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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

18 November 2012

Treasurer's economic note

The youngest of my three kids turned 18 this year. It got me thinking how much the world has changed since I started off on my journey as a young adult some forty years ago. Many of the jobs and some of the industries that exist today weren't around when I was 18. Even for the professions that have been constant, you'd be hard pressed to find many people doing exactly the same thing in exactly the same way. Being a teacher, mechanic, farmer, engineer or nurse today is a lot different to what it was a generation ago or even just a few years ago. New technology and processes are constantly changing the way we work. We all need to keep learning and gaining new skills. For my parents' generation, most people expected to keep doing the same job in much the same way until retirement. Today it's not unusual to switch jobs half a dozen times or more by the time you're 40. You can see this in the official statistics that show more than two million people start a new job every year  – about a fifth of Australia's workforce. Like workers, businesses too are always changing. They are constantly innovating and adapting, looking for new markets, and designing new products and services. In a typical year, around 300,000 businesses wind down and another 300,000 businesses start up. In fact, at the end of any given financial year, around 15 per cent of actively trading businesses didn't exist at the beginning of that year. This is the nature of Australia's evolving economy.

Building a Fairer, Stronger, More Resilient Economy

There will always be those who pretend things don't need to change. They like to argue we can keep on doing things the way we always have – or even that we can turn back the clock to some supposed golden age. In reality, the role of government is not to prevent change, but to lead Australians through it. That was something the Hawke and Keating governments understood to their core. They recognised the world was rapidly changing and managed that change by putting in place a series of far-sighted reforms. These laid the solid foundations for Australia's modern economy – foundations that the Rudd and Gillard governments have protected and built on through the most turbulent period in the global economy in 80 years. Today we face another period of great change. The changes are equal in magnitude to any we've witnessed before in our nation's history – the shift of global economic weight from West to East, the ageing of the population , the transition to a clean-energy economy and the ongoing digital revolution. None of these challenges can be ignored. We need to keep managing the changes and bending them to our advantage. Only by having the courage to keep making the big policy decisions can we continue to support and create jobs and keep building a fairer, stronger, more resilient economy.

The International Monetary Fund  on Friday provided a reminder of how well Australia has managed change over recent years, particularly through the global financial crisis. As the IMF notes:

Australia is one of the few advanced economies to avoid a recession during the global financial crisis, supported by strong economic fundamentals at the onset of the crisis, a well-coordinated response as the crisis unfolded, and a mining investment boom fuelled by a surge in China's demand for commodities. Five years on, both the economy and the financial sector continue to outperform most of their peers. The authorities' timely response to the fallout from the GFC, their prudent economic management, and strong supervision of the financial sector, has kept Australia on the dwindling list of AAA rated countries.

As well as our record to date, the IMF commends the Government's strategy for dealing with longer-term structural changes in our economy. It welcomes the Australia in the Asian Century White Paper , particularly the importance of meeting the opportunities identified for our health, education, tourism and other service industries to supply the region's burgeoning middle class. The IMF again throws its support behind the Government's reforms to put a price on carbon pollution as we move to a clean energy economy.

Standing Tall

The Government's responsible budget management is commended by the IMF, which notes our "fiscal consolidation path strikes a balance between the benefits of reducing public debt and the need to contain any adverse impact on economic growth." It makes the point the forecast return to surplus gives the Reserve Bank more room to move on interest rates. That's something that has been demonstrated time and time again over the past year with the equivalent of six cuts to the official cash rate . For a family with a $300,000 standard variable mortgage, our responsible budget management has helped deliver a saving of around $4,500 a year in repayments compared to when the Government came to office. The IMF also notes the combination of disciplined fiscal policy and accommodative monetary policy means Australia is well‑placed to respond in the event of further turmoil in the global economy. We saw the risks during the week with Europe officially slipping back into recession and in the U.S. – with the election out of the way – policymakers shifting their focus to the threat of the "fiscal cliff". While we're certainly not immune from turbulence in the global economy, the IMF makes clear we continue to stand tall on the global stage. It projects real GDP growth of 3¼ per cent in Australia this year – faster than any major advanced economy.

Of course, not everyone in Australia is doing it easy, but the IMF reports demonstrate just how different Australia's economic story has been over the past few years compared to most other advanced economies. While many of our peers struggle with anaemic growth and output that remains lower than it was before the GFC, our economy has grown more than 11 per cent since the Government came to office. While many of our peers have lost hundreds of thousands – or even millions – of jobs, over 820,000 more Australians have gained work during the past five years. And while many of our peers are burdened with unsustainable budgets and huge levels of debt, we have a triple A credit rating and are headed back to surplus.

The IMF reports demonstrate why all Australians can rightfully be proud of what we have achieved together over the past five years. It should also give us confidence to continue our work to position our nation to benefit from the huge changes that are underway in our economy and in our region.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia