The swearing in of Julia Gillard as the 27th Prime Minister made this past week a truly historic week for Australia. Julia is an intelligent, strong, competent and compassionate woman, and I know she'll be a first-class PM. For me, it was an unexpected but very valued privilege to be elected deputy leader of the Party I love, and the Deputy Prime Minister of a great nation. Under the Gillard Government you'll see a renewed focus on keeping the economy strong and unemployment low, and improving vital services for hard-working Australians like health and hospitals and a decent education. We understand that despite our national economic successes, a lot of people are still doing it tough, which is why we'll be so focused on the everyday concerns and pressures felt by millions of average Australian families.
Today's economic note comes to you from Toronto, Canada, where I'm representing Australia on behalf of Prime Minister Julia Gillard at the G20 Leaders' Summit due to start in around ten hours time. I've been working closely with my G20 finance colleagues in the lead-up to the Summit to develop a framework to strengthen public finances, boost productivity and rebalance global demand, and it is this work that will be considered by G20 Leaders to strengthen the recovery and promote financial stability.
This weekend's meetings show again how important it is that the world's major economies work together to tackle global economic challenges. We worked together to prevent the global financial crisis turning into another Great Depression, but there's still a lot of work to do to build balanced and sustainable global growth. This is where global economic decisions are taken that can affect us all, so it's vital that Australia has a seat at the table with the US, China and the world's other major economies.
It's currently Saturday night in Toronto, and earlier today I participated in a CEO roundtable discussion on the Australian economy and addressed a lunch hosted by Canada 2020 and the Canadian Australian Chamber of Commerce. Business leaders from across the G20 also gathered today for Canada's B20 Business Summit, which was a great way to involve business leaders in the work of the G20. It was also a great opportunity to talk about the strength of the Australian economy. Australia's economic performance always attracts a lot of attention at these G20 meetings, especially our budget position which is dramatically stronger than our peers, and our unemployment level which is around half the level in the US and Europe. Importantly we are the only advanced G20 economy to avoid recession. But we're not resting on our laurels. Far from it – we're renewing our focus on keeping the economy strong, both on the global stage as well as at home in Australia.
One area where we're delivering some extra financial help for Australians facing cost of living pressures is through well-deserved tax cuts. Under our third round of tax cuts which comes into effect this Thursday, the Low Income Tax Offset will rise from $1,350 to $1,500 (increasing the effective tax free threshold from $15,000 to $16,000); the income threshold for the 30 per cent marginal tax rate will rise from $35,001 to $37,001; and the 38 per cent marginal tax rate will fall to 37 per cent. For someone earning $50,000 a year, these tax cuts will mean an extra $450 in the pocket each year, and an extra $1,750 each year when combined with the tax cuts delivered in my first two Budgets. Lifting the effective tax free threshold for the third year in a row will provide more incentive to participate in the workforce, particularly for part-time and older workers, which will further help expand the capacity of our economy so we can grow sustainably into the future.
The Australian Bureau of Agricultural and Resource Economics' (ABARE) Australian Commodities report for the June quarter 2010 provides further details on the progress of commodity boom mark II. ABARE forecasts that earnings from Australian energy and minerals exports will increase by 28.5 per cent – or around $38 billion – in 2010-11 to reach $169.8 billion, which ABARE Deputy Executive Director Paul Morris explains "mainly reflects the significant increases in recently negotiated contract prices for coal and iron ore and the forecast higher export shipments."
ABARE reports that "demand for steel and its raw material inputs – iron ore and metallurgical coal – has improved significantly over the past year, as the global economy recovered from the global financial crisis". It notes that record high iron ore spot prices in early 2010 were reflected in the outcome of recent contract negotiations, with prices reported to have increased by around 90 per cent for the June quarter and a further 23 per cent for the September quarter. ABARE expects Australian exports of iron ore to increase by 9 per cent in 2010 and a further 7 per cent in 2011, commenting that "global iron ore trade has, and will continue to be, dominated by the two largest exporters: Australia and Brazil."
In terms of exports, ABARE says that "in 2010, Australia is forecast to remain the world's largest exporter of metallurgical coal, increasing its share of the global seaborne market from 64 per cent in 2009 to 65 per cent in 2010. … In 2011, all major export markets are forecast to experience modest growth, as demand for seaborne metallurgical coal continues to grow."
At our first press conference on Thursday, Prime Minister Julia Gillard said the Government would open its doors to the mining industry and in return we ask that the mining companies open their minds. As a sign of our goodwill, on Thursday we announced that we would take action to cease our information campaign as soon as possible. We also asked that the mining companies cease their advertising campaigns as a reciprocal sign of goodwill, and it's been good to see that several mining companies and lobbyists have since suspended their campaigns. As the global CEO of Morgan Stanley, James Gorman said on Thursday during a visit to Sydney, "it is clearly to everyone's advantage to talk through the issues as carefully as possible and that seems to be what the Government is now doing." I'm looking forward to leading these discussions along with my colleague Minister Martin Ferguson.
As important as Thursday was for our national story, Julia and I don't see cause for celebration – only cause to knuckle down and get back to work. As Deputy Prime Minister and Treasurer, my focus is on providing continuity and stability, and delivering the responsible economic management that's been the hallmark of our time in office. My priorities are built on the same beliefs I've held dear for all of my political life: a strong economy, a dynamic and internationally-competitive business community, secure and well-paid jobs, reward for effort, a fairer go for people on low and middle incomes, giving more Australians a role in our prosperity, and security and dignity in retirement. I'm honoured to pursue these goals under our new PM.
Treasurer of Australia
Sunday 27 June 2010