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

6 June 2012

Press Conference

Canberra

SUBJECTS: National Accounts data, Opposition negativity, economic climate for reforms, EMAs, mine approval processes, employment, instability in Europe

TREASURER:

Well I think the country should have a bounce in its step today, what a great day for Australia, and what a stunning set of figures. I think these figures send the loudest possible message to the world, that Australia is the strongest preforming developed economy, bar none.

To have growth of 1.3 per cent in the March quarter and the strongest through the year growth since 2007 is simply a stunning achievement. So whilst you've got European countries which are going backwards, other countries, developed economies around the world with very high levels of unemployment, Australia has surged forward in a remarkable way. We have seven Eurozone economies in recession, as well as in the UK, and many more developed economies which are crippled by unemployment, this result says something very special about Australia, and it says something very special about our people, about our resilience, about our hard work, and about our capacity to face up to the worst that the world can throw at us, it does all of those things.

Yes, we do have challenges, but what we see here is resilience and we are an island of growth in the middle of global uncertainty. We have here the best combination of strong growth, low unemployment, record investment, record investment, contained inflation and of course falling interest rates, so these numbers do say something about all of us, they are numbers about which every Australian can feel proud. They are proof that something special is happening in our country, and of course they prove we are all bigger than the doomsayers and the naysayers in our community.

Now I just want to go through some of the detail. Today's figures show that GDP rose by 1.3 per cent in the March quarter and 4.3 per cent through the year. It was 2.5 per cent over the year to the December quarter. Now in through the year terms, this is the fastest growth recorded in over four years.  Now I think as you can see in this chart, growth in this quarter is significantly faster than growth in any other major developed economy. So when we talk about Australia outperforming the world, this is what we mean - Australia is outperforming the world. This quarterly outcome is underpinned by a surge in business investment and also by strong consumption growth. What we've got here is a really healthy combination of outcomes, what this does is shine a light on the core strengths of our economy.

Household spending rose by 1.6 per cent in the quarter contributing 0.9 of a percentage point to growth in the quarter, this is a strong outcome with consumption growing 4.2 per cent through the year to March, well above trend and also its fastest growth in four years. Consumption growth was also reasonably broad-based through the year as this chart shows.

This chart blows away so much of the commentary that talks down our economy, and what it shows is that growth is broadly-based in our economy. What we've seen here is healthy growth, healthy growth in consumption services, from households spending in areas like travel, recreation and health. And also, in this quarter, we saw strong retail spending growth, particularly in areas like food, of course that reflects in part consumers taking advantage of lower prices, but across the board, consumption is very broadly-based in our economy. Now, of course, with this strong consumption comes the added bonus if you like that we are also saving more.

So on the one hand we have solid consumption, but on the other hand, our savings ratio is still elevated at 9.3 per cent. Now the other key driver of growth in the quarter was business investment, which grew by a robust 5.3 per cent in the quarter and contributed 0.9 percentage points to growth. Now this further underscores the resource pipeline that we've been talking about over the last couple of weeks.

We've seen engineering construction surging by 19.7 per cent in the quarter. Through the year, business investment is now up 20 per cent with engineering construction up by a remarkable 53 per cent. Now once again as you can see in the chart, there's much more to come. Investment pipeline in resources is now up to a record half a trillion dollars, with over half of that in projects at an advanced stage.

Now we can expect this investment to be lumpy in the quarters ahead as these projects are rolled out but they do continue to be an anchor for our economy in the face of global instability. Now what's even more impressive about the data today, is that it has been achieved despite weather related supply disruptions to iron ore production in the quarter. For example iron ore exports fell by 3.9 per cent in the quarter, partly due to cyclone activity in WA, which resulted in temporary port closures. This contributed to a decline in export growth in the quarter, which detracted 0.2 percentage points from quarterly growth.

Now of course the accounts do also indicate mixed conditions in our economy, they do show where the global headwinds are hitting, the high dollar, and where there are significant structural changes which do weigh down on some sectors.  Dwelling investment attracted 0.1 percentage points from growth in the quarter as many households still reluctant to take on more debt. And as expected we saw commodity prices decline in the quarter, which contributed to a 4.9 per cent decline in quarterly profits along with the high dollar. So there have been headwinds as well which is also why this is such a remarkable result.

It's really hard to look back, to look over the fundamentals of the Australian economy. We've got impressive growth while nearly half of the Euro area is going backwards. We've got strong consumption growth and households still saving, we've got record business investment with that half a trillion dollar pipeline I was talking about at before, we've got rising incomes at low unemployment and contained inflation and falling interest rates, and we have strong public finances and a budget returning to surplus at a time when it couldn't matter more. So as this chart here shows once again, the Australian economy continues to power ahead of every single major advanced economy. The Australian economy is now remarkably 9 per cent larger than it was prior to the global financial crisis, now if you look over there you can see the relative comparisons with other major developed economies, with the United Kingdom, with Italy – but we have surged ahead of the world and are now 9 per cent larger than we were. What this means is that we can have confidence in today's exceptional result because it does reflect a unique set of exceptionally strong economic settings in our economy.

Now I just want to make a few remarks about the economic debate and I also want to send a message to all the doomsayers out there who get such prominence in our media. We need to keep the fundamentals of our economy to the fore in our national discussion. Let's spend more time recognising our strengths as well as looking at weakness. Let's make these figures an extraordinary circuit breaker in our national discussion, let's look to build on our strengths not just to dwell on the challenges. Now we've been through too much as a country these past few years to talk ourselves down and to make the impacts of global events worse in our economy. We can see here the fundamental strengths of our economy which will serve us well in this volatile global environment.  Yes it's true that Europe is in terrible shape, but we here in Australia, in our region have unique strengths and we approach these challenges from a position of strength.

I'm very aware to all the challenges in the Australian economy and in the global economy, but I'm also keenly aware of our strengths and those doomsayers out there talking down our economy should stop, they should cease, because what we have here is a reaffirmation of the fundamental strength of our economy. This tide of negativity, relentless negativity from the doomsayers has to stop, because it insults the hard work that so many Australians put in to make our economy strong. It undermines the hard work of those people that go to work every day, earn a good wage and work hard, it undermines the work done by so many people in small businesses.

What we should be doing is having a much more informed discussion about the strength of our economy, this torpedos all the scare-campaigns run by Mr Abbott and Mr Hockey and they should desist, they couldn't even bring themselves yesterday in a discussion to say that the Australian economy had some strengths; they could barely welcome an interest rate cut. Mr Hockey said the Australian economy was weak and underperforming. This is simply not true. We've got to get back to the facts, it's important that we do, that we honour the hard work of people who go out there and earn a wage, we honour the hard work of those people that run businesses, that are contributing to these results. That has to be a very important outcome of these results.

Sometimes I've asked when I go to schools from students, what do I do as a Treasurer? What does it mean? What's it all about? And I say to them it's about growth and jobs, it's about investment, and it's about making sure that people who work hard to make our economy strong and a fair go. About making sure all of those people that work hard get a fair go, and of course making that happen is just not a function of what governments do, although that's important - it's a reflection of our national character, the efforts and enterprise of every household and every business. So what we see here today in these results is that it's a big day for the economy, it's a big day for our country, and it's a big day for the government. Let's have a bit of pride in these figures, let's recognise them for what they are, let's have a bit of belief so that we continue to face the global uncertainty from a position of strength. Over to you.

JOURNALIST:

Where do you think this negativity comes from? Is it only Mr Abbott and Mr Hockey?

TREASURER:

No, it's not, it's not only Mr Abbott and Mr Hockey. There are people in the business community who from time to time talk our economy down. Now, this is part of a legitimate debate, but I think it goes overboard. You can see here today from the consumption figures that consumption is broadly-based, but there are structural changes occurring in our economy as well and we should recognise these changes in the economy come from structural changes at the same time we recognise the underlying strength of our economy. So I think it is imperative that we have a much more informed public debate about our underlying economic strength, it's also important that we recognise that not everybody in our economy is in the fast lane, which is why the government has been talking about this challenge for the last couple of years.

We've put into the public debate the notion of a patchwork economy because it does accurately describe our economy. Not everybody out there is in the fast lane of the resources boom, not everybody out there is necessarily feeling the full benefits of it, which is why we have embraced the debate about spreading the opportunities of this remarkable period right around our economy, including to those who aren't necessarily in the fast lane. And the great thing we see about the figures today is how broadly that has been spread and combined with what the government is doing in terms of bringing the budget back to surplus, interest rates coming down, spreading the opportunities of the boom through important initiatives like help for families with the cost of educating their kids, increased family payments, they will keep that economy broadly-based and they will keep it growing based on the economic foundations we see here today.

JOURNALIST:

When you say business community, do you mean people who are in the, parts of the economy that are underperforming legitimately describing what they see? Or do you also mean I suppose political lobbying of the kind we've seen against mining tax, carbon tax – when you refer to the business community what type of (inaudible) are you referring to?

TREASURER:

There's a number of repeat critics out there all the time who've got nothing good ever to say about the economy, that's their right and they'll keep on going and doing it. The responsible business community gets out there, by and large and backs in the economic strength that we see here today. But there's too much in our media of the negativity, too much analysing of every figure from the downside, and not enough analysis of every figure on the upside, so so much of what gets transferred out there sees the glass as being half empty, not more than half full. I think what these figures demonstrate is the need for us to be optimists and I see these figures as a victory for the optimists over the pessimists, I see these figures as a victory for all of those that are optimistic in Australia and it puts the naysayers and doomsayers right back in their box.

JOURNALIST:

You say this vindicates your return to surplus, forecast return to surplus, do you think it vindicates the timing of the introduction of the carbon tax as well?

TREASURER:

Well I think it blows away the ridiculous scare-campaign being run by Mr Hockey and by Mr Abbott. I mean we have here the strongest growth figures in the developed world virtually, certainly amongst the major developed economies. It simply blows away the hysterical nonsense that we saw from Mr Hockey and Mr Abbott yesterday, describing our economy as underperforming, describing our economy as weak. Now look, not everybody as I said before is in the fast lane, and of course we have an unemployment rate of 4.9, that may tick up a little, of course there are stresses and strains in certain sectors of our economy.

But if you look across our economy, with the exception of one regional area, unemployment rates have a 5 in front of them by-and-large, and in some areas it's a little higher, but the benefits of this growth are spreading across our economy and combined with what the government is doing, particularly in our recent budget to spread the benefits of the boom through to more households, that combined with the fact that our medium-term fiscal policy has given the Reserve Bank maximum flexibility when it comes to rates.

Those things combined, will certainly give a very good boost to all of those people who deserve it, for people who go to work and work hard and want nothing more than a fair go at work, a decent wage, those small ‘bizzos' out there want to make a quid, all of those people, we need to respect their efforts, cause these results today show what they've done and we've got to keep doing it. And the people that are out there, talking this place down all the time show little respect for the hard work for all of those people that have contributed to this result today.

JOURNALIST:

Just following up on that question Treasurer, talking about the carbon tax. The Opposition keeps saying well this is the worst time ever to have a big new tax, do these figures say that (inaudible) we can actually afford to address climate change?

TREASURER:

Of course they do, all of these, all of the figures including modelling shows that what they are saying about the carbon price is simply wrong and has been disproven by a multitude of ways in the last couple of weeks. The fact is with a carbon price our economy will continue to grow, it will continue to generate jobs, it will continue to have a minimal impact on inflation - all of those things are there in the modelling. We've got a political campaign being run by the Liberal Party and a number of their cronies that are out there trying to trash our economy for political advantage.

JOURNALIST:

Treasurer, can I ask about the fast lane. If WA did secede then the figures would not look half as pretty. Looking at WA in particular, correct me if I'm wrong but it looks like WA's growing faster than China. Does that in itself show that part of the background of this argument you made over EMA's is people again not understanding what's going on in WA? Is this the sort of background you should have given your critics including those in the caucus and the union movement?

TREASURER:

Well firstly, just a caution here, using the quarterly figures, for states, doesn't necessarily give you an accurate measure of growth over a year..

JOURNALIST:

(inaudible)

TREASURER:

I was just about to come to that, thanks Peter, because that was my next point. The first place that you would then go would be the annual figure, so the annual figures put growth in WA at 7.8, and of course strong growth too in my home state of Queensland. But what we have seen here..

JOURNALIST:

(inaudible)

JOURNALIST:

… 14.

TREASURER:

Yes I have that here.14 [per cent] in WA, 7 [per cent] in Queensland, so that's a more accurate way of looking at the figures. But I think what these figures show is in total is that the benefits of mining are spreading across our economy, and they are spreading more broadly than people assume and we do have to have a much more informed discussion about all of that and the government's been up for that.

JOURNALIST:

EMAs, getting back to EMAs, this is the background that is totally misunderstood, that this economy, the WA economy is going gangbusters.

TREASURER:

Not by me.

JOURNALIST:

Well it is by your caucus (inaudible)

TREASURER:

So you assert. I don't think anybody out there in the caucus or more broadly disputes the fact that we have a strong demand for labour, we have a low unemployment rate, we have to deal with labour supply issues, particularly the resources sector. That's why I announced Enterprise Migration Agreements in my budget, it's why I've been talking about this since back in 2010 when most people in this room chose to ignore it all. So the truth is the government has been talking about it for a long time, we're serious about policy response and it does involve a much more detailed community discussion, so I agree with that.

JOURNALIST:

One of the surprises in the National Accounts is very strong growth in individual earnings, I think 2.5 per cent (inaudible), what do you think is driving that, it's kind of surprising that profits are down?

TREASURER:

Well the more accurate gauge here is the wage price index, I wouldn't be using that as your guide on what's happening with wages growth and the wage price index is a bit below trend at the moment, it's not accurate to say that that reflects the growth of wages as a whole per cent of other issues in there, and it also includes employment growth, there are compositional issues with that measure, no one out there in the economic professions using that as a measure of wages growth, and wages growth at the moment is a bit below trend.

JOURNALIST:

(inaudible)

TREASURER:

I've just explained to you, I don't believe wages are doing that, I don't believe that's an accurate measure of what is happening with wages growth.

JOURNALIST:

Can I ask you a Queensland question relating to Alpha mine (inaudible) progress of (inaudible) assessments processes. What is your comment on the Queensland government's record in this area and do you support the Commonwealth (inaudible)?

TREASURER:

It's very clear the Queensland Government have been flip-flopping all over the place on this for the last week and hopefully they've come to their senses in the last 24 hours and sit down and have a sensible conversation with the Commonwealth about how we put in place good environmental outcomes so we can guarantee jobs. That's what the Commonwealth is up for, we've been up for it for a long time, we've been talking to the states. I think they decided they'd come a long as a new government and play a bit of politics from the Liberal Party point of view and it's blown up in their faces.

JOURNALIST:

Mr Swan, what do you say to workers from Hastie Group or Kurri Kurri, you say we should have a spring in our step, what about this (inaudible)

TREASURER:

As I said to you there are sectors in our economy that are doing it tough, and workers in the aluminium industry are part of that, and what we have to do as a community is get behind them as much as we possibly can and make sure that we support them if they lose their jobs. There are going to be jobs lost in sectors of the Australian economy that is very clear as sectors of the Australian economy are under stress, that sector is under stress because of the low price of its product on international markets, very weak international conditions and it's not just in that sector, there are other sectors as well but we can face these challenges from a position of strength as a country and we have to do everything we possibly can to help those workers get work elsewhere, absolutely.

TREASURER:

These figures are three months old, before the worst happened, before turmoil in Europe. How sustainable (inaudible)

JOURNALIST:

These figures are broadly comparable with the forecasts that we put in the budget and we are expecting to come back to surplus in 2012-13 and we're going to do it on the back of very strong economic fundamentals. So I look at these figures as a reaffirmation of the strong economic fundamentals and a reaffirmation indeed of what we've got in our forecasts in the budget because they're broadly comparable with our forecasts in the budget and that's the great thing about them.

That's why, rightly, Australians should be optimistic about the future, and yes, it is possible that things could even take a worse turn in Europe and in the global economy, but we face these challenges from a position of strength and these figures here today demonstrate why we should be confident in an unstable global world, that we can do well. That's what these figures show and that's why there so important. Thanks very much