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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

20 May 2012

Treasurer's economic note

After months of poring over the numbers and details, it was great to finally get out and about during the week to talk about the Budget and what it all means for families, businesses and communities across the country. It's probably the part of my job I like most – discussing budget policies in action on the factory floor, in the boardroom, in the class room, in the hospital ward, and around the kitchen table. While there may be other issues occupying the political debate on any given day, what the people I met really wanted to talk about was the role the Budget could play in building a stronger economy and a fairer society for all Australians.

Delivering for All Australians

The response to the Budget from Australians from all walks of life has been pretty heartening. Like the parents I met, who have welcomed the Schoolkids Bonus that will help pay for uniforms, books, excursions and all the other myriad of expenses that come with getting their kids through school. Like the families, pensioners and students, who are looking forward to higher payments as part of the Clean Energy Future package to help make ends meet. Like the small business owners, who know they'll be able to instantly write off refrigerators, furniture and any other new business asset worth up to $6500 from July 1, or the first $5000 of a car, ute or van. Like the executives, who have praised the loss carry-back initiative that will help companies get through hard times and invest to take advantage of new opportunities, as well as measures that lift workforce skills and participation. Like the Australians with a disability and their carers, who know the time has come for our nation to do a better job delivering the services and support they need. Like individuals and families who support reforms to increase quality and choice in our aged care system. And like millions of households and businesses, who are enjoying lower interest rates that the Budget's return to surplus is helping deliver.

The Shift to Clean Energy

The Government is also taking steps to build a stronger economy by putting a price on carbon pollution from July 1. This will drive innovation to find better, less polluting ways of producing power, goods and services. Carbon-intensive energy will become more expensive and clean energy cheaper. Australia generates more carbon pollution per person than any developed country in the world – more than the United States and about five times more than China – so we don't have any time to waste in preparing for the clean energy future. If Australia's businesses and industries were to remain locked into old practices and defer investments in cleaner, more efficient technology, our economy would slip behind our international competitors. A failure to act is the real risk to Australian industries and Australian jobs.

During the week, Australian families on low and middle incomes started receiving extra assistance ahead of the introduction of the carbon price. As I've said many times before, the impact on cost of living will be modest. On average, households will see cost increases of $9.90 per week, while the average assistance will be $10.10 per week. Almost 6 million households will be assisted to meet their entire average price impact, and over 4 million households will be better off with a buffer of at least 20 per cent over their average price impact. By taking simple steps to reduce energy use, such as turning appliances off at the wall, households can pocket the additional assistance they receive and end up further in front. This shows you can do your bit to help the environment and help your family budget at the same time.

Families on Family Tax Benefit Part A have already started receiving Clean Energy Advance payments into their bank accounts of up to $110 for each child and in addition those on Family Tax Benefit Part B will get up to $69. Pensioners, students and other eligible payment recipients are also set to receive increases in their support payments before the end of June. On top of this, every taxpayer earning up to $80,000 a year will receive a tax cut, with most getting at least $300 annually. This saving is being delivered by a tripling of the tax‑free threshold from $6000 to $18,200 from July 1. As well as helping with the cost of living, this major reform will free around 1 million Australians from having to lodge a tax return. Regular wage earners with incomes below the new tax-free threshold will not have any tax withheld from their wages by employers, which will mean higher take-home pay and better incentives to work.

Europe's Difficult Road Ahead

It's been a rough few weeks on global financial markets, including on our own share market. As I've been saying for many months now, these bouts of volatility are likely to be with us for some time to come given the profound challenges facing Greece and many other parts of Europe. Determined, consistent and continuing action will be required by European policymakers to deal with the sovereign debt crisis, get their budgets back on a sustainable footing, and restore growth. Data out during the week showed Europe's economy remained stalled in the March quarter, with solid growth in Germany offset by contractions in both Italy and Spain. The Budget takes a conservative view of Europe's economic outlook, with the euro area forecast to contract by ¾ of a per cent in 2012.

Of course, Australia is not immune from events in Europe – as the Budget showed government revenues have been written down by a staggering $150 billion since the onset of the global financial crisis. But it's important we don't lose sight of the fact that our economic credentials are among the strongest in the world: we have one of the lowest unemployment rates in the developed world, we have sturdy public finances with very low public debt, we have a AAA credit rating from all three major ratings agencies for the first time in our history, we have contained inflation, we have a huge pipeline of mining investment, and we have a budget returning to surplus next financial year ahead of every single major advanced economy. These strong fundamentals are the reasons why we're able to get on with the big reforms like pricing carbon pollution and building a National Disability Insurance Scheme, while at the same time delivering support to help make ends meet for families on low and middle incomes. By keeping our economy growing and keeping Australians in work, we're able to put in place the foundations to build an even stronger, fairer society.

Wayne Swan
Acting Prime Minister and Treasurer of Australia