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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

23 October 2011

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Treasurer's Economic Note

A month ago, over a hundred people set up camp in New York's Zuccotti Park to protest against corporate greed and corruption. Since then, the Occupy Wall Street movement has grown, with thousands joining similar demonstrations in cities around the world. We've seen our own small-scale version with sleep-outs at Brisbane's Post Office Square, Sydney's Martin Place and Melbourne's City Square. While the protests don't have a concrete set of aims or demands, they have lead to an increased debate around the world about issues of social and economic inequality. There seems to be a growing sense of frustration in many countries that opportunities are not being evenly shared and that the burden of the global economic downturn has been carried by those that can least bear it. It's disappointing this important discussion has been obscured by instances of violence over the past few days. People of course are always free to protest as long as they are peaceful, follow the instructions of police and don't interfere with the rights of others.

The Economics of Equality

With the continuing global economic uncertainty, G20 countries need to focus on sustainable budgets, financial stability and reforms to promote growth. At the same time, it's critical not to lose sight of the fundamental purpose of sound economic management: creating prosperity and opportunities for more of the world's people. As I wrote last week, Australia has worked hard to highlight the importance of job creation and skills investment through the G20. Europe, the US and some developing economies have yet to recover the millions of jobs lost in the aftermath of the global financial crisis. In many places, a stubbornly high rate of unemployment has lead to a loss of skills in the economy and a loss of hope in society.

Communities are stronger when more people have access to the dignity of employment and every individual has the opportunity to play their full part. Countries with greater income equality enjoy higher rates of long-term economic growth. As New York University Economics Professor Nouriel Roubini has noted, the wave of social and political turmoil around the world this year reflects concerns about the widening gap between rich and poor. “Any economic model that does not properly address inequality will eventually face a crisis of legitimacy,” Roubini wrote this month. “Unless the relative economic roles of the market and the state are rebalanced, the protests of 2011 will become more severe, with social and political instability eventually harming long-term economic growth and welfare.”

Maintaining the Fair Go

Australia has always prided itself as being the nation of the fair go. We're a self-reliant people who are quick to offer a helping hand to those in need. That spirit was on display during last summer's tragic floods and cyclones. And it's a spirit seen in the work of hundreds of thousands of Australians who do critical volunteer work each year. A belief in the fundamental importance of a strong and fair nation where nobody is left behind is the foundation of this Government, in the tradition of all Labor governments. In fact, it's the reason I got into politics.

While our economy is today the envy of the developed world, the prosperity doesn't stretch to every postcode. Business investment is surging, but not every region is growing strongly. Incomes are rising, but many households are struggling to balance the family budget. Unemployment is low, but some families have never had a breadwinner. Consumers and some businesses are benefiting from a high dollar, but others like tourism operators and manufacturers are feeling the pain. These contrasts are all part of our patchwork economy. Strengthening the entire economy and spreading opportunity is what the Minerals Resource Rent Tax is all about. Among other benefits, revenue from the MRRT will provide tax breaks for Australia's 2.7 million small businesses and increased retirement savings for workers, particularly for the 3.5 million people on low incomes.

The Occupy protests in Australia have been on a much smaller scale than those in many other countries. We haven't suffered the immense social dislocation and detachment that occurred elsewhere in recent years because we got the big economic calls right and didn't follow the rest of the developed world into recession. That doesn't mean we don't need to keep working to build a stronger, fairer nation. The fight against inequality is an ongoing battle. It's important that governments around the world continue working to create jobs because employment is the surest path out of poverty and towards a better life.

Opportunities for More Australians

Converting the benefit of a growing economy into increasing job opportunities for more Australians was at the centre of this year's Budget. We announced an investment of $3 billion over six years to reform our training system to help people get the skills they need in a changing economy. We've also made a variety of reforms to encourage and reward the participation of more people in the labour market. Measures like cutting effective tax rates for single parents with school age kids, and wage subsidies for employers who hire a very long-term unemployed person are all about giving more Australians the opportunity and dignity of a job.

This Government has been focused on creating a fairer, more prosperous society through a range of policies. We've reformed the industrial relations system to promote productivity, fairness and cooperation in the workplace. We've changed the tax system to provide more relief to those on low and middle incomes, including a plan to more than triple the tax-free threshold. We're providing more support for families through the Education Tax Refund and paid parental leave. We've delivered an historic boost to the pension to provide a more secure retirement to older Australians. And we've made record investments in schools and hospitals so all Australians have access to decent services and get a decent start in life.

A Week of Decision

Australia's low unemployment rate stands in stark contrast to those seen in Europe, where rates of joblessness are up to four times higher. European leaders will meet today and again during the week as they seek to agree on a comprehensive plan to address the sovereign debt crisis. Together with other finance ministers at the G20 meeting last weekend in Paris, I again made it very clear that our European colleagues need to take swift, decisive and credible action to prevent the crisis spreading further in their region and throughout the global economy. European leaders have pledged to deliver this, but the eyes of the world will be on Brussels this week to see the final details of such a plan. The time for talk is over. It's time to move from words to deeds.

European leaders must agree on a durable solution to address Greece's excessive levels of sovereign debt. They must recapitalise the region's banking system to fortify it against further losses and to secure the flow of credit. They must build a war chest big enough to end fears of the sovereign debt contagion spreading to other European countries. And finally, they must agree on a credible framework for medium-term European fiscal integration. Anything short of this will lead to greater market instability and the potential of a protracted downturn in Europe.

Whatever European leaders announce in the coming days, and particularly if market expectations aren't met, it's inevitable we will continue to see periodic bouts of volatility. The situation in Europe will continue to have an impact on our region, our economy and our budget bottom line. But Australians should remain confident about our prospects, based on our strong fundamentals, our very low debt, low unemployment and our massive investment pipeline. With the right policies and decisions, as we showed during the global financial crisis, we can convert our current economic strength into lasing opportunities for more of our nation's people.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia
Sunday 23 October 2011