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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

5 August 2012

Treasurer's economic note

As the Olympics show, we're a nation that rejoices in seeing our own do well on the world stage. The same applies to Aussies exceling in other fields – whether it be in science, the arts or business. Part of the reason we're so proud when one of our own makes good is that it reflects well on us all. Each individual success demonstrates the success of the society we've built together. It shows the strength of our schools, our universities, our hospitals, our infrastructure, our institutions – it's something we can all take great pride in. Of course we also understand that not everyone wins a gold medal or makes it in Hollywood or becomes a billionaire. Our national ethos is that everyone should have the opportunity to make the most of their abilities. Success should be determined not by where you were born or who your parents are, but by enterprise and effort. This is why we've been so determined to preserve the idea of the fair go in Australia.

A land of hope and dreams

But as much as we'd like to think otherwise, the fair go has never been guaranteed. It's something we've always had to fight for. Over the decades, the fair go has been protected and extended by things like the introduction of the aged pension, workers compensation, superannuation and Medicare. And in recent years, this has continued with Paid Parental Leave, aged care reform, uncapping university places, putting in place a mining tax to spread the opportunities of the boom, pricing carbon pollution and assisting families to adjust to the impacts, and laying the foundations for the National Disability Insurance Scheme. It was also the spirit of the fair go that underpinned our response to the global financial crisis, protecting Australians' jobs and keeping the doors of small business open. The role of the labour movement in championing social mobility and fighting inequality over more than a century is what drew me to the party back in 1974. That's something I spoke about in my maiden speech to Parliament nearly 20 years ago, it's something I wrote a book about seven years ago, and it's something I talked about at length again during the week. It's the fight that keeps me going every day. When more people can gain the skills, knowledge and training they need to succeed, we all benefit. There's more ambition, more wealth creation and more prosperity for us all to enjoy.

Whether I'm visiting a board room or a factory floor, the two facts I like to repeat are that under this Government around 800,000 jobs have been created and we've grown our economy by nearly 10 per cent since before the GFC. It's a simple way to show not only has prosperity been created but it's also been shared. These two achievements are even more impressive when you consider they've occurred against the backdrop of the worst global downturn since the Great Depression, with 27 million jobs lost around the world and many advanced economies not even back at the starting line. All Australians can rightfully be proud of our gold-medal winning performance. And during the week we saw more positive economic data, with the second consecutive month of strong, broad-based growth in retail sales. It was particularly encouraging to see that in through the year terms, retail volumes are now growing at their fastest pace in three years. While there will always be challenges, this is another reminder that we have the best combination of solid growth, low unemployment, a record pipeline of investment, healthy consumption, contained inflation and lower interest rates.

As well as sharing the gains of economic growth, Australia has done a good job at preserving economic and social mobility – the idea that success can be determined by effort, not by where you were born or the wealth you inherit. Across 17 OECD economies, Australians in the bottom 20 per cent of income earners are the equal third most likely to lift themselves out of that situation within three years. Canadian economist Miles Corak has surveyed a wide range of studies into mobility across generations by looking at the extent to which a father's income is a predictor of what his son will earn. In the graph below, the lower the value the less a son's income is determined by his father's. It shows that economic mobility is twice as great in Australia as in the U.S. and the U.K.

Extent to which a father's income is a predictor of what his son will earn

Extent to which a father's income is a predictor of what  his son will earn

Another indicator that's received a lot of attention over the past year is the rising share of global income going to the top 1 per cent. In Australia, my parliamentary colleague and a former economics professor Andrew Leigh has led the discussion of this topic, as well as producing the findings on social mobility in Australia. His Australian research shows that shortly after the Second World War, we were roughly equal with the U.S. and the U.K. in the percentage of total income going to the top 1 per cent – around 10 per cent. There was a steady decline in that share in all three countries until the early 1980s, but since then we've seen the trend reverse. The latest data has Australia's richest receiving an 8.9 per cent share – around half the level in the U.S. and well below the U.K. It shows although we're more equal than other countries, we will still need to work hard to retain the fair go and the fair society that we have built together.

Income share of the top 1 per cent (%)

Income share of the top 1 per cent (%)

Advancing the fair go

As with my essay in The Monthly earlier this year, I've been really pleased my speech has helped generate such a lively discussion in the community. I welcome the contributions of everyone, whether I agree with them or not. Everyone deserves a say in our economic debates, just as everyone deserves a stake in our economic success. Businesses, industry associations, community groups and unions are of course entitled to have their say too and to put forward their views forcefully. As I discussed in the speech and in the essay, what I'm concerned about are the tiny minority that use their vast wealth to try to prevent the benefits of the mining boom being spread to all Australians. We shouldn't forget the important policy outcomes at stake in this debate. The Minerals Resource Rent Tax is delivering substantial tax relief for small business, higher family payments, vital infrastructure and a more secure retirement for Australian workers. Those benefits should not be lost to the Australian people so that a handful of extremely wealthy people can get a massive tax cut – which is what will happen if those opposing the MRRT ever get their way. We are at too important a phase in our nation's development to let a tiny minority manipulate the public debate and stymie vital public policy reforms that will help strengthen and broaden our economy, preserve social mobility, and help us build on our very good record of growth in difficult global times. We've got some big opportunities ahead of us, as well as some big challenges. Only with the right decisions can we keep building not only a stronger economy but a fairer society as well.

Wayne Swan
Acting Prime Minister and Treasurer of Australia

www.treasurer.gov.au
twitter.com/SwannyDPM