on Australians and I really don’t think they understand the impact of that on the economy. All the individual measures. It doesn’t understand the power and virtue of aspiration in our society. For our hardest aspiration is some other country, not Australia. That’s what Labor’s Deputy Leader has said as much – that’s what Tanya Plibersek has said.
Labor under Bill Shorten sneers at those who want to get ahead and only promises them a higher tax burden. If you work additional overtime to get ahead, Mr Shorten wants more from you, he wants higher taxes from you. If you buy an investment property to secure your family’s economic future, which so many small and family business owners do, which so many people who live in regional parts of the country do – you know there’s more people who negatively gear investments and have investment properties in the electorate of Capricornia based on Rockhampton than there is in my own electorate of Cook in Sydney’s Sutherland Shire and St George. More people in Rockhampton than in Cronulla. Labor doesn’t get that. They don’t understand the aspiration that would lead someone to make that decision and that sacrifice to invest in their future.
If you buy some shares for your retirement, again, Mr Shorten will have his hand in your pocket through higher capital gains taxes. If you try to build a nest egg to pass on to your kids, again, he’ll have his hand in your pocket. Mr Shorten even wants to ensure that our legislated tax cuts - $144 billion worth over the life of our tax plan will be cut in half. Stripped away. He will reverse the tax cuts that we have legislated from last year’s budget – reverse stages two and three of that plan that will stop over $70 billion worth of tax cuts. Australians being able to keep their own money.
There are many other things that I could tell you about, but I know Phil Coorey’s interested in asking me a few questions. But let me finish on two points. I’ve already made the point about trade and the fact that the Labor Party is baulking again on this Indonesian Trade Agreement I think tells you that when it comes to the economy, their instincts just aren’t there. It’s why the China Free Trade Agreement was never completed under the Labor Party. They never took it forward. They were never able to break through. It’s why we are able to make progress on all of those agreements including the Indonesian one today, there’s a simple reason for that. They’re not in control. They will answer to their masters in the union at the end of the day. That’s why we are looking at an economy under Labor which will see [inaudible] run their businesses, through to moving back to industry-wide bargaining which takes us back to the dark ages of workplace relations in this country.
As I move around the country and I walk in and out of small and family businesses and I ask myself why are they doing so well? It’s because they have such a wonderful relationship between their staff and the managers and owners. There’s a commonality of purpose that exists in these organisations. They’re all working to the same end. I don’t want to set Australians against each other. I don’t want to set workers against bosses. I don’t want to set one group of Australians who have had success in life against those who are aspiring to success in life. I don’t want to set enterprise in this country against anything. What I want to do is ensure that the economy, the economy that Australians live in, that they depend on, that their family’s services will rely on, whether it’s Medicare or hospitals or schools, I want to ensure, and will ensure, that it is the strongest it can possibly be in the circumstances that we are faced with.
So, it will be the most important election in decades. It certainly will. And there is a big choice to make and it’ll impact the next 10 years of your life. Whether you’re a business, whether you’re raising a family, whether you’re in retirement or entering into retirement, whether you’re a young person coming out of university, I was one of those who entered the economy under Labor in the 1990s that went into recession. I am one of those who does know what it’s like to live in an economy that is in recession and I did so as a young person coming out of university and others of my generation who knew what that was like. Why parents struggled with interest rates that today’s generation can only imagine. We can’t go back to that. We must go forward and we have the plan to take Australia there.
Thank you very much.