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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

2 December 2012

Treasurer's economic note

Investing in our businesses helps expand production and unlock new ideas. Investing in our infrastructure creates opportunities and improves efficiency. And investing in our people develops skills and nurtures talents. Our economy has been built on investments like these over many decades. Despite the most challenging global conditions in generations, we need to keep investing to increase our nation's productive capacity over time. The time, energy and money spent today will help build a stronger, more resilient economy tomorrow.

Investing in the Future

A number of reports released over the past week make clear the strong outlook for investment in our economy. Total capital expenditure is expected to rise from $155 billion in 2011-12 to an impressive $173 billion this financial year, according to figures released by the Australian Bureau of Statistics  on Thursday. It's important to note this spending isn't all confined to the mining industry. Other industries plan to invest some $64 billion to build their businesses this year. Every dollar spent is a vote of confidence in the future of the Australian economy.

Actual capital expenditure in mining reached a new record high in the September quarter, and is up 40 per cent over the year and more than 230 per cent since the Government came to office. A separate report from the Bureau of Resources and Energy Economics on Wednesday showed that the bright future for the sector  remains.  Despite pressures from the recent decline in commodity prices, the value of committed resource projects has increased to a new record high of $268 billion. When you broaden this out to include projects that have been publicly announced or are undertaking feasibility studies, this figure increases to a staggering $650 billion.

We shouldn't be surprised to see some lumpiness in the investment figures from quarter to quarter due to the massive scale of individual projects. And of course not every investment goes ahead as originally planned. Movements in commodity prices can lead companies to reassess projects, particularly those at the very early stages of planning. But what many people don't fully appreciate is how much investment is locked in with funds committed, contracts signed and construction already underway. As the OECD noted during the week :

Mining investments should continue to expand vigorously in 2013 in view of announced plans. Furthermore, export growth should gather pace with the expansion of mining capacities, and the expected improvement in the external environment in 2014.

On Wednesday, we'll receive the official snapshot of how the economy performed in the September quarter with the release of the National Accounts. We shouldn't be surprised to see growth moderate from its above-trend pace in the first half of the year given the impact of difficult global conditions and the sharp decline in commodity prices that occurred in the quarter, plus the ongoing pressures on some sectors from the high dollar and cautious consumer behaviour. Still, despite the challenges, it's important to remember our economy remains resilient. The pipeline of investment – along with our low unemployment, contained inflation and lower interest rates – provides a rock-solid foundation for our economy in the face of continuing global headwinds. Like the IMF, the OECD expects our economy to outperform every single major advanced economy over the next two years. In 2013 alone, Australia's growth is expected to be more than double the average for OECD economies. The OECD projects growth of 3.7 per cent this year, 3 per cent in 2013 and 3.2 per cent in 2014, consistent with the forecasts contained in the mid-year budget update.

Building Our Productivity

Like business, the Government also is investing in building our nation's productive capacity. While we are already a highly productive economy by world standards, we must continue work in this area if we are to deliver sustainable increases in the living standards of all Australians. The recent Australia in the Asian Century White Paper  sets the goal of lifting us into the world's top 10 in GDP per person by 2025. Under this Government, Australia has moved up in the rankings from 17 to 13, reflecting the hard work of our workers and businesses, as well as the successful policy response to the global financial crisis. To break into the top 10 will require not only greater engagement with the region, but also further improvements in our productivity. Productivity is, of course, an issue that needs to be addressed by the entire community. For its part, the Government is focusing on five key policy pillars to build a more productive economy:

  • Increased investments in roads, rail and other critical infrastructure like the National Broadband Network;
  • Building on our tax reform agenda, such as tripling the tax-free threshold to $18,200 to provide workforce incentives, and helping Australian businesses with the loss carry-back arrangements and the $6,500 instant asset write off;
  • Supporting innovation – including direct support for science and innovation in the order of $9.4 billion in 2011–12;
  • Reduced regulatory barriers, which will lower business costs and increase labour mobility; and
  • Record investments in skills from early childhood education to universities and training systems.

On this final point, important progress was made during the week with the introduction of a bill to parliament outlining the Government's commitment to give every kid in every classroom a great education . The legislation confirms our intention to introduce a fairer school funding model, based on the key recommendations of the independent Gonski Review. As the White Paper makes clear, investing in skills and education is one of the best ways to ensure we make the most of the opportunities of the Asian Century.

As well as making the critical investments in our economy, we also need to invest in our own individual futures. The increase in the superannuation guarantee  to 12 per cent is projected to deliver a 30-year old on average full-time earnings with well over $100,000 more at retirement. But one problem with superannuation has been that it's easy to lose track of your accounts if you change jobs. During the week, the Government introduced changes to protect Australians' unclaimed super. Previously a 30-year old with $2,000 in a lost super account could have their savings eroded to just $1,250 after five years because of a range of fees and deductions. As a result of the new reforms passed during the week, Australians who have lost track of their super or have an old bank account will now have their money returned faster and interest paid to preserve its real value. That means the same 30-year old will be able to claim $2,263 after five years, a boost of over $1,000 to their retirement savings. I'd encourage you to check out the SuperSeeker  and MoneySmart websites to see if you have any lost accounts – you may get an early Christmas present!

Delivering for All Australians

The investments we make to build a more resilient economy mean nothing unless they also help deliver opportunities to more Australians. That's why it was great to see legislation introduced to Parliament during the week to kick off the National Disability Insurance Scheme , which will help deliver people with a disability a better quality of life and enable them to participate more actively in society. And it's why this Government has set ambitious goals for Closing the Gap for Indigenous Australians; goals like halving the gap in employment outcomes between Indigenous and non-Indigenous Australians within a decade. I'm looking forward to speaking this week to the Australian Indigenous Minority Supplier Council. The council, which will be rebranded as ‘Supply Nation', is playing an important role in creating a generation of Indigenous entrepreneurs who will be future leaders and role models in their communities. It's a good example of how giving more Australians an opportunity to make a contribution can build a stronger, more resilient economy for everyone.  These are the types of issues the country should be focussed on - the big things - and not the preoccupation in some quarters of politics and the media with things that aren't important or of interest to the vast majority of Australians, which get far too much emphasis and which do our country and our efforts to keep the economy strong a big disservice.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia