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

27 January 2013

Treasurer's economic note

Australia continues to feel the full force of nature this summer, whether it be fires in the south and west, or floods and storms in the north. But through all this we have continued to see our strength as a nation, coming together to support each other in the most difficult of times. South-East Queensland is currently facing very severe weather conditions and I will be working with the Prime Minister and our state colleagues to provide assistance to help these communities to get back on their feet, as we know they will.

Just as the strength of our people to weather these storms did not just come about through luck, it is also true of our economy. It is only through working together and preparing for the future that Australia has been able to become the great nation we celebrate this Australia Day weekend.

There are few qualities more important to a nation than a determination to drive forward-looking reforms to provide the very best opportunities for our children and grandchildren. Navigating a substantial reform agenda can be tough going, and will usually be met with stiff resistance from vested interests. But if we are to secure the opportunities of the Asian Century, we must put in place the big reforms that will make for a stronger economy and stronger society. This was precisely the attitude of the Hawke and Keating Governments that saw Australia make substantial gains as our economy was truly opened up to the world. They too met resistance, but looking back, this was a time when Australia demonstrated very clearly what can be achieved when everyone pulls in the same direction.

The same approach was obvious in the dark days of the global financial crisis, when government, business and workers bound together from coast to coast to see our country avoid recession during the most acute economic downturn since the Great Depression.

So I'm proud to be part of a government that has inherited a willingness to tackle the big challenges, chalking up a list of reforms that will be vital to securing our nation's prosperity for generations to come. For evidence of nailing a big and tough reform in the face of the most vicious of scare campaigns, we need look no further than the successful implementation of a price on carbon pollution. There's no doubt this was hard fought, but we gritted our teeth, held our nerve, and delivered. This is an important example of the kind of reform that has a heavy political cost in the short term but delivers a big payoff for our economy and our community for generations to come.

So on this Australia Day weekend, I reflect upon our young, proud and optimistic nation making its way in the world, and the enormous contribution made from people across our vast land to make our country the greatest place on earth.

Coming together on national economic reform

Through a period where global economic turbulence has been more acute and prolonged than at any time since the Great Depression, it's critical to stay on course and steer the big reforms despite the obstacles in our way. In the face of these ongoing challenges, we're not going to take our foot off the reform pedal. Whether it be making it easier to do business, reforming our tax system to make it more fair and efficient, lifting productivity growth through investing in the skills of our workforce and a great education for all Australians, to name but a few. On the cusp of the Asian Century, we want to make sure that our nation's workforce prospers at the top of the value chain, and to ensure that we leave a legacy of fairness and opportunity for the generations of Australians that follow us.

It's obvious that government can't address all these challenges alone. For our ambitious agenda to be most effective, it requires the cooperation of a broad cross-section of our community, tapping into the vast experience that exists outside of government. In that spirit, last November the Prime Minister invited the President of the Business Council of Australia Tony Shepherd and the Secretary of the Australian Council of Trade Unions Dave Oliver to set up the National Panel for Economic Reform. The Prime Minister and I will sit on the Panel along with representatives from Ai Group, ACOSS, COSBOA and ACCI. It is plainly in Australia's national interest to bring this diverse collection of representatives to the table together to discuss the most effective way to progress the reforms that will help secure our future.

This process will commence when the Panel meets for the first time on Tuesday. I'll be providing an economic and fiscal update, saying that while our economic outlook remains positive, future economic success is not assured if we don't keep getting the big decisions right to always support jobs and growth. That is why it is so important that the Government listen to the different perspectives from business, union and community sectors, and work with them to deliver on the reforms for a modern economy. I will reinforce that we must ensure our fiscal settings are appropriate for the economic circumstances in the short term and sustainable over the medium term. This strategy has guided the Government's response to the global financial crisis – which kept the Australian economy out of recession – and our fiscal consolidation in recovery. Given the massive hit to revenues we've experienced since MYEFO, it's also the reason why it's important to let the 'automatic stabilisers' go to work; because it would not be responsible to cut so savagely that it jeopardises Australian jobs and economic growth.

Australia has extremely strong public finances and very low levels of debt, reinforced by the Government's fiscal discipline. We will keep managing the budget in a balanced way, exercising spending restraint while supporting growth and jobs. We will continue to make room for important social and economic reforms, which will be vital in securing our prosperity in the Asian Century.

Crucial to our future success will be lifting our productivity growth. As the weight of global growth moves from west to east, for the first time in our history we stand to benefit from our place on the world map. But this shift will not be without challenges, particularly in an increasingly competitive global marketplace. One of the ambitious goals set out in the Asian Century White Paper is for Australia's GDP per person to be in the world's top ten by 2025. The Panel will commence work on advancing this goal, as it will require a multi-faceted and concerted effort to lift Australia's productivity. For our part, the Gillard Government has already staked out a broad-ranging productivity reform agenda targeted on the five pillars of productivity: skills and education, infrastructure, innovation, tax, and streamlining regulation.

As the Prime Minister has said, Australia's greatest asset is its people. The Australia in the Asian Century White Paper noted that "Our greatest responsibility is to invest in our people through skills and education to drive Australia's productivity performance and ensure that all Australians can participate and contribute." That is why the Prime Minister has asked that the Panel's initial focus be on human capital and the role of skills and our education system in preparing Australians for the workplaces of the future. We are already working with States and Territories on a number of policy reforms in this area, including access to affordable child care, a national curriculum, demand-driven funding to provide more opportunities for Australians to get a degree, and a new COAG National Partnership for Vocational Education and Training.

I am confident the National Panel for Economic Reform can contribute to helping reform Australia to maximise the vast opportunities that will be at our disposal in the Asian Century. We will strive for cooperation to serve a common purpose: to ensure the strong and sustainable growth and health of Australia's economy for decades to come. Because it's crystal clear that the systems and assumptions of the past will not be sufficient to chart a course to future prosperity.

Contained inflation a sign of economic health

We got a couple more reminders this week of the resilience of our economy, with the release of the IMF's World Economic Outlook, and our quarterly inflation data.

The IMF pointed to the fact that while we can be cautiously optimistic that 2013 could be a better year for the global economy, this depends on political leadership in the United States and Europe. The report's headline figures highlight just how well placed Australia is compared to so many other countries in the world, with our solid growth outlook built on avoiding recession unlike so many other advanced economies.

The release of the Consumer Price Index on Wednesday confirmed that inflation in Australia remains very well contained, with both headline and underlying inflation moderating in the December quarter. Contained inflation is not only a reminder of our strong economic fundamentals, but it confirms the modest impact of the carbon price on consumer prices – in line with Treasury's estimate. CPI inflation was 0.2 per cent in the December quarter – or 2.2 per cent over the year, at the bottom end of the RBA's target band. Underlying inflation moderated to 0.5 per cent in the December quarter, or 2.3 per cent through-the-year. The result provided further evidence that there has been no significant, broad based increase in consumer prices as a result of the carbon price, consistent with Treasury's modelling. Contained inflation is another reminder of the Government's fiscal discipline, which has given the Reserve Bank room to repeatedly cut interest rates over the last year. Low inflation combined with solid growth and low unemployment are the fundamentals that highlight Australia's economic resilience in the face of global economic volatility.

Creating enduring reforms for future generations

One of the most important benefits of avoiding recession during the global financial crisis is that it means we have a solid base on which to deliver our reform agenda. On the foundation of a healthy economy, we've already delivered significant social and economic reforms such as carbon pricing, paid parental leave, and the continued rollout of the NBN. And we'll continue to build on that economic foundation to bring about further big reforms like the Gonski School Reforms and the National Disability Insurance Scheme.

Reform is hard work, requiring the courage of conviction and the certainty of vision. The status quo is almost always easier to preserve than to change. This is part of the reason why this week I talked about Australia becoming a Republic. I know this is an issue that generates strong views in the community, but I think it's time we had a renewed and respectful discussion about this issue. For mine, I have a fundamental belief that every Australian child should be able to grow up aspiring to be our Head of State, something that plainly is not the case at the moment. This isn't a change that will happen this week or this year, but it's a conversation that I think we're ready to start having again as a country. Of course, it will still require that very same deep consensus garnered through hard work and collaboration. These are the very same guiding principles we take to the table this week as we kick off the National Panel for Economic Reform.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia