Today's economic note comes after another very solid jobs outcome for Australia and an IMF report showing again that Australia remains well ahead of the curve. Speaking at the COSBOA National Small Business Summit in Brisbane on Thursday, I paid tribute to the small business owners all over the country who kept their doors open and took care of their workers during the global recession. With the help of stimulus, small businesses kept our economy ticking over in its darkest hour – so we now have an unemployment rate the envy of the world. The Gillard Government understands that despite the success of our economy at the national level, many small businesses and Australians are still doing it tough. That's why I'm proud of our resource tax reforms and the initiatives they're funding to support small businesses and broaden the economy.
Like a lot of Australians I was pleased to see labour force data on Thursday show the Australian economy added 45,900 jobs in June and the unemployment rate remained steady at 5.1 per cent. The Australian economy has now added 353,200 jobs over the past year – around 200,000 of them full-time – with employment growing at its fastest pace in 2½ years. Over the past 12 months, the unemployment rate has fallen by 0.7 percentage points and at 5.1 per cent is now lower than any of the G7 economies, undercutting the rate in Japan for the first time since the 1960s. That's an amazing outcome that all Australians can be proud of. It's important to keep in mind however that notwithstanding these good figures some people are still doing it tough, and that unemployment rates in some parts of the country still remain higher than most would like.
The IMF also put out its updated World Economic Outlook on Thursday which shows we remain a world leader in the global recovery, with stronger growth, lower unemployment and much lower debt than other advanced economies. It forecasts that the Australian economy will grow by 3.0 per cent in 2010 and 3.5 per cent in 2011 – a stronger outlook than for the advanced economies as a whole. The IMF notes that the global recovery remains uneven, with the recovery still fragile in most major advanced economies and downside risks persisting. In contrast, the Asian region is growing strongly, with the IMF revising up its 2010 growth forecasts for China from 10.0 per cent to 10.5 per cent and for India from 8.8 per cent to 9.4 per cent. The Australian economy is well placed to benefit from our proximity and links to the world's fastest growing region, with the IMF pointing to robust commodity prices which are boosting domestic demand in our economy.
On Tuesday we learned that commodity boom mark II pushed Australia to its third largest trade surplus on record in May, at $1.6 billion. Katie Dean from ANZ said "the trade surplus blasted expectations out of the water to come in at … more than three times the market forecast of $500 million." In addition to this good result for May, the trade surplus originally reported for April was revised up from $0.1 billion to $1.1 billion. This largely reflected the continued incorporation of contract price increases for iron ore and coal into the data provided to the Australian Bureau of Statistics by the Australian Customs and Border Protection Service, which receives information from exporters. The ABS explains that "at the time of initial reporting to Customs the final prices may not be known for some commodities", and therefore "new contract prices that have been recently negotiated, or are still being negotiated, for commodities like iron ore and coal may not be fully reflected."
Following our breakthrough agreement with the mining industry, BHP Billiton chairman Jac Nasser sent a letter to shareholders on Tuesday detailing our new Minerals Resource Rent Tax, saying "a good foundation has now been established on which an effective tax can be implemented." On Thursday, Rio Tinto chief executive Tom Albanese told a meeting of the Melbourne Mining Club in London that he was "keen to get projects moving again" and "have now asked my team to review projects against this more positive backdrop."
On Tuesday Rio Tinto Iron Ore chief executive Sam Walsh announced that Rio Tinto was "in the process of re-opening studies in relation to our Pilbara expansions", saying "with the certainty that we've now got with the Minerals Resource Rent Tax, we are now reconfiguring those numbers and the impact back into our projects." That same day Xstrata Coal chief executive Peter Freyberg announced that Xstrata had decided to recommence $186 million of planned investment in Queensland, a decision which "effectively lifts the suspension on expenditure announced by Xstrata last month and allows the next stage of planning for [the] internationally significant Wandoan project to proceed." It was also great to hear Chevron Australia announce on Wednesday that it had made a new deepwater natural gas discovery in the Carnarvon Basin offshore Western Australia. Chevron vice chairman George Kirkland indicated that Chevron is "continuing to invest in a significant exploration program to underpin the long-term growth of our Australian business."
I think Australians can be proud of the way the Government and the mining industry came together to reach a breakthrough agreement that will see an extra $10.5 billion returned to the community. This agreement means that 2.4 million small businesses will have their paperwork reduced by being able to write off immediately any new business asset worth $5,000 or less. Small companies will also get a head start in the cut to the company tax rate to 29 per cent from 2012-13.
We know how important small businesses are to the success of the national economy, which is why we did our best to make them a priority in our response to the global crisis. One of the key measures specifically targeted at small business was our Small Business and General Business Tax Break. The Australian Taxation Office advises that as at 30 May 2010, 234,929 businesses had claimed the tax break in their 2008-09 tax returns, with some 208,280 of these small businesses. Of the $5.040 billion worth of bonus deductions that have so far been claimed, $2.841 billion has been claimed by small business.
I know the Reserve Bank's decision on Tuesday to keep official interest rates on hold would have come as welcome news for many small businesses and families around the country. We know how hard small businesses and families are hit by interest rate rises, which is why we're so focused on reform and managing this mining boom better than our predecessors managed the last.
Minister for Superannuation Chris Bowen joined Jeremy Cooper on Monday for the release of the Cooper Review into the governance, efficiency, structure and operation of Australia's superannuation system. Chris will now consider the recommendations of the Cooper Review and how we can make the superannuation system simpler, safer and more efficient, and has already welcomed the MySuper and Superstream initiatives which could lower fees by 40 per cent. The Cooper Review is the third leg in the Government's plan to secure the retirement incomes of working Australians – coming on top of an increase in the super guarantee to 12 per cent over the coming years as part of our fundamental tax reforms, and a ban on commissions for financial advisers.
The past few weeks really sum up what the job of Treasurer is all about. A fortnight ago I was talking to G20 Leaders in Toronto about the two-speed recovery and our efforts to secure global reform, then went straight into intense negotiations with the mining companies and our new PM and Minister Ferguson which delivered a breakthrough agreement in the national interest. This past week I've discussed our support for pensioners and self-funded retirees at a Seniors Forum in my electorate, before announcing a new $4.9 million investment in a medical training facility in Chermside with Health Minister Nicola Roxon. Because delivering responsible economic management and better living standards is all about getting the best intelligence on the global economy, listening to the concerns of business, taking on hard reforms, supporting those Australians doing it tough, and keeping the economy strong so we can deliver better services for hard working families.
Treasurer of Australia
Sunday 11 July 2010