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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

14 April 2013

Treasurer's economic note

At the core of this Government is a belief that a smarter and fairer Australia will create a stronger Australia. It is the principle that governs every decision we make. So it should come as little surprise that as a Government we are so determined to put in place the Gonski reforms that underpin our National Plan for School Improvement. This is because these reforms will be vital to driving productivity and prosperity for our country in this the Asian Century.

Over the past 30 years, Australia has steadily risen to the very top of world economic rankings. Guided by sound policies and big reforms, we kept climbing through the worst conditions the world could throw at us, and today we can all be proud at where we sit compared to so many of our peers around the world. But make no mistake: this is not the time for complacency. If we rest on our laurels, we risk slipping from our coveted position in the global economy.

That's why we have the goal of putting Australia's school system in the world's top five by 2025, and putting our students in the world's top five countries for reading, science and maths. Getting there means advancing our education system by investing in the capabilities and skills of our people from their earliest years through their working careers. In turn, this investment will drive productivity and economic growth for Australia in the decades ahead.

This morning the Prime Minister has outlined details of the funding program that will support the Government's National Plan for School Improvement. Under the plan – constituting the biggest education funding reform in four decades - schools will share in an extra $14.5 billion in public investment over the next six years. This is an unprecedented commitment in converting our vision into concrete reality.

Why we need to invest much more in Education

We have to boost our investment in education because while our economy has powered ahead, the fact is our school system has fallen behind. Over the last decade, our results have declined in absolute terms, while other countries have overtaken us in international rankings. On average, Australian students still perform very well, and in the three PISA domains of reading, maths and science we're significantly above the OECD average, but our system has also developed a disturbing trend.

Looking closely at our results reveals the emergence of two tiers in our education system. While Australian students perform better than their global peers on average, the gap between the best-performing and the lowest-performing students is higher in Australia than in other OECD countries. The Gonski review found that in 2009, students from the bottom socioeconomic quartile were achieving results almost three years behind those from the top quartile, and Indigenous students were two years behind their non-Indigenous peers. Understandably, these gaps flow through to lower Year 12 completion rates, as seen by the fact that in 2011, 62 per cent of low-SES students completed Year 12 or equivalent, compared to 80 per cent of high-SES students.

We know this sustained disadvantage all too easily follows a student after school, which is illustrated by the fact that only 17 per cent of new higher education students in 2011 were from the lowest socioeconomic quartile – and only 1.1 per cent were Indigenous. Now of course, not everyone wants a higher education experience, and this isn't the only measure of success, but nobody should be denied the opportunity on the basis of their social or economic background.

Last year, an individual without any post-school qualifications was 20 per cent less likely to be in work, and twice as likely to be unemployed as someone with a post-school qualification. The findings are stark, and as a country, we need to address them. Failing to provide our children with all the opportunities school should offer has knock-on impacts that follow a student through their whole life. Of course, delivering these reforms means hard choices to ensure they are sustainable and affordable for the long term. Yesterday, we announced a package of responsible and measured savings that go a significant way towards paying for our fair share of the Gonski reforms.

What we are investing in with the Gonski school improvement reforms

Our innovative education reforms tackle this undeniable inequity in our schools head on. In part it's about an injection of funds, shared between the Government, the States and the community. But it's important to know what that funding will actually do. History tells us that throwing more money at a problem is not a fix in itself. Simply put, if we're laying out billions to fix our education system, we need to know what we're buying.

At its heart is a new school resource standard that would make ongoing additional public funding for disadvantaged students a permanent part of the system. This model has been developed by looking at what our best schools achieve, how they do it, and how much it costs them to achieve those results. A consistent resource standard will ensure that every student gets the help they actually need. This means that schools can make the changes themselves to get better outcomes for their students. For example, schools will be able to pay for literacy coaches to help students who fall behind in their reading. Extra funding will buy more release time away from the classroom for teachers to receive specific training, or give them time to mentor their newer peers on the best ways to lift up our most disadvantaged kids.

By implementing the reforms recommended in the Gonski review our schools will be fundamentally better places to teach and to learn. That's why we are asking the States to agree to our National Plan for School Improvement. The Plan includes five key reform directions: quality teaching, quality learning, empowered school leadership, meeting student need, and transparency and accountability. These reforms recognise that the source of our future strength in this the Asian Century will be in a highly-educated, highly-skilled, capable and creative workforce.

Reforms built on a strong economy and a stable financial sector

Australia is able to make these investments in the future from a position of strength, because we got the big calls right in the past. During the worst of the GFC we ensured our economy stayed strong, in stark contrast to many other countries whose economies went backwards and saw millions of people thrown on the unemployment scrap heap.

During the week at the Bloomberg Economic Summit I discussed how a big part of our world-class economic performance over the last five years has been built on the stability of our financial system. Our strong financial sector is one of our untold success stories – we got ahead of the curve before the GFC struck to keep it safe and secure. Our actions helped maintain confidence, support the flow of home and business loans, and save jobs. We are building on this strength with the announcement this week during the Prime Minister's historic visit to China that the Australian dollar will become just the third major currency to be traded directly onshore with the Chinese RMB. This visit also saw the PM elevate Australia's relationship with China to a new level with the agreement of a new annual leaders' dialogue.

Global context

Later this week I head to Washington for meetings of the G20, IMF and the World Bank. These meetings are always an excellent opportunity to take the temperature of the global economy during that critical stage of nailing down the May Budget. It was particularly crucial during those first, quite frankly manic, months as the GFC struck in late 2008. Today it's just as important to keep abreast of global events, as global uncertainty, the high dollar and subdued world growth continue to impact on our economy and budget. But as I sit in those meetings every year, I'm deeply conscious of Australia's quiet strength, and genuinely optimistic for a future Australia that's stronger, smarter and fairer than ever for the generations who come after us. And while many of my colleagues will be focused on dealing with the continuing fallout of the past, in Australia we are in a position to be investing in our future through the education of our kids.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia

www.treasurer.gov.au
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