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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

13 May 2012

Treasurer's economic note

Putting together a Federal Budget is one of the biggest privileges any person can have in public life. For me, this Budget was an opportunity to keep our economy walking tall in the world, but also put in place a set of policies that embody everything the Government and the Labor movement stands for, and which I've spent my whole political life fighting for. We're delivering four years of growing surpluses to build a buffer against global uncertainty and give the Reserve Bank room to cut rates further if it thinks that's necessary. We delivered a new 'Benefits of the Boom' package to provide real cost of living relief to families and small businesses that too often don't feel the direct benefits of the resources boom. And despite more revenue write-downs – now around $150 billion since the global financial crisis struck – we also found room for really important reforms to strengthen our community, like aged care, the first steps towards the National Disability Insurance Scheme, and a blitz on dental waiting lists.

Just two days after the Budget, we got a clear demonstration of what strong economic management is all about. Figures out on Thursday showed more people are in the workforce than ever before – just over 11.5 million Australians. Nearly 90,000 more people have gained the security and dignity of a job so far this year, taking the total number of jobs created since Labor came to office to around 800,000. It's a tremendous result for our nation, particularly when you consider over the same period about 27 million men and women have joined unemployment queues elsewhere in the world. It's another indication of our economy's resilience despite the pressures of the high dollar, cautious consumer spending and ongoing global uncertainty that are weighing on many businesses. While employment data moves around from month to month and the unemployment rate may tick up slightly in the period ahead, it's important we don't lose sight of how different our situation is to most other developed economies. Australia's unemployment rate at 4.9 per cent is among the lowest in the industrialised world, and streets ahead of the United States at 8.1 per cent, the United Kingdom at 8.3 per cent, France at 9.8 per cent, and Spain at 24.4 per cent.

It's not just our employment record that puts Australia in a league of its own. We're returning the budget to surplus in 2012-13 before many of our peers have even halved their deficits. Our economy is forecast to grow faster than every single major advanced economy over the next two years. We're rated AAA by all three major credit rating agencies – reaffirmed during the week. We have contained inflation, which has given the independent Reserve Bank scope to cut interest rates. And we have an unprecedented pipeline of investment in our resources sector.

Spreading the Benefits of the Boom

But the Government understands that not everyone is sharing the benefits of a growing economy. For many Australians, it feels like it is someone else's mining boom. That's why Tuesday's Budget contained important measures to help households make ends meet. Because of the lack of parliamentary support for our planned cut to the company tax rate, we've redirected funds to those on low and middle incomes in a way that also helps the economy, including small businesses. More than 1.5 million families will benefit from increases to Family Tax Benefit Part A from July 1 next year, with nearly half of those taking home an extra $600 a year. And a new supplementary payment will help the unemployed, students and parents on income support meet the cost of essential bills, worth $210 a year for singles and $350 a year for couples. This package, combined with the new Schoolkids Bonus, will provide around $5 billion in support to households that will in turn support consumption, business activity and jobs across the economy. Of course, this builds on the assistance we've already announced as part of the Clean Energy Future package that will see increases in family payments, allowances and pensions begin flowing over the next few weeks, as well as tax cuts for all taxpayers earning up to $80,000 a year from July 1 through a tripling of the tax-free threshold.

The Government also understands the pressures weighing on businesses, such as manufacturers, tourism operators and retailers, outside the fast lane of the mining boom. That's why the Budget introduces a loss carry‑back initiative to allow companies to get support when they need it most and to encourage them to invest and adapt to our economy in transition. Under the scheme, companies will be able to use a tax loss of up to $1 million to get a refund of up to $300,000 against tax paid in previous years. For example, a café or restaurant on a tourist strip doing it tough will be able to get the funds they need to refurbish and keep on staff so they're ready for when conditions pick up. Or a small manufacturer will be able to get funds to invest in tools and equipment to take advantage of new opportunities, find new markets, and make new products. Together with the $6,500 instant asset write-off for all small businesses which will deliver a cash-flow boost to small business worth around $1 billion in the first year, this reform will encourage innovation and investment across the economy. We will continue to work towards further potential business tax reforms, including lowering the company tax rate, provided they are fully funded and have the necessary support in the Parliament. That's why we're continuing to work with the business community through the Business Tax Working Group, which will produce its final report later this year.

Building a Fairer Society

This Budget shows you don't need to choose between a surplus and good social policy that will strengthen our community. In fact, it's only through responsible budget management that we can put in place long-lasting sustainable reforms to build a fairer society. I'm talking here not only about the funding in the Budget for aged care reform and the dental package, but also for the first stage of the National Disability Insurance Scheme. This will provide Australians with a significant and permanent disability with the care and support they need to participate in society, no matter where they live or how they acquired the disability. As the country's most fundamental social policy reform since Medicare, this will take some time to implement as we work through the details with state and territory governments. From July 2013, launch locations around the country will start to lift the standard of help for around 10,000 people with a significant and permanent disability – growing to 20,000 people from mid-2014.

Support for Reforms

In the last few economic notes, I've noted the support from economists and business groups for our fiscal strategy. It was also pleasing this week to see the positive response to the Budget from a really diverse range of industry groups and organisations stretching right across the community. Master Builders, which represents 33,000 companies in the building and construction industry, said the return to surplus "sends the right message to international investors that Australia can run a disciplined fiscal strategy which in turn better positions the nation to withstand any further global shocks to the economy [and] the planned surplus should help the Reserve Bank find room to move further on interest rates. UnitingCare, one of Australia's largest community service providers, called it a "fiscally responsible and fair" Budget that "promises a brighter future" for many Australians: "Investment in aged care reform, rolling out the National Disability Insurance Scheme, and better access to dental services for low income and disadvantaged Australians are particularly welcome initiatives. And Margy Osmond of the Australian National Retailers Association said it was a good Budget for retailers doing it tough: "What this Budget will do is put the money where it needs to be and that's in the hip pocket of Australian families.

One of the aspects I like most about the budget process each year is the opportunity to talk directly to people about how the various budget measures affect them, their families, their businesses and their communities. Over the next week I'll be travelling across the country to do just that. This is a balanced Budget, but it's a fair go Budget as well. One that shows it's only by building a stronger economy that we can create a fairer society.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia

www.treasurer.gov.au
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