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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

17 May 2009

NO.009

Treasurer's Economic Note

Welcome to this special Budget edition of my economic note, which gives me a good opportunity to point to some of the most important aspects of our Nation Building for Recovery Plan, after my most hectic week of the year. It is a Budget focused on infrastructure, jobs, and charting the course back to surplus.

As I said in my speech, the Budget is put together during the most severe global recession in our lifetimes. The past six months have witnessed the sharpest decline in activity in living memory. And this weekend we received further evidence of that, with confirmation the euro area contracted by a record 2.5 per cent in the first three months of this year.

That's why it is so important our Budget contains a plan for Nation Building for Recovery here in Australia. We're confident it will support jobs, and build the infrastructure we need to position us to take full advantage of the global recovery that will come.

The centrepiece of the Budget is an historic $22 billion investment in the infrastructure our nation needs to grow and prosper in the years ahead – investment in transport, broadband, clean energy, universities and health care.

I won't be able to run through all of the infrastructure investment announced in the Budget, but here are some snapshots of the Budget's $8.5 billion investment in Australia's critical road, rail and port infrastructure needs. Even from this brief snapshot you'll get a sense of the positive impact our plans will have on jobs and productivity.

Roads

The Government is undertaking the biggest road investment program in the nation's history, with the Budget investing an additional $3.4 billion in road infrastructure in Central Queensland, the Hunter Valley, and up and down the east coast.

On Thursday, I visited the Hunter region with the Prime Minister and Minister Anthony Albanese to announce funding for the new $1.65 billion Hunter Expressway between the F3 and the New England Highway near Branxton. The new 40 km dual carriageway will cut travel times between Newcastle and the Hunter by 28 minutes; reduce congestion; support the growing Hunter region, and meet the growing freight task of the region, which is forecast to increase 30 per cent in coming years.

Then, on Friday, I visited the Cooroy to Curra upgrade site of the Bruce Highway on Queensland's Sunshine Coast, with the Prime Minister and Minister Anthony Albanese. The Budget invested $488 million in this project, which will address capacity, safety and route reliability issues relating to a 12 km section of the Highway by providing motorists with a four-lane divided carriageway.

I also visited the Ipswich Motorway additional works site with the PM on Friday. The Budget invests $884 million in the upgrade of the Dinmore to Goodna section, bringing our total investment in the Ipswich Motorway to $2.5 billion. This investment will make the Ipswich Motorway one of the largest construction sites in the country, with more than 1,800 people working on site.

Rail

The Rudd Government is the first ever national government to invest significantly in our cities' passenger rail infrastructure, with the Budget investing more than $4.6 billion in metropolitan rail projects across the nation. Infrastructure Partnerships Australia executive director Brendan Lyon said "the funding of major projects in the Gold Coast, Melbourne and South Australia, and the commitment to examine other important projects like metros for Sydney and Brisbane, will be key to easing congestion and accommodating the continuing growth of Australia's cities."

During my visit to the Hunter on Thursday we also turned the first sod on the $134 million Minimbah Third Rail Track Project, one of six projects being delivered in the Hunter by the Australian Rail Track Corporation as part of the Rudd Government's December 2008 Nation Building statement. The project is a 10.8 km new rail track that will support up to 150 jobs during construction. Together, the Hunter Valley Rail Network improvements will double coal capacity from 97 million tonnes per annum to over 200 million tonnes per annum over the next five years.

On Saturday, I visited the future site of the 13 km Gold Coast Light Rail from Griffith University to Broadbeach. The Budget invested $365 million in this project, which is expected to support up to 2,500 jobs during planning and construction. When completed, the light rail will link key activity centres on the Gold Coast, reduce traffic congestion, and provide a boost to the local tourism industry.

First Home Owners Boost

The Budget will extend the First Home Owners Boost for an extra six months, with the Boost to be stepped down for the last three months of the extension period. We know the Boost has been successful in supporting housing activity and construction jobs. This was confirmed by new data last week showing first home buyer activity has risen to new record highs. The Fact of the Week is that the number of loans to first home buyers increased in March by 23.3 per cent to 17,652.

Fair Go for Pensioners

The Budget's Secure and Sustainable Pension Reforms will deliver a pension increase for 3.3 million age pensioners, disability pensioners, carers, wife pensioners and veteran income support recipients. This will see single pensioners receive up to an additional $32.49 per week, and pensioner couples up to an additional $10.14 per week. National Seniors Australia chief executive Michael O'Neill said "the Government has delivered on its promise to provide help for pensioners struggling to meet increases in living costs."

Tough Choices

The only way we could provide pensioners with the pension increase they deserve, and at the same time put the Budget on the path back to surplus, was by making some tough choices and finding savings elsewhere in the Budget. This article notes that ratings agency Standard & Poor's said our Budget "articulates a plan for fiscal consolidation as economic conditions recover", and is consistent with its AAA long-term foreign and local currency sovereign credit ratings on Australia.

One of the savings measures was our decision to means-test the private health insurance rebate, which will save $8.7 billion over the next ten years. This measure is expected to have a negligible impact on private health participation, with 99.7 per cent of people expected to remain in private health. On a personal note, I have always had private health insurance – but I don't expect to be subsidised by taxpayers on low and middle incomes, many of whom can't afford private health insurance themselves.

Nation Building and Economic Stimulus

I think of our stimulus plan like it's a big pipeline with investment in jobs flowing through it in stages. Stage one was direct stimulus in payments to households, to prop up demand. Stage two is our investment in schools, housing and community infrastructure. And stage three is delivered in the Budget – roads, rail, ports and other infrastructure.

This is the critical large scale infrastructure that provides jobs now by investing in the nation's economic future. And the most important thing to remember is that the pipeline is flowing right now, but it's still got a lot of stimulus to flow through right into communities all over Australia – building a more productive and more prosperous future for all of us.

Thanks for reading my note and for your interest in the nation building Budget.

Wayne Swan
Treasurer of Australia
Sunday 17 May 2009

www.treasurer.gov.au
www.australia.gov.au/economicstimulus