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

19 May 2009

NO.010

Queensland's Role in Nation Building For Recovery

Address to the Queensland Media Club

Brisbane

19 May 2009

Thanks Barton [Green, Director, Three Plus] and thanks to the Queensland Media Club for inviting me to speak today. As always, it is great to be home.

Last year I concluded the national 'Budget roadshow' in Brisbane. For ten days on the road, the prospect of coming home kept me motivated. But this year, I have come home for sustenance in the middle of the roadshow, before spending the rest of the week in Adelaide, Perth and Darwin.

I am, as you know, a very proud Queenslander. This is where I've raised my family, where I taught at university, where I cut my political teeth. Where I have experienced all the highs and lows of a career that gives me wonderful opportunities to contribute. Where I recovered from cancer, where I play cricket and surf with my kids.

No matter how much time I spend in Canberra or Sydney or at G-20 meetings overseas, it will always be home. And so it gives me a great deal of pride to be here, in front of so many familiar faces, to talk about our nation building Budget. Because Queensland is more than home. It's also emblematic of the economic future of our nation. It's where it all comes together for me.

It's here we can see the great increase in our capacity that will come with roads, railways and ports – projects that support jobs through a downturn but also ease congestion and get our goods to markets.

It's here we can most vividly see the scope to conquer vast distances with a broadband system that gives Queensland kids and Queensland businesses the tools to compete in any market in the world.

It's here that we recognise our responsibility to provide modern hospitals and schools to keep up with the rapid population growth of the State.

It's here I can see most clearly the contribution we can make to improving skills, to encouraging innovation, to prepare us to take full advantage of our growing integration into the most dynamic region in the world economy.

It's here we can recognise our diversity and the help we can provide to ensure everyone can contribute to prosperity, whether they live in the big city, along that sensational sunbelt, or in towns far to the west and north.

And, of course, it's here I'm best reminded of the need to promote and preserve a work-family balance that lets us take full advantage of the world's best lifestyle. Remembering, always, that it's what we do together that makes us strong. That it's what we do together that determines whether Australia continues to be not just one of the world's best economies, but also one of the world's best societies.

What We're Up Against

Coming home gives me a chance to reflect on all of this. To reflect on putting together what insiders and economists all agree, has been the toughest Budget to put together in modern Australian history. And to look forward – to what this Budget will mean for Australia's future, and for Queensland's future.

Never before has a modern Australian government framed a Budget in the midst of a global recession this deep. Not since the 1930s, has the Australian economy been exposed to this degree of turmoil in the global economy.

The Budget is unusual in the candour and directness with which we have assessed the severity of the downturn. You might have read some commentary suggesting that we are a bit optimistic in the Budget in expecting output growth to move above trend in 2011 and 2012. I reject that completely. Our forecasts are more conservative than the experience in coming out of the recessions of the early '80s and early '90s. In both of those cases the recovery was associated with a period of quite rapid growth in demand and output as confidence returned, the expansionary measures put in place earlier took effect, and as underused capacity was taken up. It is the normal pattern of recovery, which we identified in this Budget.

We have been very direct and very upfront with the Australian people in informing them of the expected severity of this downturn. We said in the Budget last week that output would contract this year, and growth would be quite slow next year. We said that before things turn around we expect unemployment to increase by around 400,000.

Those forecasts are far from rosy. They are very grim. But they represent the Treasury's best estimates of what is likely to unfold in the labour market. And we are not going to hide from that.

Every job lost to this global recession is felt personally by every single member of the Government. I have seen enough unemployment in my life to know there's nothing more corrosive than entrenched unemployment. And we will do everything in our power to limit the profound impact job losses can have on families and communities.

Of particular concern to Queensland's labour market is the fact that global demand for Australia's commodities has collapsed. Some of the gains attributable to the largest commodity price boom in more than 50 years will be reversed. And, an expected fall of 13¼ per cent in 2009‑10 in Australia's terms of trade will take around $35 billion out of the economy.

Some of these changes will be felt more keenly here than elsewhere, given our production of export commodities and consequent exposure to developments in international markets. But there are also good reasons to be confident that growth in China and other developing economies will provide an ongoing source of demand for mineral and agricultural commodities over the next few decades.

This is one reason Australia is better placed than any other advanced economy to deal effectively with the consequences of this global recession. Another is because the Government has made some tough choices to protect Australians from the worst effects of the global economic downturn.

Actions to date

It's worth briefly recapping the decisive and early action we took in the months after Lehman Brothers collapsed. Without our timely and targeted response, there is no doubt our contraction would have been harsher.

The approach has had three phases – phases which reflect both the speed with which Australia was drawn into the global recession, and the speed with which the Government has acted to cushion the country from that blow.

First, there were timely, targeted and temporary cash bonus measures that helped stimulate economic growth while having a temporary impact on the Budget. This was essential to fill the gaping hole in private demand left open until public investment could get up and running.

Second, there are investments in thousands of now shovel-ready projects across the country – be it school libraries, new social housing projects, or private homes having insulation installed.

Third, there is big nation building infrastructure which I outlined in my Budget speech on Tuesday night. These investments – in roads, rail, ports, universities and hospitals – will support jobs now and will provide a platform for long-term growth.

Budget Snapshot

The Budget focuses squarely on stimulating the economy and supporting jobs now while positioning Australia to take full advantage of the economic recovery that will come. Our aim has been to not only tackle the downturn – but to ensure that we can seize the recovery, positioning ourselves for maximum national benefit. Our aim has also been to invest in our people – to underwrite long-term productivity and prosperity.

That's why the central task of this Budget is nation building for recovery. It delivers an unprecedented $22 billion of investment in infrastructure. These investments will bring jobs now and productivity for the long-term. They will ensure that Australia will have the best physical and human capital possible to seize the opportunities presented by the recovery – and beyond.

The investments in infrastructure represent building blocks for the future. They mean that when the recovery takes hold, our ports won't be straining so much, and our rail networks and roads will not be so clogged. Critically, these investments will employ tens of thousands of Australians, instead of letting them swing in the breeze.

I am also very proud to say that Queensland stands to be a great beneficiary of the nation building Budget. A total of $2.4 billion over six years will be invested in infrastructure projects across the State.

More than $1.7 billion will be invested in local transport infrastructure projects. This includes additional works on the Ipswich Motorway and the Gold Coast Light Rail, upgrades of the Bruce Highway from Cooroy to Curra, and a feasibility study into the Brisbane Inner City Rail.

In education infrastructure, Queensland will benefit from $180 million of investment over the next three years – including funds to establish a Science and Technology Precinct at the Queensland University of Technology.

And in health, a total of $470 million over six years will be invested in critical infrastructure projects – including the expansion of Townsville and Rockhampton Hospitals, each of which will be able to offer 100 and 600 extra beds, respectively.

The construction of these projects will support thousands of local jobs in the short-term, but leave lasting gains.

Seizing Opportunities

Let me also say a few things about the intersection of our efforts to stimulate the domestic economy, and our actions to institute long-term reform.

Throughout this global recession, we have not only been focused on the here and now. The Budget contains stimulus that will also improve Australia's long-term growth prospects. Temporary investment with lasting gains.

The $22 billion investment in nation building infrastructure is a case in point. These investments will support around 15,000 jobs each year over the coming four years. At the same time, they will lay the foundations for economic growth in the long-term by expanding Australia's productive capacity.

The record investment in nation building infrastructure in this Budget includes $8.5 billion of investment in hard economic infrastructure – the roads, rail and ports which make up Australia's land transport network. These investments will ensure that as global demand picks up, never again will Australia's ability to sell our wares to foreign countries be as frustrated by transport bottlenecks. These investments in critical economic infrastructure – especially metro rail – will also mean that as a nation we spend less time travelling to work, and more productive time at work, and with our families.

The same basic conclusions hold for the groundbreaking reforms to higher education that were unveiled on Budget night. In reforming Australia's university system, we are catapulting our universities into the 21st Century. And we are planting the seeds for future growth.

Currently, not every qualified student can secure a university place – or a place in their preferred course. Beginning next year, that will all change. No longer will bureaucrats and politicians in Canberra determine how many university places will be funded in each field of study. Instead, the task will fall to Australia's future workers – the talented students of today, who will be the scientists, engineers, businessmen and wealth creators of tomorrow. Over the next four years alone, this move to a demand-driven university system will result in an additional 50,000 new students securing university places.

To further improve Australia's human capital, the Government will also invest over $400 million to ensure that more talented students from low socioeconomic backgrounds can benefit from a university education. For the last 20 years, each year only about 14 per cent of Australian university students have come from low socioeconomic backgrounds. And as a result, the country has failed to tap into reservoirs of talent which could otherwise make us a more productive and prosperous society. That's why the Government will now reward universities which attract and retain students from poorer backgrounds. As part of these reforms, universities will also be funded to build long-term relationships with schools in disadvantaged areas – so that the students and parents in these areas know that a rewarding university education is not beyond their reach.

The Budget also invests in Australia's transition to a low pollution economy. The Government will invest $2 billion to support industrial scale Carbon Capture and Storage projects in Australia, and a further $1.5 billion to demonstrate large scale solar generation projects. These investments will immediately drive billions of dollars of private investment in clean energy solutions, create thousands of green collar jobs, and make sure Australia is ready to compete in the carbon-constrained world of tomorrow. It is just another example of how we are driving our stimulus dollar further – to protect jobs now, and secure the country's long-term economic interests.

Pension Reform

Infrastructure of all kinds – transport, broadband, health, education and energy – forms the centrepiece of the Budget. But we're proud to have also made room to deliver an increased tax break for small business, an historic Paid Parental Leave scheme, and long overdue reform of our pension system.

I don't have time here today to run you through all the details of all of these initiatives. But I do want to make some personal observations about what we have done to give a fair go to pensioners – by taking some tough decisions to make the pension system more sustainable into the future.

I'm proud that we were able to provide a decent increase in incomes for some of our lowest income Australians – age pensioners, the disabled and those who care for them. Doing the right thing by the more vulnerable people in our community was the main reason I got into politics.

But I also know that with all the economic challenges we face – not least of all the long-term ageing of our population – it's no good reforming the pension system without also putting it on a more sustainable footing. That's why I am just as proud of the fact that we have offset the full costs of the pension reform in the long-run.

Increasing the base rate of the single pension by more than $1,500 a year was no mean feat, given that the global recession has imposed a $210 billion write-down on the Budget. Our predecessors couldn't do it when it was raining gold bars. And they also couldn't take the tough decisions to ensure the sustainability of the pension system into the future – notwithstanding all the intergenerational reports they commissioned and touted.

But the historic pension reforms in this Budget are not just important for Queensland's more than 630,000 pensioners. I'm here to tell you that improving pension adequacy in a sustainable way matters to the whole community.

When the poorest in our society have that bit of extra security, all of us are better off. Everyone can know there is a decent safety net in retirement, even if economic hard times hit. The global financial crisis has been a timely reminder of this. The existence of a strong safety net gives everyone a greater stake in our society, and greater confidence, knowing that safety net is there.

I'm well aware some of the savings measures that made this pension increase possible have probably impacted upon people in this room. But I've been encouraged by what I have heard around the community, even from those adversely affected – that there are people doing it tough in this recession, especially our pensioners – and everyone has to do their bit to help out. That is the spirit that will get us through these tough times, and be of lasting benefit to our cohesion as a community in the long-run.

Budget Sustainability

When you look at Tuesday's Budget, I think you'll agree more was done to build a more prosperous future and look after pensioners, parents and small business in tough times, than was achieved by my predecessor in the easy boom times.

But the big difference between now and then is that the economy has turned. The tide of revenue has gone out. And that's why in order to lay the foundations of a more prosperous and fairer future we had to take hard decisions elsewhere in the Budget. That's what reforming governments do.

In keeping with this, we have charted a path back to surplus, through tough, but necessary savings measures totalling $22.6 billion over four years. This is another central component of this Budget's focus on the future – on the long-term sustainability of our public finances.

I don't like the idea of debt any more than the next person. It's one of the things I take some pride in as an Australian politician – that our national economic debate demands fiscal prudence, and rewards it too. The same is not true everywhere. Other countries are content to run big deficits forever, and increase debt forever, and it's to our credit that we don't. I welcome and value that scrutiny.

If you must borrow, it must be for the right reason. So the right question to ask is why we are borrowing at present. And there are two answers to that question.

One, Mr Turnbull and Mr Hockey – for all their professed abhorrence of debt – agree with 100 per cent. When budget revenues collapse because of a global recession, you can allow a temporary deficit, and borrow to cover it, or you can seek to prevent the Budget from falling into deficit by dramatically raising taxes and severely cutting services – in the case of the next few years, by hundreds of billions of dollars. And we all know that such savage cuts to services, or increases in taxes, would only pour fat on the fire of the domestic slowdown – burning businesses and those they employ.

Now, until last Thursday, politics had been stuck somewhere in the twilight zone while Mr Turnbull and Mr Hockey decided their fiscal strategy. They even wanted to pretend a small surplus would be possible this year. That was until they worked out that such an argument wouldn't bear a millisecond's scrutiny in a budget reply speech. Accordingly, Mr Turnbull last Thursday night embraced every dollar of the Government's fiscal policy, by merely proposing one savings measure in place of another he didn't like. Mr Turnbull's deficit and his borrowings would be at least as big as ours and beyond the forward estimates, most likely bigger. So that debate has finally come back to earth with a thud.

The second reason we are borrowing comes back to what I said above about preparing Australia for the recovery. And it comes down to something Australians do with their own family finances every day of the week – that is, borrowing to build assets. If Australia is to take full advantage of the global recovery when it comes, we need to have the right infrastructure in place – both physical and human. And that's why this Government is borrowing responsibly – to invest in Australia's economic future, so that we can all reap the long-run dividends of these important nation building investments.

Conclusion

As I have stressed today, we must build infrastructure now, to create jobs now, but also to lay out the path to recovery. To build world-class economic infrastructure that will see our economy bounce back strongly from this recession. This is what we mean by nation building for recovery. Because the Australian economy must not just withstand the global recession, it must emerge from it stronger, more resilient and more flexible than before.

For the reasons I outlined at the beginning of my speech, I want Queensland to be a key part of that recovery. In my 54 years as a Queenslander and my 38 years in Brisbane I have seen us transform from a backward-looking quarry into a more diverse, more intelligent economy with so much to offer the nation. I have seen this State play such a massive role in the economic transformation and success of Australia. I have seen its central role in the last 17 years of prosperity. I see the contribution it will make to the next generation of growth we must build together. And it will be at the front of my mind as we go about putting in place the nation building infrastructure that delivers productivity and prosperity, and protects our way of life, well into the future.

Thank you and I look forward to your questions.