The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

12 August 2012

Treasurer's economic note

When fewer people have the opportunity to play their full part in society, there is less achievement, less wealth creation, and less prosperity all round. We've seen this play out in many parts of the developed world in recent years – a vicious cycle of stagnant economic growth, skills destruction and social dislocation. Providing more people with the opportunity of employment is not only important for reducing inequality and increasing individual living standards, but also for ensuring long-term, sustainable economic growth.

A focus on employment

As a Labor Government, we've been focused on the creation and protection of jobs since day one. Thanks to the cooperation and determination of businesses and workers, not only were hundreds of thousands of Australian jobs protected during the depths of the global financial crisis, but hundreds of thousands more have been created in the years since. In fact, an extra 810,000 Australians have gained the dignity and security of paid employment since Labor came to office. That's an extraordinary achievement for a nation of less than 23 million people. Even more so when you consider that it's come during a period of unprecedented global volatility that has seen around 27 million people join the world's unemployment queues. It's worth contemplating what could have happened in Australia.

Over the same period in which Australia has created 810,000 jobs, around 5 million Americans and 8 million Europeans have become unemployed. If Australia's jobs record had been replicated abroad, an extra 15 million Americans and 16 million Europeans would be in work today. You can see in the following graph that while our employment levels have grown significantly in recent years, the U.S. and Europe have yet to recover the millions of jobs lost in the aftermath of the GFC.

Employment growth in Australia, the US and Europe

While the unemployment rate moves around from month to month, we need to keep our jobs record in perspective. Our unemployment rate is among the lowest in the industrialised world, and less than half that of Europe. In fact, it's less than a quarter of that of some European nations. During the week, we saw Greece's jobless rate rise to a record high of 23.1 per cent. Even more concerning is the fact that some parts of Europe have youth unemployment levels of around 50 per cent. Without the prospect of a job, millions of young people are being denied the opportunity to become self-reliant, learn valuable skills and make a contribution to their communities. For these nations, there is a very real risk of a lost generation.

A better banking deal

As well as Australia's tremendous record on jobs, it's pleasing to see the positive results from other actions we've taken since the GFC – like our banking reforms. Since the package was announced in December 2010, smaller banks have captured an estimated $17.7 billion in home lending business from the big banks. And the non-major banks have grown their home lending at almost three times the rate of their bigger rivals over the past year. The measures to build a more stable, secure and competitive banking system include:

  • Banning mortgage exit fees on new home loans;
  • Investing more than $15 billion in residential mortgage-backed securities to help fund more than 215,000 home loans and allow smaller lenders to increase competitive pressure on the big banks;
  • Introducing covered bonds that have allowed non-major banks to access cheaper, longer-term funding to help them compete;
  • Establishing a permanent Financial Claims Scheme to protect deposit funding which smaller lenders rely on much more heavily to make home loans and small business loans;
  • Introducing new mandatory one-page fact sheets for home loans so consumers can compare apples with apples, making it easier to shop around and figure out who's offering the best deal;
  • Passing historic credit card reforms to crack down on unfair treatment of Australians with credit cards and save Australians money on repayments; and
  • Bringing in a new 'tick and flick' service to give Australians the freedom to switch deposit accounts with the stroke of a pen.

Reforms like these are all about turning up the heat on competition in the banking sector and putting power back in the hands of consumers. The ban on mortgage exit fees means that if Australians don't like a decision their bank makes, they can now walk down the road and look for a better deal. Around $160 billion worth of mortgages have been taken out completely free of exit fees since the ban began last year. And by the end of next year, nearly 2 million Australians will have a mortgage completely free of exit fees. This means banks increasingly have to earn the loyalty of their customers. So if you're not happy with your current bank, I'd encourage you to look around at what else is on offer. Even though the Reserve Bank kept the official cash rate on hold during the week, it's worth remembering we've already had the equivalent of five interest rate cuts since November. That's substantial relief for millions of households and businesses. In fact, a family on a $300,000 variable mortgage is today paying around $4,000 a year less in repayments since Labor came to office.

A position of strength

There's no denying many Australian businesses and workers are doing it tough with the high dollar, heightened global uncertainty and structural changes in our economy. But – as I discussed with a group of business leaders yesterday – it's important to keep in mind that we face these challenges from a position of unrivalled strength. On Friday, the RBA again highlighted these strong fundamentals, upgrading its growth forecast for 2012 to above trend growth, and pointing to stronger than expected employment growth, and low inflation outcomes which partly reflect a recent improvement in productivity. Of course, we should never view the world through rose-coloured glasses, but when a handful of prominent people refuse to recognise our economy's strong foundations – and instead talk our economy down – it just makes life harder for Aussie businesses and households, and – more broadly – makes it harder to make the most of our nation's opportunities. Instead, if we acknowledge our strengths as well as the challenges we face, we can convert our current economic success into enduring gains, building a stronger economy and a fairer society for all Australians.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia