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 November 2011

[PDF 216KB

Treasurer's Economic Note

Thursday marks both the end of the parliamentary year and the fourth anniversary of the Labor Government taking office. It's a good opportunity to look back at our nation's journey over the past few years. Thanks to the hard work and determination of millions of Australians, we've avoided recession, kept our economy strong, and made some great progress for families, workers, the aged and the disadvantaged. What we've achieved together is all the more remarkable given what's been thrown at us. Communities across the country are still healing and rebuilding from some of the worst natural disasters in our history – from the Black Saturday bushfires of 2009 to last summer's floods and Cyclone Yasi. On top of this, the global economy has been through its most turbulent period since the Great Depression. That turbulence has hit our financial markets and our exports, making businesses more hesitant in their hiring decisions and households more cautious in their spending. It has also reduced economic growth in Australia and ripped $130 billion from government revenues. Against this backdrop, Australians can rightfully be proud of what our country has achieved. By working together, we've shielded the economy, keeping workers in jobs and bringing home pay packets to their families. While millions overseas have joined the world's unemployment queues, we've managed to create jobs – 750,000 of them since the Government came to office. Job creation has and will continue to be this Government's number one priority.

Investing in the Future

Keeping the economy strong and keeping Australians in work means together we've been able to create a stronger, fairer nation over the past four years. Here's just a few of the ways we've gone about doing that:

  • starting the first national Paid Parental Leave scheme that helps families look after their newborn babies at a time when costs go up and family income goes down;
  • putting a price on carbon pollution and using over half the revenue to help households with flow-on costs, leaving around 4 million household budgets actually better off;
  • beginning to build the foundations for a National Disability Insurance Scheme with state governments that gives disabled people access to services and facilities they need when they need it;
  • providing the biggest boost to the pension in our history with the maximum rate of pension increasing by about $148 per fortnight for singles and $146 per fortnight for couples combined over the past two years;
  • starting to put in place the biggest overhaul of the health and hospital system since Medicare;
  • rolling out an affordable, high-speed broadband network to all Australian households and businesses no matter where they are;
  • committing to tripling the tax-free threshold, providing greater incentives to work and meaning about one million extra Australians won't have to lodge tax returns;
  • investing more than $36 billion in roads, rail and ports;
  • providing more than $2.2 billion for mental health services, with a greater focus on prevention and early intervention;
  • cutting personal income taxes by $47 billion – targeted mostly at low- and middle-income families;
  • introducing the Education Tax Refund worth up to $400 for each child in primary school and more than $800 for high school students to help pay for things like school text books and uniforms; and
  • increasing the Child Care Rebate from 30 per cent to 50 per cent for out-of-pocket child care expenses that provides families with up to $7,500 per child per year towards child care costs.

Locking in the Gains

I'm hopeful of adding to this list of achievements this week by gaining the support of the lower house of Parliament for our critical reforms to lock in the gains of the mining boom. The Prime Minister and I will continue talking to our parliamentary colleagues over the coming days about the importance of the Minerals Resource Rent Tax and the benefits it delivers to the community. I welcome the soaring profits of our mining industry. It's a great thing for our country, creating thousands of new jobs and billions of dollars in new investment. But mining is different to other industries. It's often not appreciated that the coal and iron ore in the ground are owned by the Australian people, not by the mining companies. These resources can be dug up and sold only once. That's why the Government is committed to ensuring the Australian community receives a fair return from the nation's mineral wealth.

The current taxation system has failed to keep pace with the boom. The following graph shows how royalties have declined as a share of operating profits before tax over the past decade.

Chart 1 - showing how royalties have declined as a share of operating profits before tax over the past decade

Royalties usually take a flat amount of the value of production regardless of profitability. The great advantage of the Minerals Resource Rent Tax is that the higher the mining company's profit, the more tax is paid. That means the Australian community keeps getting a fair return from the nation's mineral wealth.

Saving for the Future

One of the main benefits delivered by the MRRT is the big boost to Australia's superannuation savings – an extra $500 billion is expected by 2035 as a result of the changes. Those are funds that will largely be invested back into Australian companies and Australian jobs. One fact that is often overlooked is the important role that superannuation played in helping us withstand the worst of the global financial crisis. Rather than having to go offshore for funds, many companies were able to secure funding from the nation's pool of superannuation savings.

As well as increasing the super guarantee from 9 per cent to 12 per cent, MRRT revenue will also help pay for another important reform to our superannuation system. Over $800 million a year will go towards making superannuation fairer for 3.6 million workers on low incomes. Currently, some people receive no tax benefit from employer contributions because the 15 per cent super contribution tax is above their income tax rate. From 1 July, low-income earners will receive a refund of the contribution tax, worth up to $500 a year in extra retirement savings for a person with an income up to $37,000. This important reform rewards hard work, and will help deliver greater financial security and retirement savings for more than one in three Australian workers.

The Asian Century

As President Obama told our Parliament during the week, Asia will define the century ahead. The MRRT is a critical reform that will help Australia make the most of the opportunities that flow from what is the greatest economic transformation in modern history. Asia's demand for our resources is bringing incredible benefits to Australia, but it's also accompanied by a higher dollar and skills shortages that are putting pressure on many other parts of the economy. There's no need for the success of one sector of the economy to come at the expense of another. The MRRT will allow us to spread the dividends of the boom so they can make a much greater contribution to jobs, to infrastructure, to national savings and to sustainable growth across the entire economy. It's not about slowing the fast lane of the resources sector. It's about ensuring all sectors benefit, using the strength of the mining boom to strengthen the entire economy.

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