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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

22 March 2009


Treasurer's First Economic Note

Welcome to my first economic note. I hope you find it a valuable way to keep up to speed with what's happening in the Australian economy during this global recession.

As we go about helping to cushion Australians from the worst the global economy can throw at us, I know how important it is to communicate with you and to keep you informed, in simple terms you won't need a PHD in economics to understand.

The global crisis is having a huge impact on every one of us. With the right decisions, we can ensure Australians are not only cushioned from the worst effects, but that Australia comes through in a position to prosper in the future.

Last weekend, I attended a meeting of the G-20, which is the world's 20 most important economies. The global recession is hitting economies around the world - including Australia - so it is vital that Australia contributes to global responses through this group. The G-20 communique and annex will give you more information on the outcomes of this meeting.

Unfortunately, the international economic outlook continues to worsen. The International Monetary Fund (IMF) has cut its global forecasts further, now expecting global activity to contract for the first time in 60 years, by between ½ and 1 per cent this year.

As the global recession takes hold, unemployment continues to rise around the world. This week we saw the unemployment rate in the UK rise to 6.5 per cent, the highest since 1997. This comes on top of the US figures last week, showing that their unemployment rate had risen to 8.1 per cent, its highest level in more than 25 years.

Australia is better placed than other countries to face this global recession, but we are not immune from what's hitting us from overseas.

That's why, in the past week, we've seen data from the Australian Bureau of Statistics showing that consumption goods imports (like clothes, books and household appliances) continue to fall, which means demand here in Australia remains pretty soft.

We also saw some indicators of future economic activity fall further, indicating that the Australian economy will continue to slow due to the global downturn.

But we also received further evidence this week that our first economic stimulus package has helped support jobs in the retail sector, in places like supermarkets, department stores and cafes. That's why this week's Fact of the Week comes from the Australian Bureau of Statistics numbers that show that employment in the retail sector increased by more than 16,000 over the three months to February.

These figures represent a turnaround of more than 30,000 jobs compared with what happened in the previous quarter. Though we don't get carried away with one month's numbers, this is a really good result in tough circumstances, for a sector that employs so many Australians.

Our $42 billion Nation Building and Economic Stimulus Plan also began to take effect this month, which will help cushion the blow from the global recession and support the recovery when it takes hold. More than two-thirds of that plan is directed towards building schools, homes and roads.

In the past week, Nick Sherry and I announced reforms aimed at curbing excessive 'golden handshakes' paid to company executives. These reforms will empower shareholders to more easily reject termination payments where they are not in the interests of the company, the shareholders or the community. We have also tasked the Productivity Commission with examining the broader issue of executive remuneration.

This Monday, I will be giving a speech at the Sydney Institute about how Australia is trying to stay ahead of the game during this global recession. I'll be talking about some of the short-term challenges mentioned in this note, but I'll also say a few things about how Australia's future can still be full of promise if we pull together and keep doing the right things.

This coming week we will also see the Reserve Bank Financial Stability Review, which gives us a bit of an update on the state of Australia's financial system, which has fared far better than almost any other world wide.

Thank you for your interest and for taking the time to read this note.

I don't need to remind you that these are difficult times. But with national unity and with purpose, acting on the best available information, there is no reason we can't emerge from this global recession stronger and more prosperous than before.

Wayne Swan
Treasurer of Australia
Sunday 22 March 2009