The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

20 February 2011

NO.005

Treasurer's Economic Note

Today's economic note comes to you after another round of important meetings with my fellow G20 Finance Ministers in a week where we continued the crucial rebuild of Queensland after this summer's natural disasters. Last week I announced a substantial assistance package for people doing it tough in the wake of Cyclone Yasi with Queensland Premier Anna Bligh and Minister Joe Ludwig in Brisbane. Over the past few days, I've been giving our international friends the clear message that while the devastating floods, cyclone and bushfires will take their toll on Australia in the short term, our economy is resilient and will bounce back strongly, just like our people. We've had to endure unimaginable destruction, but with solid fundamentals and responsible economic management, we will withstand these challenges just like we did during the GFC.

Cyclone Yasi Assistance Package

On Wednesday, I announced a package of measures to help Far North Queensland recover from the impacts of Cyclone Yasi. The region faces some specific economic challenges over the weeks and months ahead because of its reliance on a few key industries – like sugar and bananas – that will take several months to recover from the massive damage that was inflicted. The package will help ensure that businesses keep their doors open, that workers keep their jobs, and that North and Far North Queensland is well positioned to continue its economic growth once the recovery is underway.

The package includes: special concessional loans of up to $650,000 for eligible businesses, primary producers and not-for-profit organisations suffering extreme damage, with a grant component of up to $50,000; wage assistance for employers, including primary producers, equivalent to Newstart Allowance for up to 13 weeks (this period may be extended to 26 weeks depending on the speed of the recovery); and a $20 million Rural Resilience Fund to help fund business and community support activities, such as farm clean-ups, counselling and social support measures. This assistance builds on a range of measures that have already been rolled out, including granting more than 200,000 claims for Australian Government Disaster Recovery Payments that have already injected more than $230 million into cyclone-affected communities.

Business Taskforce

On Tuesday, I chaired the third meeting of the Queensland Floods Business Taskforce. On top of more than $70 million in financial donations, businesses have also contributed tens of millions of dollars worth of in-kind assistance to help the recovery effort in Queensland, and they're looking to contribute even more. The Business Taskforce has received many requests from the business community for more information on how to get in-kind assistance to where it is needed most, and one of the key initiatives to come out of Tuesday's meeting was the creation of a new website which will help match offers of assistance from business with communities in need.

Launched yesterday, the Join Forces website allows not-for-profit community and sporting groups affected by the recent floods and cyclone to register on the website and outline the assistance they need. Businesses can then search through the list of community organisations and ‘join forces' with a group to support them in their recovery. This week I will write to business leaders to encourage them to participate in this important initiative, and the Business Taskforce will continue to work with the business community to ensure they are doing all they can to help rebuild Queensland.

Rebuilding after the Floods

To better inform people about the Commonwealth Government's response to the floods, today I am launching a dedicated ‘Rebuilding after the Floods' website. The website can be found at www.treasury.gov.au/floodrebuild and includes a range of information like key facts, frequently asked questions and links to useful websites.

The website also includes details about the temporary flood reconstruction levy. This modest one-year levy will see 60 per cent of taxpayers contribute less than $1 a week. Higher up the income scale the amounts are still modest, with someone earning $80,000 paying only $2.88 a week – less than the cost of a cup of coffee. Understandably, many Australians will want to find out for themselves how much they will be paying, and the website includes an easy-to-use calculator to help people do just that. From my talks with people on the ground, I know a lot of people are overestimating how much they're being asked to contribute – with many people surprised to learn they won't need to pay anything at all.

US Budget

While we can be confident about our own recovery, we can't forget the world economy has had a steep climb out of global recession and still has a lot of ground to make up. Last week we saw the Obama Administration take some important steps towards restoring fiscal sustainability in the US, with the release of its 2012 Budget. As part of the Budget, the US Government proposes to reduce the US federal deficit by US$1.1 trillion over the next decade, with two-thirds of this coming from spending reductions and one-third from increased revenue.

Despite these ambitious measures, there is still a long way to go to address the long-term fiscal challenges in the US. Back home, we can take comfort in the fact that Australia's public finances are in a much stronger position. Unlike the US – which aims to reduce its budget deficit to 3 per cent of GDP by 2015 – we are on track to return the budget to surplus well before then in 2012-13. This represents the biggest positive turnaround in the budget position since the 1960s and would just not be possible if it wasn't for our strict fiscal rules, which we put in place when we moved to support the economy during the worst of the global financial crisis. That strategy involves some pretty tough discipline. It means finding savings to meet increases in spending and restraining overall growth in spending to 2 per cent in real terms. To put that into perspective, real spending growth has averaged about twice that amount over the past couple of decades. It's this spending discipline that will help ensure our budget position remains amongst the strongest in the developed world, and that's particularly important as we grapple with the challenges of mining boom mark II.

G20 Finance Ministers' Meeting

The first Finance Ministers' meeting under the French Presidency of the G20 wrapped up in the early hours of this morning. Meetings like these are critical for taking the global economy's temperature, particularly in light of uncertainty around the recovery and concerns about sovereign debt in Europe. I had a lot of good discussions with my G20 colleagues, including one-on-one meetings with World Bank President Robert Zoellick, International Monetary Fund Managing Director Dominique Strauss-Kahn, our host, the French Finance Minister Christine Lagarde, and US Treasury Secretary Tim Geithner.

The primary focus of G20 Finance Ministers was how to deliver on the G20 aim of ensuring strong, sustainable and balanced global growth. We agreed on a number of indicators to help identify global imbalances, to guide us in our work as we implement our Framework for Strong, Sustainable and Balanced Growth and monitor the commitments already made. G20 Finance Ministers also committed to implementing and building on the substantial financial sector reforms agreed in Seoul last year.

Coming Up

This week I'll speak in the House of Representatives on the legislation to implement the temporary flood reconstruction levy. It's been inspiring to see the way that communities, businesses and governments have come together in the aftermath of recent natural disasters. The unprecedented scale of the devastation has meant that there is no one answer: we've needed volunteers to roll up their sleeves to help in the immediate aftermath; individuals and businesses to donate money and goods and services to help those people affected; and investment to repair and replace public infrastructure by all levels of government including a roughly 75 per cent contribution by the Commonwealth Government. It will take every sector of the community, in every corner of the country, doing their bit to get through these tough times, and that's what Australians have been doing – and that's what we'll keep doing – until these communities get back on their feet and are stronger and more prosperous than ever.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia
Sunday 20 February 2011

www.treasurer.gov.au