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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

8 May 2011

NO.016

Treasurer's Economic Note

The finishing touches are being put on this year's Budget, and even as I write, the printing presses are running hot, churning out hundreds of copies of the documents. The four major budget papers run to a total about 1,000 pages, accompanied by a variety of supporting documents and ministerial statements. These will be available online after 7:30pm on Tuesday night when I deliver the budget speech in Parliament House. Of course, the Budget is much more than an exercise in publishing or accounting. It's a demonstration of our values, beliefs and priorities. It shows where we are as a nation and sets out the roadmap for where we want to go.

Twin Challenges

The Budget will have one eye on the present, and one on the future. In the short term, the summer's natural disasters, the after-effects of the global recession and a patchwork economy mean we face much lower tax revenues. One aspect of the patchwork economy is that many businesses – particularly small businesses – which aren't in the mining boom fast-lane are doing it tough. That's why I can announce the Budget will deliver small businesses in 2012-13 some new relief in the form of an immediate write-off of the first $5,000 of motor vehicle purchases. In the same year, as many as 720,000 small businesses will benefit from a reduction in the company tax rate to 29 per cent. These changes will make tax simpler and increase cash flows so small businesses will be able to reinvest in their operations and grow.

However, while we face short-term softness, over the longer term, our fundamentals are strong with low unemployment, record terms of trade and a huge pipeline of investment in the resources industry. The Government shouldn't be chasing the same resources as the private sector – that would only add to price pressures, and ultimately feed through to the cost of living for Australian households. As Finance Minister Penny Wong explained in a speech in Melbourne on Tuesday, we need to restrain spending and return to surplus in 2012-13 so that we're not adding to the pressures that will come with the mining boom. That means we need to make tough decisions now to avoid much tougher decisions later on.

Because of our patchwork economy it's more important than ever to get the policy settings right. Some towns are riding high on the mining boom, and others are picking up the pieces after being buffeted by floods and cyclone. Some businesses are benefiting from a high dollar, and others like tourism operators and manufacturers are feeling the pain. We have an unemployment rate with a ‘four' in front of it, yet there are pockets of our country where young people still can't find a job. We're earning more for our exports than we have in well over a century, which is great for mining-related businesses, but consumers are reluctant to spend. These contrasts are all part of our patchwork economy. And addressing this patchwork to spread opportunity is one of the big challenges facing us in the years ahead. The Budget will continue this Government's mission of boosting living standards and creating a stronger economy to benefit all Australians.

Focusing on the Important Things

It sometimes seems that the Budget is treated like a magic act, judged on the number of surprises, clever one-liners and rabbit-out-of-the-hat-style tricks. In an opinion piece on Monday I argued how the Budget shouldn't be assessed on the colour and movement, or on how various sectional or vested interests respond to it. Instead it needs to be considered in total, for what it means for our economy, and for maintaining strong and secure growth. As my former Cabinet colleague Lindsay Tanner discusses in his new book, too often trivia and entertainment swamp out a proper conversation about what's really important for our nation. Considered and responsible debate will help inform our ability to keep getting the big economic calls right. We shouldn't lose sight of the fact that the Budget is about addressing immediate economic challenges and also the challenges Australia faces in the years to come. Tuesday evening isn't a one-night show.

Getting the economic settings right, of course, is only half of the equation. The rest is about ensuring more Australians have the opportunity to benefit. What got me into politics as a young man and what continues to drive me is a belief that society can't leave people behind. A strong economy can't just be for the fortunate few – it has to help those in real need and deliver benefits to the millions of Australians whose hard work has helped make our economy one of the strongest in the developed world. That's why even with the necessary tough decisions in this Budget, we'll still be driven by our Labor values. The strength of an economy is judged not just by numbers on a page but by the living standards of our people, access to health and education, and the creation of jobs. That means this Budget will recognise cost of living pressures through measures like tax assistance for low-income earners, increasing family payments for parents with teenagers, and providing more support for disabled children. It will also build on our historic boost to the aged pension with a new measure to make sure no Australians are left behind as our society moves into the digital era. Under the program, households with at least one person on the maximum rate of the aged, disability, carer or veteran pension can receive a high-definition set-top box, have it installed on their existing analog TV, and be shown how to use the equipment. As well as gaining the benefits of better reception and more choice, the switchover is necessary as analog broadcasting is scheduled to end at the end of 2013.

The Budget will of course also continue its focus on employment – because it's jobs that provide the path to a better life. An extra 750,000 Australians have joined the workforce since we came to office, and Treasury expects a further 500,000 jobs will be created by June 2013. It's important to remember that before the global downturn we had an unemployment rate the same as the United States. Today ours is 4.9 per cent and data released last week saw the US rate rise to 9 per cent. Certainly there are still a lot of people doing it tough in our patchwork economy, but too often we lose sight of Australia's stunning economic success.

A Team Effort

Putting together a Budget is a team effort. It requires the contribution of hundreds of people, many of them toiling for months on end. One of the many I'd like to mention is Ron Hutchison, who is printing his last set of budget papers this week after an incredible 48 years in the job. Ron, who now oversees the printing process as the account manager, started work as an apprentice printer when he was just 15 at the time Harold Holt was Treasurer. I thank him and all the other unsung heroes for their hard work. I've spent a lot of this week working alongside many of them down at the Treasury building where the lights have been burning all night as we put the finishing touches on the papers.

We've come a long way since preparations first began. Each year the basic outline of the Budget starts to form in the closing months of the previous year. There are meetings with the Prime Minister, Finance Minister and colleagues, as well as hundreds of hours spent in Cabinet and committee meetings, and Treasury briefings. Saving and spending priorities, basic fiscal parameters, and policy proposals are all debated and discussed – often with a great deal of passion. The process is long and arduous. Around the Cabinet table, we never forget that the decisions that get taken have an impact on people's lives.

There's also plenty of input into the budget process from individuals, businesses and community groups. Scores of written submissions flood in when I invite people to have their say on what the Budget should contain. And on top of this, of course there are the countless conversations that I and my colleagues have in communities across the country. This feedback is really helpful and provides an insight into the different challenges faced around the nation. It all helps ensure the Budget reflects the values and aspirations of all Australians.

Meeting the Challenges Ahead

Early on in politics I learned you often have to choose between what's right and what's popular. This Budget won't put short-term political interests ahead of the long-term national interest. And it won't leave the heavy lifting to future generations. Just as we shielded the economy from the blows of the global downturn, we'll continue to manage the economy responsibly. It's because we kept our economy out of recession that we're now in a position to return to surplus and tackle the challenges that lie ahead. That, in a nutshell, is why this Budget will be all about getting us back in the black, getting more Australians in jobs, and spreading the opportunities of the mining boom.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia
Sunday 8 May 2011

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