Deputy Prime Minister and Treasurer
3 December 2007 - 27 June 2013
Treasurer's economic note
As the Prime Minister noted during the week, it's worth comparing our employment situation to that of the United States. Since Labor came to office, around 700,000 more Australians are in work. Over the same period, six million people have joined America's jobless queues. If the U.S. had matched our job creation record, an extra 15 million Americans would be in work today. The comparison shows that despite the volatile global conditions, our economy walks tall in the world. We have solid growth, contained inflation, strong public finances and a huge investment pipeline - this was all highlighted by the Reserve Bank of Australia in its Statement of Monetary Policy on Friday.
A focus on jobs
The Labor Government has been focused on keeping the economy growing to support and create jobs since day one. This approach underpinned our response to the global financial crisis, which helped keep the doors of business open and hundreds of thousands of workers in jobs, bringing home pay packets to their families. The success of our strategy is clear today. The economy has grown about 7 per cent since the global financial crisis, while many other developed nations have yet to make up the ground they lost, and our unemployment rate remains lower than every major advanced economy except one. Certainly, the slowing in the global economy is having an impact on our economy. We've seen this in the recent slowing in employment growth. With the increased level of international uncertainty, businesses are understandably a little more hesitant in their hiring decisions, and are instead giving their existing employees a few extra hours of work each week. Had employers met the increase in labour demand by hiring new employees, we would have seen nearly 100,000 additional jobs created in Australia over the past year.
The weaker global conditions combined with the high Australian dollar has also resulted in job cuts at a number of companies in recent weeks, particularly in trade exposed-sectors like manufacturing. Obviously we'll offer affected workers all the help we can to get them back into the workforce as soon as possible. We also have a range of policies to assist specific sectors boost their competitiveness and move to more economically-sustainable models. But we shouldn't pretend that there's a simple solution. The affected businesses will need to do more to adapt, to improve their efficiency, to spot new opportunities, to find new markets, and to design new products.
A future for manufacturing
I have no doubt manufacturing will continue to be an essential part of the Australian economy. In fact, extensive Treasury modelling shows output from the sector will be around 5 per cent larger by the end of the decade. There has been a shift to high-value manufacturing in Australia in recent decades and this trend will continue in the years to come. Unsurprisingly, given the mining boom and the current pipeline of investment, output in the resources sector is expected to increase by around 77 per cent by 2020. And our services sector is expected to grow by a hefty 38 per cent as Aussie businesses develop new ways to capitalise on the rising wealth and rapidly growing markets of consumers, not just in China but right throughout our region. There's no doubt Australia will remain a nation that makes things, but the type of manufacturing will continue to change just as all industries continue to change.
One of the important ways we're helping manufacturers and other industries under pressure from the high dollar is through tax reform. For instance, one of the purposes of the Minerals Resource Rent Tax is to help those businesses that aren't in the fast lane of the mining boom. Revenue from extremely profitable mining companies will go towards a cut in the corporate tax rate and provide a major tax break for Australia's 2.7 million small businesses. From 1 July, small businesses will be able to immediately write-off each asset they buy worth up to $6,500 - things like a computer system or office furniture.
We're also looking at potential reforms to the tax treatment of losses as a way to encourage investment, particularly in struggling businesses. By removing barriers to investment, the tax system can help provide businesses with a new lease of life. The independent Business Tax Working Group is looking at potential options and is scheduled to report back to me next month.
The working group was established to further some of the ideas that came up at last October's Tax Forum. Another specific area of reform discussed at the Forum was to do with improving tax concessions for the not-for profit sector. Today Assistant Treasurer Mark Arbib and Minister for Social Inclusion Mark Butler have announced a new working group to examine the current range of tax concessions provided to the sector and whether there are fairer, simpler and more effective ways of delivering the current envelope of support. I look forward to hearing the views of the Working Group, particularly given the sector does such important work in the community.
With many businesses and households doing it tough, a lot of people are justifiably angry that some of our hugely profitable banks aren't doing the right thing by the community. Even though a family with a $300,000 mortgage is still paying around $3,000 a year less than when we came to government, I suspect many families this weekend will be having a very close look at the deals on offer from other lenders, some of which are around a full percentage point lower. Our competition reforms - such as banning exit fees - are making it much easier for customers to walk down the road and get a better deal elsewhere. I'd encourage customers who aren't happy with their bank to vote with their feet.
Queensland and NSW floods
The Prime Minister yesterday visited some of the communities hit by floods in recent weeks. We're working closely with our state counterparts in Queensland and New South Wales to make sure those communities get the help they need as quickly as possible. So far we've provided more than $12.9 million in disaster recovery payments to provide immediate relief. Despite the terrible impact on affected communities, we're not expecting the flooding to have a significant impact on the national economy at this stage. While the heavy rainfall has resulted in the temporary closure of several rail lines and caused disruption to some coal mines, it hasn't caused any significant disruptions to major coal mining operations in the Bowen Basin or the Hunter Valley. And while some crops are likely to be affected by the damage to farm land, Treasury advises the impact on the supply and prices of fresh produce is not expected to be great. Of course, the main focus at the moment is on the affected families and individuals. If you have the capacity, I'd encourage you to make a donation to the Salvation Army Flood Appeal or the Queensland Premier's Flood Appeal . Earlier this month at a commemoration of Cyclone Yasi in Tully in Far North Queensland with Premier Bligh, I was struck by how many people came up to me and asked me to pass on their thanks to the broader Australian community for everyone's extraordinary generosity in tough times. I'm sure Australians will again show their incredible support for the communities hit by this latest disaster.
Deputy Prime Minister and Treasurer