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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

9 September 2012

Treasurer's economic note

A young man or woman turning 21 today has never lived during a time of recession in Australia. And very few people aged under 40 have ever had to endure a recession in their adult life. It's easy for us to underestimate both the significance of this achievement as well as the level of hardship that a recession can cause in a society. The National Accounts  on Wednesday were an opportunity to pause and reflect on Australia's remarkable economic performance over the past two decades and particularly in the four years since the global financial crisis first struck. It was a reminder that even in the face of many challenges 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.

Ahead of the world

The Australian economy grew faster than every single major advanced economy both in the June quarter and over the year to June. It was particularly pleasing to see that growth was broadly based:

  • Household consumption rose, supported by low unemployment and rising incomes, though global turbulence continues to weigh on consumer confidence;
  • New business investment climbed, hitting a 40-year high as a share of GDP, as companies continued to invest in the future;
  • New engineering construction reached a record high, with overall engineering construction 60 per cent higher over the year;
  • Public demand increased, underpinned by investment in rail and energy infrastructure and the roll-out of the National Broadband Network; and
  • Net exports made their largest contribution to quarterly GDP growth in over three years. There were higher shipments of commodities, with iron ore export volumes hitting a new record in the quarter.

While some parts of our economy are under pressure from global uncertainty, the sustained high dollar, lower commodity prices and other structural changes, we need to keep things in perspective. The results of the past week show we've got the best combination of solid growth, low unemployment, healthy consumption, contained inflation and lower interest rates .

On top of this, we also have an enormous pipeline of investment, with a record $260 billion either committed or already under construction. Whether it's for new projects or existing assets, Australia has always been a capital-hungry nation. We rely on funds from overseas to help generate jobs, build businesses and create prosperity. Of course, we also have a strong and robust system in place to ensure foreign investment is consistent with Australia's national interest. That was the case this month with the approval of a proposal to acquire the Cubbie Station. The business had hit some tough times and there had been a cloud over its future for a long time. New investment is needed to protect jobs and support ongoing economic activity in the Dirranbandi and St George regions. I've detailed strict undertakings attached to the proposal covering issues such as employment, board composition and water use, and ensuring the business continues to be run on a commercial basis by Australian-based management.

21 years of growth

The June quarter results also confirmed Australia's unbroken 21-year stretch of growth - a record no other advanced economy comes even close to matching.

Years of consecutive growth to date

Years of consecutive growth to date

Unlike most other advanced economies, Australia didn't fall into recession during the GFC thanks to our successful stimulus response, together with the hard work and resilience of the Australian people. The benefits of this have been much longer lasting than many people realise. By avoiding recession, we avoided the downward spiral of business closures, job losses, skills destruction, and social dislocation that occurred on both sides of the Atlantic. This month Federal Reserve Chairman Ben Bernanke  drew attention to the lasting toll of the downturn in the U.S.:

The stagnation of the labour market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.

Early yesterday morning we saw more disappointing labour force figures out of the U.S., where recent employment growth hasn't been enough to replace the jobs lost in the aftermath of the GFC. Here at home, the success of our stimulus not only kept Australian workers in jobs and the doors of Australian businesses open during the depths of the global downturn, it also secured the foundations that have underpinned our continuing economic success. As a result around 800,000 more Australians are in work since this Government came to office, while in America around 5 million people have joined the nation's unemployment queues. And while our economy is 11 per cent bigger since the Government came to office, major economies like the U.K., Japan, France and Italy haven't even made up the ground they lost during the GFC.

A focus on jobs

Data on Thursday showed Australia's unemployment rate edged down to 5.1 per cent in August. While the figures move around from month to month, the big picture is that our unemployment rate is amongst the lowest in the industrialised world. In stark contrast, the same day we learnt Greece's jobless rate rose to a record high of 24.4 per cent. Most disturbingly, around 55 per cent of Greece's youth are unable to find work. The terrible impact of Europe's economic crisis on youth unemployment was highlighted in a report during the week from the International Labour Organization . Without the prospect of a job, a rising number of young people around the world are being denied the opportunity to learn valuable skills and make a contribution to their communities.

Europe's policymakers must continue their efforts to support economic growth and job creation, and recapitalise their banking system, while putting in place a credible medium-term framework for reducing excessive sovereign debt levels and boosting competitiveness through structural reform. The European Central Bank's announcement on Thursday of further measures to stabilise sovereign bond markets was a positive development, but it's absolutely vital that Europe's political leaders use this window of opportunity to stabilise the path of the region's troubled economies. Determined, decisive and consistent action will be required to restore hope and prosperity for Europe's millions of unemployed.

A better school for every child

Investing in education is one of the best ways to keep our economy strong. That's why we've almost doubled funding for schools to more than $65 billion over four years. On Monday, the Prime Minister announced the next steps forward . The Government will work with the States and the education sector to deliver a new national school funding model to ensure Australian students are ranked in the world's top five for reading, maths and science by 2025. Better schools will help our kids secure the high-skill, high-wage jobs of the future and deliver our economy the workers it needs. Better schools are also one of the best ways to reduce inequality and build a fairer society. As a Labor Government, we're committed to making sure every kid in every classroom gets a world-class education.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia