Minister for Financial Services & Superannuation
14 September 2010 - 1 July 2013
Post Budget Breakfast
Institute of Public Accountants
Parliament House, Canberra
11 May 2011
-- CHECK AGAINST DELIVERY --
I want to begin by acknowledging the traditional owners of the land on which we are gathered this morning – and pay my respects to their Elders, past and present.
I also want to thank the CPA, the Institute of Chartered Accountants and the Institute of Public Accountants for hosting this Post-Budget breakfast.
The IPA – which until a few days ago was known as the National Institute of Accountants – the CPA and the ICA championed the cause of taxation reform in their pre-Budget submissions.
I couldn't agree more.
We do need to maintain a constructive dialogue.
I would go further and say that dialogue needs to be substantive.
As a nation, we have to get away from sound bite-style policy and search for systemic ways to make our nation more sustainable, more innovative and more competitive …
… to make the transition into a digital economy …
… and that requires informed debate and discussion – and decisive action.
After all, if global phenomena such as climate change and the Global Financial Crisis have taught us anything it is this:
Everything and everyone is connected …
… and change is not optional – it is inevitable.
That is why this Budget – together with the taxation discussion paper set for release in June and the Taxation Forum set to be held in October – are so important.
They are important because change will not wait for us.
The point I am driving at is this:
Australia is now in its 20th year of consecutive economic growth.
That's a great achievement – and a testament to the reforms of the Hawke and Keating Governments – but we cannot afford to take our future granted.
The world is in transition – towards digital technologies, towards China and India, towards sustainability, towards longer life expectancy – and we have to keep up.
That's why a good Budget – and Wayne Swan's fourth Budget is a good one – needs to be more than a recitation of estimates and actuals.
It needs to be a statement of purpose.
And our purpose is securing Australia's future.
Increasing participation rate
A central theme of the Budget is building the more productive workforce our economy needs to take us into the future.
That's why the Budget takes an economy-wide approach to encouraging more Australians to look for work — young people, single parents, older people, and some people on disability support.
We have invested $558 million in the National Workforce Development Fund that will deliver 130,000 new training places over four years.
We are providing $101 million to help 40,000 apprentices complete their training.
And we are investing $100 million for more flexible training models in apprenticeships.
In addition, we will cut effective tax rates for 50,000 single parents by up to 20 cents in the dollar and invest $80 million in their skills.
These investments in our workforce will ensure that Australians have the skills they need to find jobs, and to meet industry needs — both now and into the future.
Returning to surplus
No Budget is easy, but some Budgets are less easy than others.
Consider the circumstances surrounding this Budget.
We are still feeling the effects of the GFC.
We have come through some of the worst natural disasters in living memory, both here and overseas.
Disasters such as the January floods, Cyclone Yasi, the Christchurch earthquake and the Japanese tsunami are expected to subtract about ¾ of a percentage point from Australia's real GDP growth in 2010-11.
The negative impacts are expected to be temporary.
The resumption of activity and the reconstruction effort are expected to add to real GDP growth from 2011-12.
Beyond the short-term impact of the natural disasters, Australia's real GDP growth is expected to strengthen to 4 per cent in 2011-12 and 3 ¾ per cent in 2012-13, led by record investment levels in the resources sector.
Employment growth is expected to remain solid over the forecast period, and the workforce participation rate is expected to remain at around record highs.
The unemployment rate is forecast to fall gradually from its current level of about five per cent, to 4 ½ per cent during 2012-13 as the economy approaches capacity.
Our high terms of trade are supporting strong national incomes and growth in the broader economy, but conditions will remain challenging in sectors of the economy that are not benefitting from the resources boom.
While the strong Aussie dollar and the withdrawal of fiscal and monetary policy stimulus are helping moderate inflation, they are also bearing down on activity and profits in some sectors.
So, while the Australian economy is expected to grow at an above-trend rate over the next two years, we can expect to see some effects of the "patchwork economy".
While the surge in demand for our natural resources will bring new income into Australia, it will also test the capacity of our economy, and put added pressure on wages and prices.
We also have to take into consideration the significant risks to the global recovery.
Risks, such as,
Uncertainty about the speed and strength of the Japanese recovery ...
Rising world oil prices ...
The potential for sovereign debt concerns in the Euro area to spill into the broader European financial sector and beyond ...
Failure to develop a credible medium-term response to the unsustainable US fiscal position ...
And inflationary pressures, rising energy costs and higher food prices in emerging market economies.
What does this tell us?
That Australia cannot afford to wait for change.
We need to press ahead and keep implementing robust macroeconomic and structural policies.
All of which is why our Government is delivering on our promise to return the Budget to surplus in 2012-13 and beyond.
After all, paying down debt increases our nation's capacity to respond to whatever shocks may await us in the future.
It's worth noting that Australia is returning to surplus well ahead of other major advanced economies.
The United States, the United Kingdom, France, Japan and Italy will not even halve their deficits as a percentage of GDP by 2012.
These economic circumstances place considerable constraints on the Government's ability to embark on large scale tax reforms.
Despite this difficult environment, this Budget delivers sensible, forward-looking tax reforms that build on the Simpler, Fairer, Stronger package announced last year.
Importantly, the measures in this Budget continue to implement the reform directions indentified in the Australia's Future Tax System Review.
This Budget improves the incentives set by the tax system in a number of areas:
- improving participation incentives for spouses without children, by phasing out the Dependent Spouse Tax Offset;
- targeting small business tax concessions by replacing the Entrepreneurs' Tax Offset – with a small business tax package that includes a $5,000 immediate deduction for motor vehicles from 2012-13; and
- improving certainty for investors by allowing infrastructure projects of national significance to carry forward losses with an uplift factor to maintain their value.
The Budget also includes a number of measures that support fairness and integrity in the tax system, such as:
- reducing access to income splitting by high-income earners by removing access to the Low Income Tax Offset for the unearned income of minors; and
- increasing the integrity of the system by improving the reporting of taxable payments made to some contractors, and taking stronger action against fraudulent "phoenix" activity, fraudulent tax refund claims, and non-payment of tax on government payments.
Speaking of fairness and integrity brings me to disability.
This is an area that I have a real passion for – having worked as the Parliamentary Secretary for Disabilities and Children's Services.
It's also an area I see enormous potential in, economically.
Currently, the Productivity Commission is preparing its final report on the feasibility of a National Disability Insurance Scheme …
… which could significantly boost productivity by enabling more Australians with a disability to participate in the workforce.
I look forward to that Productivity Commission report.
In the meantime, our Government is pressing ahead with other disability initiatives in the Budget, such as:
- Relaxing the Disability Support Pension work restriction to let DSP recipients work up to 30 hours per week;
- Investing $146.5 million over five years to provide grants to families to access early intervention services for children with disability;
- And investing $200 million over three years in extra support for school students with disability.
As an economy, we are in transition.
As a society, we are in transition.
As a nation, we are in transition.
We are benefiting from high commodities prices and the second mining boom.
We are seeing the re-emergence of opportunity in Asia.
We are building for the potential of the digital economy.
And we are faced with the challenge of an unprecedented ageing of our population. Not to mention climate change.
The hard truth is that economic, generational and environmental change is coming our way … whether we like it or not.
Now, there are two kinds of change:
- The kind of change you make happen,
- And the kind if change that happens to you.
Our Government believes in making change happen.
That's why we led the world with our pro-active response to the Global Financial Crisis.
That's why we are taking action to on carbon.
That's why we're building the National Broadband Network.
And that's why we've delivered this Budget with a purpose …
… because leadership in Government is all about making change happen for the better.
In conclusion, the 2011 Federal Budget is a tough Budget for tough times.
It provides the clear-sighted approach and fiscal discipline Australia needs to continue moving forward.
And once again, I'd like to thank you for your pre-Budget submissions, and for inviting me to speak with you this morning.