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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

28 April 2013

Treasurer's economic note

The cooler months are now noticeably upon us which for me always coincides with the busiest few weeks before the May Budget. This week, both the Prime Minister and I will give speeches addressing the unique challenges we face in this year's Budget. We may have passed the darkest depths of the global financial crisis, but developments in the global economy continue to put revenues under huge pressure. We have seen a very unusual set of circumstances where activity in the real economy continues to grow solidly, outpacing growth in the nominal economy. For the first time since records began, we have now seen this occur for three straight quarters in a row. A substantial part of this owes to the sustained high dollar which has put profitability under pressure and contributed to subdued growth in prices across the board.

While the forces bearing down on the Budget have changed over the past five years, the principles that guide our approach to fiscal policy have remained the same. The Gillard Government will always ensure our fiscal position is sustainable through sensible structural saves (such as means testing  the Private Health Insurance Rebate), many of which continue to improve the budget position over the longer term. But we will never cut to the bone, putting jobs and growth at risk by taking an axe to the economy. We'll continue to strike the right balance of making room for smart investments that support jobs and growth of the future while continuing our fiscal consolidation in a balanced and responsible way. Australia's unrivalled economic success clearly validates this approach – it's a proven strategy that guided Australia through the worst of the global financial crisis, ensuring Australia was one of only a handful of advanced economies to avoid recession. This is clear when you consider the 900,000 jobs that have been added in Australia since 2007, and the 28 million that have been lost elsewhere in the world over the same period. We can proudly point to an economy that is 13 per cent larger than at the end of 2007 while half of all advanced countries are yet to get back to the starting line.

While circumstances obviously vary from country to country, governments around the world are also facing challenging fiscal circumstances in light of lower budget revenues. Though long overdue, I am happy to see a real debate  now finally taking place in Europe over the appropriateness of fiscal austerity. Over the past week, some very senior policymakers in Europe voiced concern that mindless austerity, or cutting to the bone of basic services, is the wrong way to address the structural deficiencies in the euro zone. To date, this approach has pushed a number of economies in the region further into recession, inflicting untold misery on millions who have lost their jobs. If the debate over the past week is anything to go by, I'm more hopeful Europeans will change tack and start to make the necessary long-term reforms their economies need by putting their budgets on a sustainable footing in a way that supports jobs and growth today.

Smart Investments

In this Budget, we will kick off our plan to create a smarter Australia to give every child the best education possible, so they're in the box seat to win the high-skilled, high-paid jobs of the coming decades. As we look to take advantage of the opportunities that will flow our way from the Asian Century, we need to ensure we're able to compete in the region where the world's best schooling systems exist. The National Plan for School Improvement  will deliver an historic increase in education funding to improve the quality of teaching and learning so that students in Australian classrooms will be in the world's top five in maths, reading and science by 2025.

Last week, New South Wales became the first state to sign up to the plan which will see around $5 billion in additional funding flow to the classrooms of 1.1 million NSW students over six years. Under the Government's national plan an extra $14.5 billion will be invested in Australian schools over the next six years, of which $9.4 billion will come from the Commonwealth. The opportunity is there for other states and territories to sign up to these critical reforms to ensure every single Australian school can benefit and not a single child is left behind. A student going to school in Brisbane doesn't deserve to have less of an education and support than one going to school in Bondi just because of their postcode – that's simply unfair. These reforms are too important for politics, they are too important for game-playing, they are too important to look for excuses – they are critical to the future of every Australian child and the future of our country and it's time for state governments to put schools and students first.

The May Budget will also find room for DisabilityCare Australia , the national disability insurance scheme. This long overdue reform will improve quality of life for hundreds of thousands of Australians with a significant and permanent disability, and their families and carers. DisabilityCare is Australia's most important social policy reform since Medicare introduced universal health care to all Australians.  The current system is broken, meaning many people aren't getting the help, care or support they need every day. Consider that DisabilityCare could mean the difference between a shower every day for someone with a spinal injury – rather than a couple of times a week. It could mean a correctly fitting wheelchair for a child, rather than one that makes living with a disability even harder still, as they grow while they wait three years for a new one. It will mean families getting the support and respite they need, so their care is sustainable into the future. It's unfathomable that there are people living in our community without these basic supports.

Since funding the first stage of DisabilityCare in the 2012-13 Budget, we have reached agreement with New South Wales, South Australia and the Australian Capital Territory to roll out the full scheme across those states. Last week, the Government also announced that the scheme would be launched in the Barkly region of the Northern Territory in July 2014. Labor will take the hard but responsible decisions necessary to ensure a truly national scheme is fully funded into the future.

The Fair Go

In my essay  published yesterday by the Chifley Research Centre , I wrote that the fundamental objective of economic policy is the creation of greater prosperity to enable a better life for everyone. I am proud to be part of a Government that has consistently got the big economic calls right even when that comes at a political cost. Our country is stronger for the challenges in the global economy we have stared down and overcome. No country in the world has made better decisions over the past five years than ours, and the dividends of that can be seen in solid growth, low unemployment, contained inflation, and low interest rates.

We did this while spreading opportunity and creating wealth – ensuring as many people as possible have had a chance to share in Australia's success. It's called the fair go – regular readers of this note would know this is something I'm pretty passionate about. In my maiden speech to Parliament in 1993, I talked about a land characterised by the fair go, where “ordinary people would be able to fulfil their dreams, regardless of where they came from or the social group they were born into.” The notion that a fair day's work deserves a fair day's pay. The idea that our children deserve the same opportunities at education and development, no matter the postcode they reside in. I firmly believe that without this defining principle of Australian society, our nation would not be the tremendous society we live in today. There is too much at stake to let the fair go slip away and as a country, we need to be conscious that it's something we must fight to protect.

This is the philosophy the Gillard Government will once again bring to the Budget on May 14 – my sixth Budget. This year, we will add to the almost $160 billion of responsible savings we have already made to ensure our fiscal position is sustainable. Sustainable public finances also depend on strong economic fundamentals, which is why we won't be making savage cuts that put jobs and growth at risk. We will find room for the investments Australia needs to keep us a strong, smart and fair country into the future. It's through smart investments like DisabilityCare and the National Plan for School Improvement that we will remain the country of the fair go, where every Australian can have a chance to share in our prosperity no matter what corner of the continent they come from.

Wayne Swan
Deputy Prime Minister and Treasurer of Australia