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

18 December 2011

NO.048
[PDF 193KB

Treasurer's Economic Note

Exactly 100 years ago, Prime Minister Andrew Fisher was in the middle of a term of government that helped set the course for our fledgling nation. Between 1910 and 1913, the Fisher Government passed laws to create Australia's first paper currency and to set up the Commonwealth Bank; it began the rollout of a railway to cross the Nullarbor; and it implemented a series of social reforms including the introduction of workers' compensation, an allowance for new mothers, and the old age and disability pensions. This mixture of responsible financial management, nation building and social advancement and support was to become the hallmark of Labor governments over the next century. The core mission behind these reforms and those that followed was the creation of a strong and secure economy that looked after the interests of working families and individuals and the most vulnerable in the community. This ambition has remained constant through the decades although the means of achieving it have changed. Labor has always believed in a society that rewards the hard work and effort of workers and businesses, a society where the benefits of economic strength flow to everyone, not just the lucky few, and a society where anyone can succeed no matter who their parents are or what town or suburb they grew up in. Our challenges today are very different to those faced by the Fisher Government, but our ideals remain the same.

Working Together

As we wind down for the year, it's a good opportunity to reflect on the year just passed and the challenges of the year to come. It's certainly been a rugged 12 months for many Australians. On top of businesses battling a high dollar and households under everyday pressure to pay the bills, we suffered some of the worst natural disasters in our history. Along with the hardship and devastation left in the aftermath of floods, storms and fires that struck regions across the country, we also saw an incredible community spirit emerge. A gumboot army of volunteers stepped forward, with Queensland literally running out of gumboots because so many people wanted to help. Thousands showed up to shovel mud out of the kitchens of strangers, and thousands more donated money and food. And through the one-year flood levy, Australians have helped rebuild shattered communities. More than 8,000 kilometres of state roads and over 4,000 kilometres of railways have been restored, more than 400 schools are open again, and tens of thousands of homes and businesses are being rebuilt and repaired. There's still more work to be done and some of the scars will never heal, but this year has been a great reminder of how our nation has succeeded when we've banded together, when we've stood shoulder to shoulder.

We can see the benefits of working together in the performance of our entire economy over the past four years. Central to our nation's remarkable success amid the toughest global conditions in 75 years has been the collective effort of businesses, the Government and millions of ordinary Australians. Our unemployment is low, businesses are making record investments to expand, incomes are rising, inflation is contained, our public finances are in great shape, and interest rates have just been cut for a second straight month. Our situation could not be more different to those European nations that are crumbling under the weight of weak and negative growth, mass unemployment and unsustainable debt levels.

There are plenty of ways to measure our strong fundamentals: our solid economic growth, our $455 billion investment pipeline in resources, our very low public debt levels or our gold-plated AAA credit rating. For me, the most vivid and important way to judge our economic success is to look at the number of jobs our nation has created. Since Labor came to office, around 750,000 extra Australians are in paid employment. That averages about 500 jobs created each and every day for the last four years. It's worth reflecting on what this tremendous economic achievement means to the lives of those affected: 750,000 more Australians bringing home a pay packet each week and gaining the promise of a brighter future.

Helping Families and Businesses

Of course having a job is the best defence against cost of living pressures, but this Government has also introduced a range of measures to help working families and individuals make ends meet. For workers, we've delivered three rounds of tax cuts that have cut the tax bill of someone earning $50,000 by 18 per cent or around $1,750 per year. For new parents, we've introduced Australia's first national paid parental leave scheme that helps families look after newborn babies at a time when incomes go down and costs go up. For people with kids in child care, we've increased the childcare rebate from 30 per cent to 50 per cent for out-of-pocket childcare expenses and made payments more frequent, providing families with up to $7,500 per child each year towards childcare costs. For families with school age children, we've introduced the Education Tax Refund worth more than $400 for each primary school student and more than $800 for each secondary school student to cover the cost of books, stationery, computer equipment and – since July 1 – school uniforms. For pensioners, we've delivered the biggest boost to the pension in our history with the maximum rate increasing by about $148 per fortnight for singles and $146 per fortnight for couples combined over the past two years.

But it's not just what we've done so far that is helping households with tight budgets – it's also what we will deliver in the year ahead. From next month, families with teenagers aged 16 to 19 years who are studying will see an increase in Family Tax Benefit Part A of up to $4,200 a year, recognising the higher costs as children get older and the need to encourage more teenagers to stay at school. In May and June, people will receive increases in family payments, pensions and youth allowances to help with the modest price impact from the introduction of a price on carbon pollution. And from July, we'll triple the tax-free threshold to more than $18,000, delivering a tax cut to everyone earning up to $80,000 and freeing around 1 million people from the burden of having to lodge a tax return. Nine in ten Australian households will receive tax cuts, payment increases or both as part of the Clean Energy Future package, and over 4 million households will be better off with a buffer of at least 20 per cent over their average price impact. By keeping the economy strong and Australians in work, we're able to deliver real benefits like these to help working families and individuals with cost of living pressures.

We've also been determined to help Australian businesses, particularly those which aren't in the fast lane of the mining boom, and which feel the impacts of a high dollar and cautious consumer spending. Small businesses will see a major new tax benefit with the introduction of an instant write-off for any asset worth up to $6,500 and the first $5,000 for cars, vans and utes. We're also cutting the company tax rate for all Australian businesses and we convened the really successful Tax Forum this year where government, business, union and community leaders  all debated the next steps forward in our tax reform journey.  We're now doing some important work emerging out of that Tax Forum on the tax treatment of losses and have set up a Business Tax Working Group to harness the expertise of Australian businesses.  The centrepiece of this year's Budget was a massive $3 billion investment in skills and training, with a new focus on reforms to ensure we're delivering the skilled workers businesses need.  Along with substantial new measures to boost workforce participation, it was good to see these measures widely welcomed by the business community. Of course we'll keep working together with the business community – just as we did when we moved to keep the country out of recession and keep customers coming through the doors of Australian business – to ensure the Australian economy remains amongst the strongest in the world.

A Vision for the Future

Tuesday marks the 20th anniversary of Paul Keating's prime ministership. Like Andrew Fisher, Paul was focused on reforms to secure the nation's long-term prosperity in the interests of all Australians. Along with Bob Hawke, he floated the dollar, tore down the tariff wall and introduced the superannuation guarantee – all essential to helping create the open and competitive economy we have today. The Keating Government recognised our nation's strengths and sought to best position our economy to benefit in the changing world. An example of this was how the Keating Government embraced Australia's position and economic future in Asia, and helped build stronger ties in the region through forums like APEC. Our exports to Asia have more than quadrupled since then. Within a few years, the Asian middle class will be bigger than that of the rest of the world combined. The shift of economic power from West to East is creating challenges for Australia as well as tremendous opportunities, more profound than we could have realised just 20 years ago. That is why the Government has commissioned a White Paper on Australia in the Asian Century, which will be considered by Cabinet in the first half of 2012.

The actions of the Hawke-Keating Governments underpinned Australia's last two decades of uninterrupted economic growth. Today, the Gillard Government is carrying the reform torch forward on reforms that will set Australia up for generations to come. Whether it be building the superfast National Broadband Network, creating a clean energy future by pricing carbon pollution, or spreading the windfalls of the mining boom to every corner of the country, these are reforms all made possible because they are built on a platform of fundamental economic strength. Like the Labor reforms of the past 100 years, these next reforms are ultimately about creating and protecting jobs, supporting families, and lifting the living standards of all Australians.

Wayne Swan
Acting Prime Minister and Treasurer of Australia
Sunday 18 December 2011

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