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

13 May 2011

NO.013

The Story Behind the Budget Part Two: A Budget About Jobs

Address to the NSW Business Chamber

Sydney

16 May 2011

It is a great pleasure to be here in Sydney, a city that brings together more than any other the broad range of employment opportunities that our economy presents. As a modern diversified economy, Australia presents so many opportunities and these will only get greater with the shift in global economic weight to our region. That is why the Gillard Labor Government is so committed to ensuring that Australians have the right skills to take hold of these opportunities and we provide the right support for more Australians to participate.

I had the pleasure of meeting this morning with a bunch of hard working apprentices and their trainers at Cumberland Ford in Blacktown. Justin Poore from the Parramatta Eels also joined us. In addition to being a talented footballer, Justin is completing his plumbing apprenticeship. Because Justin understands, just like the apprentices at Cumberland Ford do, how valuable having the right qualifications is for your future.

Today I want to talk about jobs, both the importance to the business community and to individuals. This is the second in a series of five speeches on the Budget I'm giving as I move around the country.

Last Friday, I spoke in Brisbane about the importance of getting the right fiscal settings. That means bringing the Budget back to surplus in 2012-13 as promised so that we're not chasing the same resources as the private sector when the mining investment boom hits top gear. That's meant taking some difficult decisions in order to put in place $22 billion in savings across the budget. These difficult decisions, along with restraint in new spending, has meant average real spending growth over the five years of this Budget is the lowest since the 1980s. But our fiscal settings are just one part of our broader economic settings to invest in the capacity of our economy.

If there is a central theme to this Budget it is jobs. That really shouldn't surprise anyone, because it's been at the heart of all that we've done since coming to office. We understand that it is the business sector that creates jobs in our economy. But we also understand that this is helped by the Government getting the policy settings right – whether that be by supporting the economy in the global recession, providing the right training or encouraging more Australians into the labour force.

So today I'd like to talk about how we're investing in jobs through the Budget and about how our investments will build the capacity of our country well into the future.

I'd like to start by contrasting Australia's experience of the global financial crisis with that overseas, particularly through the lens of jobs. The fiscal stimulus this Government brought in from 2008 saw Australia avoid recession, and avoid these very serious long-term problems that now affect the livelihoods of millions around the world.

Since we came to office, more than 700,000 new jobs have been created, while the world has shed nearly 30 million over the same period.

In the United States, employment has fallen by well over 4 per cent since March 2007, while employment in Australia has grown by over 9 per cent. During this period, business in this country worked with employees to reduce hours rather than cut jobs. This cooperative approach served us well, and as the economy recovers hours worked have increased as has full-time employment. This means we didn't have to go through the loss of skills that unemployment – particularly long-term unemployment – can cause. And we avoided the destructive impacts of entrenched unemployment on lives and families.

As the International Labour Organization and IMF have previously noted, studies for the US show that jobs lost in recessions can have a lasting impact on people's earning power – with reduced earnings of 20 per cent on average even 15 to 20 years after the job was lost. And the impact is not just on workers themselves, it's the kids, families, communities that are all affected by prolonged periods out of the workforce. That's why Paul Krugman says, "behind those dry statistics lies a vast landscape of suffering and broken dreams".

In Australia, if we look at people unemployed for more than six months, our long term unemployment rate is 1.7 per cent – compared with around 4 per cent in both the United States and the United Kingdom. Of course, it's always hard to imagine the counterfactual – or what could have been if the Government didn't chose to intervene when it really mattered. What's important here is that tens of thousands, if not hundreds of thousands of Australians avoided it – and this was because of choice, not chance. That is an extraordinary outcome of which this Government is extremely proud. But we shouldn't underestimate the importance of reducing further unemployment and dealing with the challenges of entrenched disadvantage in the labour market.

Because we survived the GFC, we're now facing vastly different challenges to many of our peers. The fundamental challenge we face is no longer one of surviving a time of weakness, but of embracing a time of strength. As I have spoken about previously, the shift of global economic weight to our region will bring with it great opportunities.

Our economy is in the early stages of Mining Boom Mark II, with the terms of trade at their highest sustained level in 140 years. Mining investment is expected to reach a record $76 billion in 2011-12, taking new business investment to around 50-year highs.

While this will bring with it great opportunities, it will also stretch our economy's capacity and put additional pressure on our workforce. And the pressure is particularly intense on trade exposed sectors, including manufacturing and tourism. But as I said last week, the opportunities are far greater than for just our mining and associated sectors.

The number of middle class consumers in Asia is expected to increase by more than 1.2 billion people by 2020. That would mean that by the end of this decade Asia would have more middle class consumers than the rest of the world combined. Middle class consumers have different tastes – they travel more, they want better education for their kids, they spend more on food, technology and communications. What we've got to offer goes well beyond resources – we've got a bunch of smart industries that will take full advantage of these new middle class consumers. This will create job opportunities and whole industries that we can't even imagine now.

At the same time as we are managing this transformation, we will also need to manage a transformation in our population. This year saw the first baby boomers turn 65. Over the decades to 2050, the proportion of Australians aged above 65 is expected to nearly double – rising from about 13 per cent now to almost 23 per cent.

This change in our population is going to present a number of challenges. But it will also present great opportunities. The challenge is for us now to ask – How do we harness the life experiences and intellectual capital of senior Australians? I have immense confidence in the capacity of Australian businesses and workers to innovate and respond to these sorts of challenges.

The key is ensuring that our workforce has the skills of the future. The most important task we faced in the Budget was setting Australia up for the transition the mining boom is bringing to our economy now, and for the impacts of an ageing population in the years ahead. This means returning the budget to surplus as the economy returns to full strength, so that we are not compounding the inevitable pressures of the mining investment boom. And this also means lifting the capacity of our economy through investments in critical infrastructure and delivering the labour force that Australia needs. This is both delivering for business and for working Australians.

Never before have interests of business and low-middle income workers been more aligned. Through investing in the skills that business are calling out for and the skills that will allow workers the shot at a better job, this Budget is simultaneously for the wealth creators and the workers. It's been very encouraging to hear business groups welcome the training and jobs focus in the Budget and I thank them all for their support.

To deliver on jobs we need to transform our training system, so that it supports an economy in transition, so that it meets the changing needs of businesses across this patchwork economy, and so that it delivers quality training that Australians need to progress to high-paid, rewarding jobs.

At the same time, we need to reach out and draw in every willing pair of hands, to boost participation in our labour force well beyond the current high levels. The simple fact is that there has never been a better time to enter the workforce. And there has never been a better time to boost our participation rates, through a mix of rewards, opportunities and responsibilities.

That's why the centrepiece of this Budget is our Building Australia's Future Workforce package. We want to boost the skills of our workforce and extend the opportunity of participation to more Australians. We need to draw in more young people, more older Australians, more unemployed and parents with school aged children, more Australians with a disability.

This is not just a story about mining jobs. It is about ensuring those industries that compete with the mining sector for labour, can still find the workers they need. It is about the workers for the jobs of the future. But more importantly it is about giving the opportunity to more Australians for a better job or for a first job.

There are too many Australians who could benefit from our strong economy, but who aren't participating at the moment. The causes of that are complex, and addressing them is challenging. But we need to deal with issues like intergenerational welfare dependence, so people have greater opportunities in life.

This Government believes in the dignity of work, in the intrinsic value and worth that comes from being involved in the economic life of the country. And that's why it is so important that we seize the extraordinary opportunity ahead of us, that we use it to draw out Australians who have been left behind, and revitalise regions that have been left behind.

The jobs we offer as a nation, and the training that's available for people to undertake those jobs, are the most important mechanisms we have for spreading opportunity to every postcode. This Budget is about managing our economy in transition, to make sure opportunity and possibility reaches out to everyone, particularly those who might have been left behind in the past.

Critical to our success is a $3 billion skills package to ensure more Australians have the training they need to participate in the economy of the future. A key priority for the skills package is shifting our training system so that it is driven by the needs of the workforce and the economy.

We will bring industry, employers and unions together to identify the areas where training is needed. And we'll invest $558 million over four years in a National Workforce Development Fund to deliver that training – 130,000 places all up.

Of course, training our workforce is a shared responsibility of employers and government. That is why we'll seek an average industry contribution of 50 per cent for the new fund. This is only one part of our efforts to transform the whole training system. Around 1.7 million Australians study in public VET each year, but less than 30 per cent complete their course. This is bad for the economy, bad for employers and bad for students. We are putting $1.75 billion on the table for those States who are willing to partner with us in ambitious reform; reform to improve completion rates, match training to the needs of the economy, and lift the quality of teaching.

We are also investing $200 million to continue our efforts to reform the apprenticeship system, improving completion rates through mentoring and allowing apprentices to progress as they learn rather than serving out time. Study after study has shown that kids who complete high school have access to more and better jobs, and the chance to earn higher incomes over their lifetimes. So we will provide $772 million over five years to increase Family Tax Benefit Part A for dependent 16 to 19 year olds in full time secondary study, to encourage more kids to stay in school.

Some people are keen to work, but lack the core foundation skills that they need to get the jobs they want. $143 million will help them attain the basic literacy and numeracy skills, they need to participate more fully in the modern workforce. And we'll reach out to a broader range of people who may want to increase their involvement in the workforce, with rewards, opportunities and responsibilities. We are rewarding single parents by cutting their effective tax rates by up to 20 per cent, and letting them keep up to $3,900 more of their income from work. Sometimes it is employers who deserve the incentive, and that is why we will provide wage subsidies for people with disabilities and for the very long term unemployed.

Incentive is no use without opportunity, so there will also be 30,000 new training places for single and teenage parents to build their skills and get them ready for work. We know that fear of losing payments can lock Disability Support Pensioners into a lifetime on welfare. So we will give them the opportunity to work up to 30 hours per week, without losing payment eligibility. But with reward and opportunity comes requirements, like extending how long the very long term unemployed have to spend to build their employability through work experience activities.

I have spent a lot of my public life talking about the entrenched disadvantage we see concentrated in some locations. We know that breaking these cycles is not easy, so we will adopt intensive approaches for teenage parents and jobless families and extend income management to more disadvantaged areas.

We also need to harness the skills and experience of older Australians, and we will build on the improved work bonus and skills investments using the findings of the new Advisory Panel on the Economic Potential of Senior Australians.

Migration will continue to play an important role in meeting our skills needs as well. This is not about replacing Australian workers with migrants. This is about filling critical skills gaps, allowing our companies to grow and expand, and employ more Australians.

A belief in the inherent value of jobs is at the heart of this Government.

It informed our difficult choices through the toughest parts of the global recession, and it has underpinned every tough decision we took in this Budget: jobs, skills, training and education.

This Budget is focussed squarely on the future: on the challenges that we're only now grappling with, and those that the next generation will confront. The key to that future is building Australia's skill base as a diverse knowledge economy that can compete with the world, sitting as we are on the edge of Asia.

We're focussed on the jobs, the investments and the reforms of the future. We have to be, if we're going to turn the mining boom into an opportunity boom.

Tomorrow I'll be talking in Melbourne about how we ensure the opportunities of the mining boom are spread to more Australians. Access to employment can be no surer way of achieving that – and that's why jobs are right at the very heart of our Budget.

Thank you.