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

21 June 2010

NO.018

Positioning Australia for the Future –
Delivering the Next Wave of Critical Economic Reform

Address to the Capital Markets Leaders Summit

Parliament House

21 June 2010

Thank you for the invitation to speak tonight and in particular thanks to the Property Council.

I am proud to stand here and say to you that the Australian economy is one of the strongest performing in the developed world. Australia's performance during the global crisis is a tribute to the resilience of our businesses, workers and local communities. The way in which everyone pulled together during the global crisis says a lot about our national character.

Our economic strength during the crisis is also due in no small part to the Government's stimulus measures. When jobs and businesses were threatened by the global recession we stepped in and did what was necessary to keep our economy strong. Those actions meant that at a time when countries all over the world fell into deep recessions, our economy was growing and still creating jobs.

The head of the OECD, Angel Gurria, went as far as to say when describing Australia's performance:

"You've done well. You've actually been quite exemplary. You've had good growth even in difficult moments"

Our success during the GFC and Australia's economic strength is evident in any number of measures.

Take the fact that of the world's 33 advanced economies, 31 found themselves in recession, more often than not in deep recession. But not us. Our economy grew by 1.3 per cent during 2009 – a full 4½ percentage points above the advanced economy average.

In the rest of the world millions of jobs have been lost. In Australia, we've been creating jobs. We have more Australians in work today than before the global crisis began, some 250,000 of them. That's a wonderful achievement in the midst of the greatest disruption to global growth in 75 years.

Looking forward, our future economic prospects remain bright. Our economy is forecast to strengthen further, growing by 3¼ per cent in 2010-11 and 4 per cent in 2011-12. And the unemployment rate is expected to fall to 4¾ per cent by late 2011-12.

Our performance during the GFC is a great achievement of which all Australian businesses and households, and the Government, can be proud. Together, we have not only stared down the global recession. We have emerged stronger than other advanced economies.

Tonight I'm keen to talk about how we build on this strength and position Australia to take maximum advantage of the opportunities for our domestic economy from growth in our own region.

Global Economic Outlook

As we see it, the global recession has accelerated the shift already underway in the global economic landscape. At the moment we're seeing different parts of the world growing at two very different speeds.

The growth prospects for many advanced economies remain modest. Many of these developed nations have a difficult path ahead. They face the huge task of reducing debt and they are saddled with the tragedy of double-digit unemployment.

At the same time, China and other emerging economies are leading the recovery and the outlook for these economies is strong. This means that going forward a greater share of global growth will come from our own region.

It's well known that growth in China and India will see the transfer of the weight of the global economy to the Asian region. What you may not realise is that, according to the IMF, in five years time Asia's economy will be about 50 per cent larger than it is today. And by 2030, it could become the world's largest world economic region, exceeding the G7.

The continued emergence of China and India should present considerable opportunities for Australia for many years to come. But it also brings challenges. That's why we need to press ahead with key economic reforms that have been the topic of some really heated debate in recent weeks.

Outlook for Australia

I am optimistic about the medium-term economic outlook for Australia.

We are expanding our productive capacity through judicious investment in skills and infrastructure. And the economy's strong performance through the global financial crisis has meant that we have avoided the erosion of the skills base and the loss of business capital that has occurred in other countries. Australian firms and workers are in good shape to take advantage of the expected recovery in global demand.

We also have the budget on a responsible path back to surplus, and we expect to be back in the black in 2012-13. This is three years earlier than previously projected, and ahead of every major advanced economy. Australia's budget position continues to be among the strongest in the developed world. A return to surplus in 2012-13 places Australia well and truly at the forefront of global fiscal consolidation efforts.

A Commitment to Reform

Our own performance and the performance of other countries in our region presents opportunities and challenges. We need to press ahead with key economic reforms that build on our economic strengths and position Australia to take full advantage of opportunities which exist domestically and in our region.

That is why the Government is committed to delivering reforms in the key areas of tax, superannuation, and infrastructure. These reforms build on our record of pension reform and health reform – and continue our commitment to ensure all Australians share in the nation's economic prosperity.

Australia has seen first hand the problems of failing to manage commodity boom mark I. Australia failed to invest in building our capacity and infrastructure bottlenecks built up and strangled our potential. We suffered under a two-speed economy, where growth in resources made it harder for other industries to compete. And at the end we had little to show for the boom.

We are determined to make sure Australia has more to show from this boom than the last – it is the driving principle of our reforms.

A profits-based tax will ensure Australians are receiving a fair price for our non-renewable resources. This is a reform recommended by the independent tax review – and a model of tax reform supported by the Minerals Council of Australia in their submission to that tax review.

The Resource Super Profits Tax (RSPT) is a critical reform in itself – but it will also allow us to deliver the economic reforms which will grow the economy more generally and ensure the benefits of commodity boom mark II go to all Australians.

The revenue raised through the RSPT is dedicated to all Australians through superannuation reform; to companies through corporate tax cuts; and to our communities through investments in infrastructure. These are measures that will grow the economy.

Superannuation reform will boost national savings and retirement incomes – growing the pool of funds available for further investment.

Company tax cuts – including early introduction for small businesses – will boost the competitiveness of companies across all industries and provide opportunities for local companies to invest and grow.

And the investment in infrastructure funded by the RSPT – $6 billion over ten years – will boost the productive capacity of our economy, addressing bottlenecks for growth in our ports, rail and roads.

Delivering on these reforms is crucial to our national economy and in the interest of all Australians, including in your own sectors.

Affordable Housing for All Australians

Given that this event is sponsored by the Property Council, let me turn to another reform priority – housing reform.

Doing all we can to enable a strong economy is essential to delivering a rising standard of living for all Australian families but it will not be enough. Australian families also need affordable homes.

Recently the topic of home ownership has come up in my own home – with two adult daughters and a teenage son, it's a topic I am always happy to encourage! Like many parents, I am concerned by how difficult it is for my daughters to access home ownership. I have lived in the same house for over 30 years and have enjoyed all the benefits that come with home ownership. Like most parents, I want my kids to be able to access the same opportunities that I have had through home ownership.

Australian house prices have grown strongly over the past 15 years, having more than tripled since 1995. This price growth has not been limited to our capital cities – many regional and rural areas have also seen big rises.

Of course, for those Australians who already own homes, higher house prices may be welcome. But for those Australians seeking to enter the housing market, high house prices and rents make the transition to home ownership or getting into the rental market all the harder.

I think that one of the reasons that Australia has relatively high house prices and rents is because of an inability to supply more housing in the face of strong demand. In fact, the supply side of the housing market has struggled to keep pace with demand for over a decade now.

The Australian housing market has seen around 150,000 dwellings built each year over the past decade. This compares with estimates by the National Housing Supply Council of underlying demand in excess of 200,000 dwelling units in 2008-09. Once they factor in other issues, like replacing demolished stock, the Supply Council estimates that Australia has a current supply gap of around 178,400 dwellings. If recent patterns continue, this gap could grow to more than 600,000 dwellings by 2028-29.

It seems that the supply of housing in Australia is not as responsive as it could be and this has been the case for some time now. That is, we are simply not building enough houses and units.

One of the reasons we are not building enough homes is because of the impediments created by various regulations, slow planning and zoning processes, and complex, uncertain and time-consuming systems for charging developers for infrastructure. In the worst-case scenario, it can take as long as 15 years to proceed from the identification of suitable land to a completed house. We can do better than this.

We need a housing market that is more responsive to demand. A market in which available land is released promptly, with development not hampered by uncertainty around infrastructure charging. A market that delivers a range of housing types to help ensure that housing is not beyond the reach of some of the most needy in society. And a market that is responsive to Australians' desire to change their housing as their life circumstances change.

The Government's Housing Policy Response

We have been mindful that the solutions to improving housing affordability lie in increasing the supply of housing and supply responsiveness. Most of our policies have been targeted at increasing the supply of housing, especially for the less well-off and most vulnerable groups in society.

Much of the Government's efforts in this regard have been led by Jenny Macklin and especially the Housing Minister, Tanya Plibersek. I think they have done a magnificent job.

We signed a $6.2 billion national affordable housing agreement with the states to deliver affordable housing to the less well-off.

We delivered a further $5.2 billion of stimulus money to build more than 19,300 homes and maintain the existing public housing stock. Recent dwelling commencement figures highlight the importance of this stimulus funding to the housing sector. Public sector housing commencements were up 73 per cent in the latest quarter while the number of private commencements was flat.

We introduced the National Rental Affordability Scheme to encourage institutional investors to deliver low-cost rental housing in our big cities. And I am proud to say that as at May 2010, at least 1,700 dwellings have been built and are available for rent at below market rates. And based upon what participants are telling us, we expect that by 30 June 2011 this figure will grow to over 8,000 dwellings.

We have also introduced the $512 million Housing Affordability Fund (HAF) to drive reform among state and local governments' planning and zoning processes and infrastructure delivery.

We are providing more incentives for young people to save for their first home through First Home Saver Accounts.

We supported the housing market through the worst of the GFC through the First Home Owners Boost.

We have committed to much-needed investment in land transport infrastructure ($37 billion), including $27.7 billion in urban and regional roads. This infrastructure will help support housing. And we have moved to encourage better planning of our cities to ensure our infrastructure is being used and planned for efficiently.

These are all important steps and they will all contribute to improving the functioning of the Australian housing market and in particular, the supply of low-cost housing. But being aware of the scope of the challenges in the housing market, I recently announced with the states a reform agenda for further improving housing supply and affordability.

The Commonwealth and state treasuries and premiers' departments are now fully engaged in the process of designing reforms to improve the operation of the housing market. I'm determined to see the Australian Government play a role in reforming the housing market for the long term, embedding better practices in planning and zoning and developer charging.

I was pleased to see the NSW Government recently announcing much-needed reforms to its planning processes and reductions in stamp duties.

Recently, Dr Steven Kennedy from my department outlined some broad principles for infrastructure charging including that charges should be efficient, transparent and accountable. These principles are designed to lower the costs associated with uncertainty surrounding infrastructure charges and to increase transparency.

I am pleased that the Property Council has engaged with this reform process and hope we can continue to constructively pursue solutions.

Concluding Remarks

As you always do when you prepare for a speech like this you reflect on the scope of our reform agenda and the work ahead. It reminded me that what has remained true since we came to government is that supporting families and providing opportunities for all Australians has remained our guiding principle.

When working with the Prime Minister and other colleagues to craft a way forward for Australia during the GFC, the circumstances of our many different households and families were front and centre in our thinking.

What could we do to ensure kids would still be able to get jobs? How could we buttress the financial sector to ensure credit would continue to flow to businesses so they could continue to invest and grow? And how could we ensure that we would emerge from the crisis stronger and ready to prosper?

Australia's success in countering the GFC shows that together we can achieve great things. My hope is that we can bring that same sense of purpose, and focus on supporting all Australians, to delivering the next stage of critical economic reforms, including those I have discussed tonight.

Our tax plans, superannuation reforms and infrastructure agenda – including reforms in the housing market – will benefit not only the current generations but the generations to come. This is an agenda we are committed to and I encourage you to look at the full scale of our reform agenda to appreciate the great opportunities it presents for our nation.

I look forward to discussing these issues with you further this evening. Thank you.