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

12 May 2010

NO.008

Personal Reflections on the 2010 Budget

Address to the National Press Club

Canberra

12 May 2010

Thanks very much Ken [Randall] for having me here again and thanks to all of you for your interest and your attendance here today.

I know a few Treasurers before me have done more Budgets than the three I've chalked up. But three Budgets have been enough to establish in my mind that the Press Club is a particularly discerning post‑Budget audience. An audience that is already familiar with many of the numbers I presented last night, and one that won't take kindly to hearing them all again today.

I appreciate the informality of the post-Budget speech. And I want to take the opportunity today to step back a little from the detail of last night's documents.

I want to say something about how far we have come in the past three years, something about the big challenges and opportunities that I see before us today, and then something about what all this means for our plans going forward.

I'll also talk about the Budget itself, but mainly in the context of this wider, more personal perspective on what I think is a pretty remarkable economic story.

It's fair to say the past few weeks have been far from typical budget preparation. I've been to a G20 meeting in DC, spent time on Wall Street, delivered a tax reform package, and now a Budget.

Plus I've been receiving almost daily briefs on the unfolding situation in Greece - a situation that concerns us all, but most of all Greece and its neighbours in Europe.

Some Global Content

I want to start on the international front today, because it sets so much of the context and also underscores how remarkable our performance has been.

A couple of months ago there was a G7 meeting in Canada. No doubt the economics commentators were aware of this, but it was pretty clear from the lack of reporting and excitement that the world has lost interest in the G7 or the G8.

For Australia, where the really big change has occurred is the emergence of the G20, of which we are of course a member, as the broadly representative and widely recognised coordinating council for the global economy.

Not since World War 2, when Australia had a voice in the formation of the IMF and the World Bank, have we played such a significant role in global economic discussions as we do now.

This new central body of global economic governance is more than twice the size of the G8 in terms of numbers of members, but even so nearly 90 per cent of independent nations are not included in the G20.

And it is not the size of Australia's GDP that makes us an indispensible member of the G20. We are included and we keep our place because of the quality and relevance of what we can bring to the discussion. We continue to punch above our weight in this respect, and we will do a lot more hard work in coming years to strengthen the range and depth of our contributions.

We should never take our inclusion for granted - we earned it through our constructive contributions and we will have to earn it time and time again.

My experience of the past few years is that Australia's strong performance during the global financial crisis and its aftermath elevated our standing in the eyes of other members.

When I was at the G20 Finance Ministers' meeting two weeks back I was struck by just how patchy the global recovery really is - countries like ours looking to the future; others still sifting through the rubble of a deep recession and the aftershocks which keep reappearing in different forms.

Our inclusion is also about much more than our strong performance in the crisis. It is also the unique economic model we showcase to the rest of the world. We are an example of the benefits of globalisation, but also a great example of fairness.

We are showing the world that it is possible to be an open, market-driven economy, and also a society which takes care of the old and the sick and the jobless, and which shares fairly the considerable benefits of economic prosperity. Those of you who know me know how seriously I take this responsibility.

A Tale of Three Budgets

Now we come to a discussion of the three Budgets I have now delivered and what brings them all together. Looking back on those Budgets reveals an exhilarating 30 months. It hasn't ever been boring.

We came to government at a time, you might recall, when inflation was rising and the Reserve Bank was tightening monetary policy. One of the first decisions the PM and I made was that we must not risk adding more pressure to interest rates, adding to the burden on Australian homeowners and businesses, by adopting an expansionary fiscal policy.

But we also knew that there was a substantial infrastructure deficit left by 12 years of neglect.

The first Budget found a difficult balance. We decided on a tight fiscal policy. At the same time we had to set aside the money we needed for infrastructure and education, and we set up the mechanisms which would identify the priorities when we came to spend it.

We could have spent a lot. Our predecessors had shown the way. We decided not to follow it.

Not four months after that first Budget, Lehman Brothers went under, and the entire global financial system very abruptly found itself swaying on the edge of a cliff. We had plenty of good reasons to be very worried, and we were. I'm not too proud to say I didn't sleep much at all.

We knew that our banks were sound, but in the circumstances of September and October 2008, even with our financial system being well-capitalised, well-regulated and well-managed, and with very safe lending standards, Australia was not immune from the collapse of confidence in the global financial system.

Whatever else happens in this job, whatever else happens to us as a government, I doubt I will ever be prouder of our officials in Treasury, the RBA and APRA, of the Government, and of the Australian people, than I was in that sudden global economic catastrophe of 2008.

Australians were concerned - as they should have been - but they did not panic.

We moved quickly to ensure our banks maintained access to global capital markets on competitive terms, to support the continued flow of credit through the Australian economy. And we prepared an immediate package of decisive fiscal measures to support spending and confidence, while working to prepare another.

Again we were harshly criticised. Some critics said it was too much too soon. Others said it was too little too late. At various times the Opposition contributed the view that it was too much and that it was too little, and that it was too soon and that it was too late.

But at the end of the day, we knew we had to move very quickly and we did. And of course, our stimulus worked.

It worked to sustain household spending, to support confidence, to support construction, and to support investment. Most importantly for me, it saved jobs.

In the OECD as a whole, unemployment has increased by over 15 million since December 2007. The US, the UK and Europe experienced their deepest recessions in years and are only now emerging from them.

Bearing in mind the severity of the global recession, it is a remarkable thing that more Australians have jobs today than when we were elected to government at the end of 2007 - and not a few more jobs, but over 300,000 more jobs.

It's also remarkable that our GDP, our economic output, is substantially higher today than when we became a government, and that our exports are higher by both value and volumes than what they were at the end of 2007, the peak year in world economic growth.

The 2010 Budget

So we come to the third Budget, in many ways the most complex of the three and in some ways the hardest to construct given the strictness of the fiscal strategy we imposed on ourselves. With responsible management the Government will halve peak debt and get the budget back in black in three years, three years early.

It wasn't easy, but last night's Budget is still one that most of my ministerial counterparts in other countries would love to hand down. While other countries are going through a white-knuckle ride, we are delivering the stable, steady economic leadership we've always wanted to make the hallmark of our Government.

It is a Budget that builds for the future on the success of our economic policies in recent times. I think its strength is that it gets the basics right - and it gets them right for the long term.

It used to be the case that each Budget was a slight variant on its predecessor. In the case of the last three, each has been dramatically different as we responded to dramatically different circumstances.

Last night's Budget marked another shift. We have started to close the budget gap more rapidly than I expected. Growth is rebounding, revenues are returning, and surplus is within sight.

They will never admit it, but every government faced with these conditions in an election year has the temptation to misuse the return to growth to buy votes. It's something we saw a lot of in the last few election year Budgets.

We ruled out an election year spendathon from the very beginning. The vote-buying of those years was obscene. I never completely understood Peter's need to pull rabbits out of a hat then lecture the country about how clever he was. There has to be a greater purpose to government than that.

The Government I'm part of didn't choose the times. Like anyone, we would have preferred to have managed the economy when the going was easy.

Our plan was to employ the gains from the longest boom in memory to secure the future of the country - by investing in education and skills, reforming the health system, modernising infrastructure, creating better public services.

It's still our plan, despite all that's happened. And to the extent it's been possible, we've used the stimulus to rebuild and reform and create new capacity for the long term.

Obviously I care what you write about our Budgets and obviously I'd rather you write nice things than critical things. But it's been a bit different this time around.

I deliberately described it as a no-frills Budget, because it is. I deliberately described it as workmanlike, because it is. I said it sets a new benchmark for responsible Budgets, and it has.

It may not be an electioneering Budget, but it's a Budget I'm happy to be judged on by the Australian people, who expect and deserve the highest standards of responsible fiscal management.

Why It Matters

I'm really proud of what we could do in the Budget to boost national savings; build the skills and infrastructure base of the economy; and invest in renewable energy and the health system while offsetting the lot. It is the fiscal story that matters most.

I hope you agree that these initiatives marry economic necessity with enduring Labor values.

I know you don't want me to run through every initiative again or all the dollar figures and start dates and the like. So I want to do something a bit different today: instead of giving you chapter and verse I want to tell you about just one of our initiatives - the Apprenticeship Kickstart we extended last night. It says a lot about why Budgets matter.

As you know, the new program will provide an extra incentive of $3,350 for small and medium businesses to take on a traditional trade apprentice in skill shortage areas. It will provide greater access to training and support for around 22,500 young people around the country.

I'm indebted to my friend Jason Clare, the Parliamentary Secretary for Employment, for telling me last week as I put the finishing touches on the Budget, about what this program has meant for young people who want to be the tradies that build our country up into the future.

Jason tells me the Apprentice Kickstart, alongside the targeted support from our fiscal stimulus, has already boosted traditional trade apprenticeship numbers back to pre-global recession levels in just one year. To give you a sense of this achievement, what it took us 12 months to do, it took 13 years to do following the 1990s recession.

Twelve months - not 13 years - to rebuild the apprenticeship base - that means a lot to us.

Think about that for a moment - we repaired our apprenticeship base through good management and the intelligent design and implementation of a good program.

That 13‑year recovery is one of the reasons why pockets of the economy were crying out for skilled workers as the last boom gathered pace.

This one simple fact doesn't just sum up why we extended the program last night; it sums up the kind of difference you can make in government. It sums up the kind of difference we have made and the kind of difference I will always want to make so long as I'm in public life in this country.

The Opponents of Reform

I honestly don't think our political opponents feel this sense of purpose. I don't think they feel the same responsibilities to working people and their families that we do.

I don't say this lightly and I don't say it glibly. I say it because it is the only possible judgement on a Coalition that was happy to let families swing in the breeze when things got really willing in the global economy. In Australia's hour of need, they were nowhere to be seen.

Their vote against stimulus wasn't just the stupidest economic decision they could have made, it was also the cruellest. Australians were relying on all of us to do the right thing by them and I'm sure they were as surprised as I was to hear Mr Hockey and Mr Abbott argue we should do nothing.

Now our opponents give every indication of making the same mistake again, with tax reform.

We've got used to Tony Abbott's view on government policy: first, oppose it. Second, read it.

It was no different on tax. Anyone who thinks Mr Abbott is a serious alternative PM should remember he is the guy who opposed an ambitious tax reform package before he'd even seen it.

Unfortunately Mr Abbott's approach fits nicely with the approach taken by others who oppose the tax package I released just a little over a week ago.

It is fine for private businesses to exploit these natural resources which are the endowment of all Australians. All we ask is that there should be a fair and reasonable distribution of the benefits.

As the independent tax review work showed, Australia's mining sector has been comparatively lightly taxed in recent years. I think there is a pretty good case to capture a little more of those profits.

I've listened to the concerns of mining industry executives over the last week and a bit. Their views are respected and valued. And I understand that they personally have a big stake in stopping this reform to our tax system.

But the iron ore, the coal, the gas, the petroleum and other resources - these things don't belong to companies; they belong to our country. And we have a duty to ourselves, to our children, to ensure we get the best long-term returns from them. That we convert them into something that lasts.

Our resources aren't a boom to be squandered; they are our family farm and our family house; they are our nation's superannuation plan; and they are what will build a better future for our children.

Our resources are plentiful. But they are not going to last forever. We can't take them for granted.

And we can't go back to the lazy complacency about mining booms that characterised our predecessors - an attitude that lives on in Mr Abbott and Mr Hockey in particular.

Optimistic about the Future

Let me finish by saying Australians have some reason perhaps for quiet satisfaction about the last 18 months or so, but no reason at all for complacency.

For one thing the global economy is still fragile. As we have seen in the Greek crisis over the past few months, global financial markets are becoming increasingly wary of lending to governments in which they do not have complete confidence.

We don't yet know how that will play out, but given the size of sovereign debts and the probability of deficits for years to come in many economies, we know there is every reason to be wary and every reason to stick with the strong, sound and credible fiscal policies we demonstrated last night.

Then there are longer-term issues we need to deal with. It's important that we get young Australians into jobs or into training so they can acquire the skills that are so essential for new entrants to the workforce. That's a big priority for us - one of many.

I think there is a lot more we can do to remove impediments and constraints to growth in the Australian economy, from the way we handle water and energy issues to the way we handle transport and infrastructure.

There is a lot of meat left in tax reform and you will hear more about this in coming years. And we know we need to prepare now for the inevitable ageing of our population.

Putting together the Budget I released last night was a tremendous privilege. I got to work closely with Kevin and my Cabinet colleagues - people like Lindsay and Anthony and Chris and Julia and others. I got to work with the dedicated Treasury officials - some of the most talented people in the country.

I also got to construct a Budget that says a lot about Australia. A quietly confident country, full of practical, resilient people who can stare down a global recession then move onto the challenges of recovery without missing a beat.

I'm proud of them and I'm proud of our third Budget.

Thanks again and I look forward to your questions.