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

26 May 2009

NO.012

Resources and Recovery

Minerals Week 2009

Hyatt Hotel, Canberra

26 May 2009

-- check against delivery --

Thank you for that introduction and for the warm welcome. 

It is a genuine honour to get this opportunity to speak with you today.  And it’s an honour for the national parliament to host a group of people so crucial to Australia’s recent prosperity and its future prospects.

There has never been a better time for the discussion you will be having this week – a discussion of the role our resource industries will play in our country’s transition from recession to recovery – from victims of a global recession to beneficiaries of a global recovery.

In so many important ways, your discussions here will mirror those that my colleagues and I have been having in the lead up to the Budget I handed down here just a fortnight ago.  That’s because your industries and your companies sit right at the intersection of so many crucial considerations about the economy we want to build for Australia into the future.

You have been impacted by this global recession as much, if not more, than anybody.  You have seen your prices fall and the boom unwind.

You have watched as closely as I have the plummeting fortunes of so many of our key trading partners – in our region and, indeed, right around the world.

Some of you have been forced to make that awful decision to lay off workers you spent a great deal of time training for important jobs. 

Some of you have made decisions about your investment plans that you were not contemplating just one year ago.

I know none of these have been easy decisions. 

All of us here also know that it hasn’t been easy on your workers, their families, and communities dotted right around the nation that have depended so much on the jobs your companies have provided them.

You are grappling with all these issues.  They are tough issues.  I know because I grapple with them every waking minute as well.

But if I know you, like I think I do, then I know you are also grappling with another big challenge: how to make the next generation of growth and opportunity in the resources sector better than the last.  How to position your companies to employ more people, generate more wealth, work smarter and more productively than we did during the boom that’s now unwinding.  How to position the resources sector to make a greater contribution to the next generation of national prosperity than it did to the last.

And that’s where your interests, and my interests, intersect.  All of us here are nation builders by nature.  And if we are to take full advantage of the coming recovery it’s nation building that Australia needs most.

That’s what I’m keen to talk about this morning. 

And I want to leave you with this central message: Australia’s next generation of prosperity must be different to the last one.

It needs to be more sustainable. 

It needs to be unshackled from capacity constraints that hold us back.

It needs to rely on a more productive economy with:

  • More modern infrastructure.
  • An even better trained, more highly-skilled workforce.
  • And a smarter, more sustainable national Budget.

I want to touch on each of these issues shortly.

But first let me just give you my perspective on what we’re up against in this global recession, what’s happening to our major trading partners, and the magnitude of the challenges we all face internationally.

Trading Partners

It is an unfortunate sign of the times that Japan’s record contraction last week barely raised an eyebrow in the Australian media.

We have conditioned ourselves for awful news out of the major economies we trade with – the Asian and other economies you rely on so heavily as markets for your minerals.

These sorts of numbers are impossible for you and I to ignore.

Eight of our top 10 trading partners are in recession or suffered big contractions in output.

Take some of our major export markets for coal.

Japan – which accounts for around half of all our coal exports – contracted by an unprecedented 14.8 per cent on an annualised basis in the past six months.

In Korea, output has fallen by 9.8 per cent on an annualised basis over the past six months.

The euro area is in deep recession. Activity there has fallen by eight per cent on an annualised basis over the past six months.

And China, by far the biggest market for our iron ore exports, has had its growth rate cut in half.

Not surprisingly, these sharp downturns in many of our largest export markets are expected to lead to falls in export volumes in the year ahead.

As commodity exporters, you will of course feel these effects most directly.

You are feeling the sharp declines in export prices, as the largest commodities boom in 50 years begins to unwind.

You probably know that these falls are expected to wipe $50 billion from export earnings in 2009-10 alone.  Falls of a magnitude that has not been seen in the past half century.

Credit Flows and Three Waves of Stimulus

While your industries are hard hit by this global recession, the truth is no sector of our economy is free from its brutal impact.

Such extraordinary times like these have called for extraordinary action.

When the global financial crisis erupted in September and October last year it was clear we needed to act on two fronts.

First, we needed to secure the flow of credit to our economy.

That’s why we moved quickly in October to guarantee Australian bank deposits and wholesale borrowings.

This has enabled our banks to continue to access the funds required to lend to business and households – to keep credit flowing in the economy.

Second, we needed to provide an immediate and substantial stimulus to domestic demand.

Our approach here is rolling out in three waves.

The first wave was temporary and targeted income support directed towards the most cash constrained people in the country.

This was the only way we could inject stimulus quickly enough into the economy to fill the gap in private demand.

This has worked to support the retail and housing sectors while these indicators have plummeted elsewhere around the world.

The second wave was our investments in shovel-ready, necessary infrastructure projects across the country – upgrading our schools, homes and communities. 

The Budget marked the third phase of our stimulus strategy – larger and longer-term nation building infrastructure.

Road, Rail, Ports and Training

It is these investments in roads, rail, ports, universities, and hospitals which will support jobs now and position Australia to take full advantage of the global economic recovery.

They will be crucial to the better movement of people and capital, and to our ability to get your resources to global markets when demand picks up again.

And that is why the Government is investing in our international gateways.

When the nation begins to emerge from the global recession, Australia will rely on ports such as Darwin and Oakajee to be ready to meet global demand.

That’s why the Government is investing $339 million, in partnership with the West Australian Government, for critical common user infrastructure at Oakajee.

We have a long-term vision for WA to be not just world-class in mining, but also in industries along the value chain.

During the port and rail construction phase, from 2010 to 2014, it is estimated the project will generate up to 2,000 jobs, with around 400 personnel operating the infrastructure when complete.

During my visit to Darwin last week, I visited the site where we will be making a $50 million equity injection into the $325 million East Arm development at the Port of Darwin.

I was advised whilst on site that the existing port will reach capacity by 2011 due to the expected forecast growth in bulk commodities including iron ore, magnetite, copper concentrate and phosphate.

And that is why our nation building investments are so important.

The Darwin Port expansion is expected to double the capacity of Darwin Port – increasing capacity to about 12 million tonnes annually. 

And to make the most of our investment in ports, the Government has also committed to a National Port Strategy.

The strategy will help ensure the efficient movement of freight in and out of our ports so that ships are not waiting offshore for weeks to load and unload their cargo.   

We have asked our national advisory council, Infrastructure Australia, to work on the strategy, to be delivered to the Government by the end of 2010.

These investments will ensure our ports are part of a supply chain that efficiently moves goods from the farms, mines, and factories to international markets.

The Government is also investing a further $3.4 billion in Australia’s busiest freight route and key feeder roads from Melbourne to Cairns.

This takes the Government’s total funding of road projects across the nation to $27.7 billion over six years.

Over the last few weeks I have visited a number of the sites that will benefit from this additional investment in our national highways.

One of these is the Cooroy to Curra section of the Bruce Highway.

Our $488 million investment in this important section of the Bruce Highway is a critical investment to boost safety and capacity on our national highways.

I have also visited the construction site of Ipswich Motorway, where work is already underway, and which will receive an additional $884 million, taking our total investment in the Ipswich Motorway to $2.5 billion.

This road plays a critical role in the transport of freight within Queensland – 70 per cent of all Brisbane’s road and rail freight is destined for the Wacol-Rocklea-Acacia Ridge area.

It is investments like these that will enhance the productivity of Australian businesses relying on Australia’s road infrastructure.

The Government is also investing $4.6 billion to the planning and development of nine metropolitan rail projects in Adelaide, Brisbane, the Gold Coast, Melbourne, Perth and Sydney.

These investments in road, rail and ports will provide a sustained boost to the economy now, but also enhance the economic capacity of the economy in the longer term.

Just as we are investing in economic infrastructure to make sure we can take advantage of the recovery, we are also investing in skills – so that we never again face the skills shortages we faced in the past, particularly in key sectors of the economy such as mining.

The groundbreaking reforms to higher education in the Budget will lead to a significant boost in the number of young Australians with degrees.

Because of that initiative, we expect an additional 50,000 new students will secure university places in the next four years alone.

At the same time, the Government is dealing with the increase in unemployment by investing in the skills of the people most affected by the downturn.

This additional assistance will help people who need training to avoid long-term unemployment and gain work when the economy recovers.

By investing in skills, the measures will also benefit the whole economy – not least, the mining sector – when it moves into recovery.

The Government is investing $1.5 billion in a Jobs and Training Compact.

The Compact includes a further 81,000 training places – which brings the total number of Productivity Places being offered by this Government to over 710,000, at a total cost of $2 billion.

Think about that for a moment: 700,000 newly trained Australians.

Like our investments in infrastructure, these investments in skill formation will ensure that Australia is primed and ready to meet the inevitable increase in demand for our natural resources, which we hope is just over the horizon.

Budget Sustainability

Just as important to our recovery is ensuring public finances are on a sustainable path.

As you know, in recent years the mining boom delivered an annual budget windfall.

In the three and a half years up to end of 2007, taxation receipts were revised up by a massive $230 billion over the forward estimates.

We now know a large part of this revenue boom was temporary, but the spending locked in by our predecessors was not.

This left the budget in a structurally vulnerable position, which has now been exposed with the downturn in demand.

The global recession and unwinding in the mining boom have stripped $210 billion from expected tax revenues over the forward estimates.

This is the biggest fall in expected tax revenues in living memory.

In a single year almost all of the revenue windfalls of the past three and a half years have been eroded.  

It demonstrates just how reliant the budget position had become on inflated revenues from the commodities boom. 

But it also puts the onus on us to put the Budget back on a more sustainable footing.

That’s what the tough long-term structural savings in this Budget are about.

They are the only way we can responsibly fund our priorities and ensure the national balance sheet remains strong. 

They are essential to finding room for important priorities like pension reform and nation building for recovery.

What Kind of Recovery?

This brings me back to the most important question facing you and I today, and that is what kind of recovery do we want for Australia?

What kind of economy do we want for when we start growing again?

How do we position our people to take full advantage of the global recovery, turbo-charging our own recovery here at home?

When it comes to the global economy, we are all up against it.

You are, the Government is, the Australian people are.

And in conditions like these it’s easy to focus only on our problems.

But I am by nature an optimist.  And I suspect many of you are too.

And there are reasons for that optimism.

Not just the relative strength of our Budget or the relative strength of our financial system or the success of our economic stimulus.

But also the encouraging signs we anticipate out of countries like China.

Like many countries around the world, China has embarked on a large fiscal stimulus package.

And with a strong focus on infrastructure investment, it will to some extent help support demand for your commodity exports.

There are some early signs this is already providing a boost to its economy. 

China is still expected to be the fastest growing economy this year and many expect that it will be the first major economy to recover from the global recession.

And China’s expansion still has a long way to run yet.

So there are also good reasons to be confident that growth in China and other developing economies will provide an ongoing source of demand for our exports for some years to come.

There’s another reason I’m optimistic about the future of our economy, and that’s the ability of people like you and governments like ours to engage each other on some of the big issues we’ve talked about today.

The willingness from both sides to contribute to a strategy that best positions Australians to take full advantage of the global recovery.

This is not to say we agree on everything – far from it.  And we’ll continue to have robust debates about important issues like the best ways to balance fairness and flexibility in the workplace, and the best way to reduce carbon pollution.

I’ve had a number of constructive conversations with many of you about our plans for the CPRS.  And I know not all of you are happy with the direction we want to take the country, towards the low pollution economy of the future.

We consider this to be one of the defining issues for our generation.  In my view, and the Government’s view, doing nothing is not an option.  And I know we sometimes have very different views on the best way forward.

So we will not agree on everything.  But we can agree on this: the next generation of prosperity needs to be better and more sustainable than the last.

I think we can agree the quality of our recovery depends on a more productive, more modern, and more competitive economy that transports your minerals more effectively and makes better use of the talents and hard work of the Australian people.

I think we can agree it will rely on better infrastructure, a smarter workforce, and the hard decisions that put the Budget back on a sustainable footing.

It will rely on the Nation Building for Recovery plans I outlined on Budget night, and it will rely on your own efforts.

These things we agree on will go a long way to determining how Australia fares into the future.

And that’s why I appreciate so greatly the opportunity to talk with you today.

So thanks again, and I wish you all the best for your conference.