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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

27 May 2012

Treasurer's economic note

Australia has always seemed a long way from Europe. If anything, recent events should make that distance feel greater than ever. We don't suffer crippling levels of unemployment - indeed, the jobless rate in Australia is less than half that of the euro area. We haven't experienced a collapse in business investment - quite the opposite, figures out during the week show planned investment in resources going from strength to strength. We're not burdened by anaemic government finances - in fact, public debt is a small fraction of that of Europe and our budget is returning to surplus  in 2012-13. We don't have a gridlocked political system - far from it, Parliament has passed more than 270 bills in this term alone. And we haven't suffered a deep and damaging recession in the aftermath of the global financial crisis - in fact, the economy has expanded by more than 7 per cent on pre-crisis levels and around 800,000 jobs have been created since Labor came to office. While it's natural to be concerned by the ongoing global turbulence and its impact on our financial markets and our economy, we need to appreciate how different our situation is here at home. We should never lose sight of our strong fundamentals, the resilience of our workers and businesses, and our proven track record of dealing with global instability.

A standout economy

During the week, the OECD confirmed that Australia stands tall on the global stage. We're expected to perform more strongly than every single major advanced economy over the next two years, with the OECD forecasting growth of 3.1 per cent this year and 3.7 per cent next year. By contrast, the OECD expects a fragile recovery in many other advanced economies, largely due to the lingering effects of past global turmoil and very challenging economic conditions facing Europe. Like the International Monetary Fund, the OECD has applauded the Government's commitment to return the budget to surplus, stating that "restoring fiscal leeway while macro-economic conditions are still favourable, and the terms of trade high, is welcome."

Our bright economic future was underscored by a separate report  out on Thursday showing the investment pipeline in the resources sector continuing to strengthen. In just six months, the total value of projects under way or on the drawing boards has grown by more than 10 per cent to reach a new record high of half a trillion dollars. Over half of this is at an advanced stage, providing a bedrock of support to our national economy in these uncertain global times. Mining companies are continuing to invest in new projects and expand production in full knowledge that the Minerals Resource Rent Tax and a price on carbon pollution will commence in just over a month's time. It shows that, despite the endless scare mongering and ridiculous claims made over the past few years, Australia's resources sector has a fantastic future.

Unfortunately we see a similar level of absurdity in commentary about our economy where the very same people who talk down our prospects then bemoan a lack of confidence. They pretend only governments have a role to play in boosting confidence, when in reality it's the responsibility of everyone to spend as much time talking about our immense opportunities as our challenges. Instead, we too often see the equivalent of a political strategy described in the United States as 'throwing sand in the gears' of the economy then complaining it doesn't work. Of course, I welcome a robust policy debate, but behaving as if our economy is in the grips of crisis or in terminal decline is not only patently false, it's deeply irresponsible. It's bad for Australian businesses and bad for Australian jobs. What's more, it prevents us from having the considered and constructive discussion we really need about our economy and where it's headed. Almost alone in the world, we have the opportunity to convert our current economic success into lasting gains. With the right policies, we can continue to grow our economy and deliver a fairer go for millions of Australians.

Helping pensioners make ends meet

This Government has a proven track record of helping households on low and middle incomes make ends meet. Our historic reforms to the pension system in 2009 increased payments and improved indexation arrangements to ensure pensions kept in step with the cost of living. Building on this, pensioners from tomorrow  will receive advance payments of $250 for singles and $380 for couples combined as part of the Clean Energy Future package. I know most pensioners are on tight household budgets so these early payments will deliver some much-needed peace of mind. From March next year, the assistance will be paid at the same time as the regular pension, worth an extra $338 for singles and $510 extra for couples combined each year.

The introduction of the carbon price will have only a modest impact on prices - in fact less than a third of the effect that the GST and related changes had more than a decade ago. The increased pension payments will cover the entire average price impact on food, utilities and all the other daily costs, and in fact most pensioners will come out in front. On average single full-rate pensioners will have an extra $2.60 in their pocket each week and couples an extra $3.90.

Building a fairer society

A strong economy is about a lot more than the gross domestic product. At its core, a strong economy is about building a fairer society. That's why I was interested to see the results of another OECD report out during the week. The Better Life Index  goes beyond the traditional measures like GDP to look at health, housing, education, the environment and a range of other measures that affect quality of life. Pleasingly, Australia topped the list, ahead of Norway, the U.S., Sweden, Denmark and Canada, when each of the 11 categories is given equal weight. While there's always more work to be done, all Australians can rightfully be proud of the nation we have built together.

Over the decades it has been the reforms of Labor governments that have put in place the foundations that have improved the quality of life for all Australians - things like Medicare, superannuation and paid parental leave . I'm proud that in the Budget this month we've continued this tradition with measures such as laying the foundations for a National Disability Insurance Scheme, our aged care reforms, and delivering the Schoolkids Bonus. These reforms are about a lot more than providing better services or putting extra dollars in people's pockets. They are about creating a society that provides opportunity to more people, a society that lifts up those most in need, and a society that gives everyone a decent shot at a decent life.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia

www.treasurer.gov.au
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