Western Australia has always managed to punch above its weight when it comes to talent and leadership.
An army of WA entrepreneurs and corporate leaders have shaped our economy. And their vision, skill and courage has only been matched by their generosity.
Today is my first opportunity to pay tribute to Andrew Forrest here in his home state, since Twiggy made his extraordinary announcement to donate $400 million to cancer research, early childhood and higher education and indigenous disadvantage.
Andrew Forrest is a remarkable Australian, he is typical of so many Western Australians who know that making an impact is all about making a difference. And I would simply like to say thank you to Andrew for both his generosity and his example.
It is a pleasure to serve alongside so many Western Australians in the Turnbull Cabinet - an outstanding foreign minister in Julie Bishop, our Finance Minister Mathias Cormann who is currently overseas but has assured me ‘he’ll be back’, Christian Porter who has taken on one of the hardest gigs as social services minister and without doubt the runaway success of the Turnbull Government, Michaelia Cash as Employment Minister.
This is a sizable delegation from the West in our Federal Cabinet. It means that the values, optimism and determination that represents the WA spirit has a large share of voice in the way our country is being governed.
But I’m sure that this audience will agree with me that too many Western Australians is never enough.
As a Government we continue to appoint Western Australians to key organisations that play an important role in our national life.
It was ten years ago that my predecessor Peter Costello - Australia’s greatest ever Treasurer - appointed John Akehurst to the Reserve Bank Board to ensure the Western Australian perspective was understood in their important deliberations.
On August 30 John will complete his second five year term on the RBA Board. I want to thank John for his outstanding contribution to the Reserve Bank board through a challenging period for the Australian economy and wish him every success for the future.
As John completes his service, I am pleased to formally announce today that his place will be taken by another Western Australian, Mark Barnaba, who fits the leadership mould I referred to earlier and will be a worthy replacement for John.
Mark possesses broad knowledge from his extensive experience in business and industry, in mining and banking. His current chairmanships of the University of Western Australia’s Business School Board and the Black Swan State Theatre Company as well his prior Chairmanship of the West Coast Eagles demonstrate his broader perspective.
An MBA with high distinction from Harvard will also ensure he will more than keep up with the MIT grads at the Bank.
We look forward to Mark providing a valuable contribution to the RBA and I congratulate him on his appointment.
Almost two months ago I handed down my second budget.
Since then the Turnbull Government has done exactly what the Australian public have asked of us: Get on with it.
Our Budget is passing the Senate.
In six weeks, we have passed 17 separate pieces of legislation to implement our budget.
While managing this Parliament has its challenges, and its costs, we are making this Parliament work, despite Labor’s cynical and self-interested obstruction.
And it hasn’t just been recently. In the year since the last election,126 separate pieces of legislation have been passed, including tax cuts for small and medium sized business, more affordable child care, reigning in union thugs by restoring the ABCC, and making multinationals pay their fair share of tax.
The Budget continues to be projected to return to balance in 20-21. Our AAA credit rating continues to be maintained. A year from now we will no longer be raising new debt to pay for everyday expenditures on welfare, education and health. This has not occurred for a decade. And we have the lowest rate of real growth in spending, at just 2 per cent, of any Government, Labor or Liberal, in the past fifty years.
Despite having to pay the price to reverse $14.7 billion in savings measures rejected by Labor and the Senate, we have kept the Budget on track and ensured the Government lives within its means.
And at around 2.30am last Friday, Australian parents were given certainty that their children’s schools would have proper needs-based funding. No special deals, but fairness and equality across the board, in every State and Territory.
And this is based on real funding, not Labor’s fake promises with fake money.
Labor never budgeted for their fake promises on schools funding, it was a con. And it was a con called out in the 2013 election, when the heads of Treasury and Finance illustrated that Labor’s promised spending on schools was not included into their budgeted medium term projections.
Our $23.5 billion needs based funding package for our schools will see a $2300 per student increase on average, delivered faster to the schools who need it most.
In WA, we will be investing $26.4 billion in schools funding over the next ten years, with per student funding growing at an average of 5 per cent each year.
As a Government, we also know that to guarantee the essential services that Australians rely on, we must continue to grow our economy.
When the growth winds blow here in WA, as they have for the best part of three decades, the rest of the country feels the breeze.
Growth here in WA has propelled us forward as a nation and spread prosperity to all corners, and at times, has sustained other states through periods of relative hardship.
Australia’s continuing record run of 26 years consecutive economic growth owes a lot to the on field performance of Western Australia.
But this also cuts both ways.
When the WA economy is retracing from spectacular highs as we have seen more recently, it can be a sheet anchor on national economic growth. Mining investment as a share of GDP has halved - and has detracted around 1 percentage point from growth per annum over the past few years.
That’s gotta hurt, and we know it has.
The economic challenges we face as a nation on investment and wages are magnified here.
Here in WA, wages are only growing at 1.2 per cent.
Mortgage stress (8.6 per cent) remains higher than the national average (7.2 per cent), and house prices have backtracked perhaps further than most anticipated.
Migration flows are also now working against WA.
Western Australia has now had 11 consecutive quarters of net interstate migration outflows - that is, people moving from Western Australia to other states.
This reflects almost 16,000 people deciding to move interstate.
Previously, the mining investment boom attracted a swag of labour from interstate and abroad into WA.
Similarly, ABS data suggest that net overseas migration to WA in 2016 was the lowest level since 1997.
This situation shows us why it is important that we have the right policy settings on immigration.
Slowing our population growth from its current level of around 1.6 per cent would hurt Western Australia, it would cost jobs in this state and hold the state back as it works to recover. It would undermine economic growth both here as well as in the NT, SA and Tasmania and on a national scale.
The better news is what Reserve Bank Governor Philip Lowe keeps reminding us, that our painful exit from the mining investment boom is almost done. We are more than 90 per cent of the way through.
And we are already beginning to see diversification across the State’s economy, as Western Australians continue to innovate, invest in emerging markets and opportunities, and forge new paths.
More than 28,000 Western Australians went out to find a full-time job in the past year, and found one.
Importantly, the bulk of new jobs did not come in mining related industries, but healthcare and social assistance (13,200), education and training (11,900), and accommodation and food services (9,500).
For better or worse, what happens in WA reverberates through the national economy.
This is why Western Australia is central to my economic thinking as Federal Treasurer, to our planning as a Government, and to our collective commitment to proactively pursue growth as a first priority.
Growth does not just magically appear at the waving of a wand.
As Western Australians know, you need to go out there and fight for it. You need to make it happen and seize the opportunities.
Western Australians are optimists. Like me, you know there are better days ahead. But you also know they won’t be realized if we fail to make the right choices, as a Government, as businesses and as communities.
And we must also be watchful against those, like Bill Shorten, who would seek to sabotage the economy by chaining our businesses to an uncompetitive tax regime, debilitating regulation or an ideological lock-out on practical energy solutions that are needed to reduce rising costs.
This is why we are pushing ahead with our Enterprise Tax Plan.
Already we have legislated tax cuts for businesses with a turnover of up to $50 million per year. That’s 3.2 million businesses across the country employing more than half the country’s workforce.
We have increased the threshold for small businesses, so those with turnovers of between $2 million to $10 million can now access tax advantages such as pooled depreciation, the instant asset write off, which we have extended for a further year, and doing your GST on a cash basis. This will directly support around 10,000 businesses here in WA.
And from tomorrow, these businesses will be joined by 10,000 incorporated businesses nationally and 1,200 here in WA with a turnover of up to $25m who will receive a tax cut, extended to businesses with turnover of up to $50 million next year.
If elected, Labor will reverse these tax cuts. They will put taxes back up on small to medium sized businesses and they will lower the threshold for small businesses back to $2 million. That is not a plan to grow the economy to support more and better paid jobs. It will instead cut profits, cut pay packets and cut growth.
By contrast we believe it is necessary to go further to secure the investment needed to support growth and more money in the pockets of wage earners.
We must have a tax environment that ensures our companies can remain competitive with their global peers who are either enjoying the benefit of low-tax environments in their own countries, or are about to.
To continue to saddle them with one of the highest company tax rates in the OECD - rates that our trading partners long kissed goodbye in their bid to jumpstart their subdued economies - threatens our economic growth.
Labor’s reckless opposition to our Enterprise Tax Plan will send Australian jobs and investment offshore.
And of course, it is why in the Budget, I announced that the Turnbull Government was putting the hard hat on, committing $75 billion to nation-building infrastructure over the next ten years.
And, thanks to the negotiation led by Mathias Cormann, working together with the new Government, we have agreed a new infrastructure funding package for WA.
Once again, this is what the Turnbull Government is all about, getting on with it.
This package includes $700 million to fund future Metronet projects that have proven businesses cases, and funding for four major road projects worth almost $400 million, including $86m for the graded intersection at Kalamunda Rd/Roe Highway interchange in Hasluck, where I was yesterday and $35m for the Manning Road off ramp in the electorate of Swan.
This is just the first concrete pour. There will be many more.
Our $75 billion rolling infrastructure fund will generate an unprecedented road, rail and runway construction boom to benefit every State and region.
And we won’t be just kicking the money out the door or signing blank cheques and popping them in the post to premiers. We will be a partner and an investor and we will expect outcomes for what the taxpayer is putting in.
And before I move off the topic of encouraging investment, today, I am releasing the Government’s interim response to the PRRT review, together with a consultation paper from Treasury that outlines the options.
We agree in principle with all of the 12 recommendations outlined in the Callaghan Review, and we now invite industry and stakeholders to work with Treasury on potential longer term reforms to the PRRT.
The PRRT remains the preferred way to achieve a fair return to the community without discouraging investment.
But there are design elements of the PRRT that may pose long-term revenue risks, including the high uplift rates, transferability, and sequencing for carrying forward exploration expenditure.
Many of these problems were exacerbated by Labor’s hamfisted handling of their disastrous mining tax. Not only did they create a tax that didn’t raise revenue and undermined confidence in mining at the worst possible time, but they also undermined the PRRT in the process.
Western Australians should never forget what Labor did to crunch confidence in the mining sector here in WA at such a sensitive time.
By contrast, the Turnbull Government will continue to tread lightly and cautiously in addressing these issues, ensuring we give certainty to projects already underway or in the pipeline, and to Australian households battling rising energy prices.
We are cognisant of the sovereign risks at play here, particularly in a sector renowned for high volatility in commodity prices and large-scale capital investment.
We need more investment. Not more uncertainty.
Now finally, before I conclude, as my Western Australian colleagues constantly remind me, we need to talk about the GST.
No one could have imagined we would have a situation where one state’s relativity would remain so low for such a prolonged period, with significant impacts on the State Government’s fiscal position.
It is why our Government has provided $1.2 billion over the past three years in top-up funding for WA to invest in local infrastructure projects, and maintain the State’s GST relativity at 2014-15 levels.
These commitments are the product of the strident advocacy of your Liberal Federal members and Senators who have been relentless on your behalf.
I continue to have great sympathy with their argument that WA has been penalised, not rewarded for your efforts.
That’s why I tasked the Productivity Commission to investigate whether Australia’s system of GST distribution is affecting our national economy and productivity.
I understand there are strong grievances from Western Australians concerned they are not getting their fair share.
States who are proactive in growing their economies to support themselves should not be penalised, particularly if others are not realising their own opportunities.
Horizontal Fiscal Equalisation sounds like a rather unpleasant surgical procedure, and for Western Australians, they would probably identify with the comparison.
But we should not lose sight of the important principle behind it - ensuring all Australians have the opportunity to receive the same standard of services that all other residents do. It’s the fair-go principle.
Some States and Territories simply do not have the critical mass of population or economy to provide the same standard of services that are enjoyed in other jurisdictions, and in the past, WA has been a beneficiary of this arrangement. That is why the CGC does not simply assign the GST on a per capita basis.
Like our welfare system, HFE provides a safety net for all Australians, regardless of where they live.
But that doesn’t give States and Territories a leave pass to not act on their own responsibilities, accountabilities and opportunities.
The PC review is a timely look at how we distribute GST and asking whether the way we do this is holding the whole country back.
All states and territories will rightly make a parochial case. As Federal Treasurer I must approach this from the perspective of what is best for our national economy.
I am also not going to prejudge findings or outcomes, raise expectations or cause concerns in other jurisdictions while we work through these issues. We must arrive at a solution that is fair, sustainable and sensible. We will look at the evidence, listen to what everyone has to say, and proceed from there.
Now one element of the GST distribution that I know has been particularly concerning West Australians is the treatment of gambling revenue.
It has been suggested to me on numerous occasions that WA is punished in the GST carve-up due to the way gambling revenue is treated. This is no longer true.
The contention is that, if the eastern States get a share of WA royalties, than WA should get a cut of eastern pokies revenue.
The CGC assesses every state’s capacity to raise revenue, not the actual revenue they raise, because the method is policy neutral.
This ensures that one state’s policies and choices can’t be used to game the system and maximise the level of GST it receives.
So for example, let’s say that tomorrow New South Wales eliminated its $8 billion worth of payroll taxes. The GST system would not suddenly redistribute GST from the other States to compensate NSW for its lost revenue.
The system would continue to assess NSW as having the capacityto raise payroll taxes, thereby ensuring that the other States who continued to raise payroll taxes were not punished.
When it comes to gambling, from 1999 to 2009 the CGC used household disposable income as a broad indicator of a state’s capacity to raise gambling revenue.
Given WA’s higher than average disposable income levels, this method actually meant that the CGC assessed WA as having a higher than average capacity to raise gambling revenue, which cost you GST.
The CGC changed their method for determining gambling revenue raising capacity post-2009, essentially because their old method wasn’t working as a good indicator of what a state could raise. I note that the CCIWA’s submission to the PC recognised this and opposed any change to the CGC’s current treatment of gambling revenues.
Nowadays, gambling revenues are still included in the GST calculations, but they are done so in a way that does not impact the GST distribution.
So be assured, WA is not getting a cent more or a cent less of GST because you don’t have pokies.
Conclusion
I want to thank you for your attention this morning.
Like Western Australians, the Turnbull Government is getting on with it. And we’re on your side.
Because we have a clear agenda to drive growth to support more and better paid jobs, so we can guarantee the essentials that Australians rely on. And we will continue to do this by ensuring the Government lives within its means.
Like in the past, there are better days ahead for Western Australia and like you, we will continue to make the right choices to ensure that these better days ahead are secured.
I have no doubt that the irrepressible spirit of Western Australians will ensure that your future prosperity will not be denied.
Interim Government Response to the Petroleum Resource Rent Tax Review