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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

21 August 2011

NO.031

Treasurer's Economic Note

Today I hosted an annual event that always brings home to me what having a strong economy is really all about. It's a celebration for the newest members of our community called Welcoming the Babies.  Hundreds of local families gathered in a park in my electorate on Brisbane's northside for a morning of activities and entertainment, and to pay tribute to the role parents play in bringing up the next generation of Australians. Having your first child can be a challenging time for young parents both emotionally and financially. That's why this Government is doing what it can to make life a bit easier for parents of children of all ages: we started Australia's first ever paid parental leave scheme this year, we increased the Child Care Rebate to 50 per cent, we introduced the Education Tax Refund and expanded it last month to include school uniforms, and in the May Budget we increased Family Tax Benefit payments for 16 to 19 year olds to help meet the extra costs of raising teenagers.

Freedom to Move

We're also helping Australian families get a fairer go in the banking system with changes like our ban on mortgage exit fees on new home loans and reforms to ensure consumers don't pay more than they should on credit cards. Today I've announced we're going to give Australians the freedom to switch bank accounts with the stroke of a pen from July 1 next year. The new `tick and flick' service will free consumers from the burden of having to change the details of automatic direct debits and credits if they want to move deposit accounts. Customers will sign just one form that authorises their new financial institution to do all the heavy lifting for them. The bank, credit union or building society will arrange the transfer of all automatic transactions linked to the customer's account - that's things like salary payments, electricity and gas bills, and rent. By taking away a lot of the hassle and headache, Australians will more easily be able to walk down the road if there's a better deal on offer for their hard-earned savings.

The initiative is the central recommendation from a review by former Reserve Bank Governor Bernie Fraser, who I commissioned in December to look at options for transferring bank accounts. His report Banking Services: Cost-Effective Switching Arrangements found full account number portability, which would allow consumers to keep their account number when they switched institutions, would not deliver enough benefits to justify the huge costs it would impose on consumers. Instead the new `tick and flick' model will be much more cost effective and deliver similar benefits. I've also announced today the introduction of mandatory one-page fact sheets for lenders' mortgage insurance so consumers can  compare quotes side-by-side, including the difference in premiums and rebate schedules, helping them get the deal that's right for them. 

Keeping Our Financial System Strong

As well as getting a better deal for consumers, another important goal of the banking reforms I announced in December was to ensure our financial system remains secure and stable.  One example of this is the work we're currently doing on legislation to allow the issuance of covered bonds, which will open up a new source of funding for Australian lenders. Our strong, well-regulated financial system is one of the factors that helped Australia withstand the worst of the global financial crisis and it's one of the reasons why we're so well positioned to ride out the current uncertainty. Our major banks are four of only nine in the world that hold a credit rating of AA or higher. They are well funded for the period ahead, and have significantly reduced the amount of funds they borrow offshore as they move to more stable, longer-term funding.

World Bank President Bob Zoellick, who was in Australia during the week, spoke about many of the other factors that stand Australia in such good stead, such as our very low levels of public debt and strong finances. He also gave us his perspective on the problems facing the global economy, echoing many of the sentiments of an opinion piece I co-authored for the Financial Times with a number of my G20 colleagues. Along with finance ministers from the UK, Singapore, South Africa and Canada, I urged leaders in Europe and the US to show the necessary political courage to get their fiscal houses in order and for all countries to work together to promote sustainable growth and address global imbalances. And as I've been advocating at the G20 for some years now, it will also require some large developing economies to put in place policies to boost home-grown demand and move towards more market-based exchange rates.

A Clear Plan

Over the course of last week, the extent of the global challenge was clear to see with the sluggish GDP data for the Euro area. Of course weaker growth in Europe and the US has an impact on Australia. We have put in place a clear plan to return our budget to surplus in 2012-13 and we are determined to get there, but as I've noted, obviously recent overseas events make that task a lot tougher. It's just common sense that if global growth slows and global financial markets fall that will have an impact on our budget. We saw that happen during the GFC, with government revenues still down around $130 billion from the levels expected before the crisis hit, with this massive revenue downgrade accounting for the vast bulk of the budget deficit.  Of course the simple fact is that our budget position remains amongst the strongest in the developed world, with our peak net debt less than a tenth of the level across advanced economies.

As I told Parliament last week, it's clear that a key factor behind the current market turmoil is a loss of confidence among consumers, businesses and investors around the world. While many Australians are feeling uneasy about the global economic outlook, we should take confidence from just how different our situation is here at home. We're not the United States, we're not Europe. Australia's unemployment rate is about half their level, we're situated in the fastest growing region of the world, and we've got a proven track record of dealing with instability in the global economy. At times like these, it's essential we keep things in perspective and not get dragged down by negativity. As an article in the Courier Mail pointed out last week, resilience and balanced optimism are the driving forces of society. Now more than ever, it's important that we have a constructive debate about our economy and our potential, rather than descending into damaging rhetoric that talks down our prospects and sells our country short.

Coming Up

An independent Parliamentary Budget Office is being set up to provide research and policy costing advice to all Senators and Members of Parliament. This week, the Government will introduce legislation to set up this important new institution that will enhance Australia's already strong budget framework, and also promote greater understanding in the community about the budget and fiscal policy. The Government has already set aside $24.9 million over four years to get the PBO up and running.

One of the most important policy challenges ahead of us is making the most of the economic and social opportunities presented by our growing population of seniors. On Friday, with Mark Butler, Minister for Mental Health and Ageing, I'm looking forward to receiving the first report from the Advisory Panel on the Economic Potential of Senior Australians. The Panel was commissioned by the Government to examine how we can best harness the life experiences and skills of the older members of our community. The panel, which is chaired by Everald Compton, is looking at a broad range of issues for senior Australians such as the opportunities created by the National Broadband Network, improving recreational activities, and avenues for increasing volunteer work. With Australians living longer, healthier lives, it's more important than ever that we consider the potential of seniors across a range of policy areas and do everything we can to keep older Australians active and attached to the community.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia
Sunday 21 August 2011

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