This edition of the Economic Note comes to you after a week of important domestic releases for the economy, including the Mid-Year Economic and Fiscal Outlook, Labour Force Statistics and the OECD Economic Review of Australia, plus the fifth G20 Summit in Seoul. I'll do my best to update you on all of this below.
In the last few minutes our plans for fiscal consolidation received a big tick from the OECD in their 2010 Economic Survey of Australia. It recognised our economy has been one of the most resilient in the OECD, and that our future prospects remain very favourable, with our growth potential among the strongest in the OECD. The OECD is really supportive of our fiscal stimulus response to the global crisis, saying that it proved highly effective in rapidly supporting confidence and activity in our economy, which helped keep Australia out of recession. In the same week that the Government released the Mid-Year Economic and Fiscal Outlook, it was particularly timely and heartening to receive yet another endorsement of our disciplined fiscal strategy, saying that "the prudent fiscal consolidation strategy reinforces Australia's commitment to sound public finances, the maintenance of which is one of the major lessons from the international economic crisis."
The MYEFO last Tuesday showed our economy is in great shape, with strong economic growth, strong job creation, falling unemployment and the fastest turnaround in the budget position in more than 40 years. The numbers show we're on track to get the budget back to surplus in 2012-13, despite the ongoing fragilities we're seeing in parts of world and the impact of the higher dollar. It would be hard to find another advanced economy that wouldn't prefer our numbers to their own.
The mid-year update is the first stage in delivering on our election commitments, including: investments in mental health, more incentives for apprentices, our paid paternity leave scheme, and tax breaks to encourage more environmentally friendly workplaces, to name a few. But for me, the most pleasing aspect of the figures is the forecast of an additional 380,000 jobs over the next 18 months or so. That's on top of the 650,000 jobs that have been created since we first came to Government. So, in a little over 18 months, it's expected that we will have around 1 million more Australians in work than when we were first elected in 2007. That's a remarkable achievement when you consider what is going on in other major advanced economies, and it's a tribute to all those workers and small businesses who do so much to make our domestic economy so strong.
Thursday's jobs figures reinforced this message, showing some 29,700 new jobs created in October alone. A key highlight for me was that a record number of Australians joined the labour force in October, with the participation rate climbing to an all-time high of 65.9 per cent. This explains the tick up in our unemployment rate to 5.4 per cent, despite the robust growth in jobs. Spending the last few days around the table with many of my international counterparts really brought home how important these figures were. The fact that our country has been able to keep Australians in work, and create so many additional jobs, really does set us apart from much of the rest of the developed world. You only have to look to the US or Euro area where unemployment rates are nearly double what we're seeing in Australia to appreciate how well we're doing.
On Friday, the PM and I attended the G20 Leaders Summit in Korea, to conclude what has been a very effective year for reform on the global stage. The crisis brought the G20 to the fore as the premier global economic decision-making body, but it has been during the recovery that the forum has really showed it has the means to deliver lasting global reforms. In Seoul, leaders agreed to some of the most significant reforms to the global economic system in generations, after a couple of years of hard work. For example, the IMF is set to receive an overhaul to its governance that Dominique Strauss-Kahn himself has described as the most significant since its inception after WW2. We welcome these moves with pride, particularly as Australia took a lead role in driving them, through our role as co-chair of the G20 working group.
In the lead-up to the meeting, my colleagues, Timothy Geithner, Tharman Shanmugaratnam and I, outlined in a joint op ed the importance of reforms aimed at lifting global growth, not just shifting it around. And G20 Leaders have agreed to take further action to achieve this through the framework for Strong, Sustained and Balanced Growth. I found it interesting to note that so many of these growth building reforms, like a sustainable retirement income regime, are well established in our own economy.
We also endorsed some of the biggest reforms to the global financial system in decades, to ensure that we don't see a repeat of the crisis and all the global job losses that came with it. Our financial system will, of course comply, in full, with new international standards. But Australia's financial system did not suffer the same excesses as those in Europe and the US and therefore will not require the same kinds of adjustments. Also, there is simply not enough government debt in Australia for our banks to meet new liquidity standards as originally drafted. Our global peers have now recognised this and are committed to rules that recognise those very low levels of debt. As a result, no Australian bank can, with any justification, cite these global reforms for stinging their customers with any additional costs. On the contrary, our work at the G20 will improve conditions for Australian consumers in the banking system.
Unfortunately this week ANZ, Westpac and NAB all confirmed the culture of arrogance and contempt for the community we are seeing among the big banks. So it wasn't surprising to read reports that the number of people looking to re-finance their mortgage, or switch home loans, more than doubled over the past week and a half. The number of customers looking to switch to the smaller building societies skyrocketed. And our crack-down on unfair exit fees makes it easier for consumers do this. On Wednesday, ASIC released new rules which explain how it will enforce our crackdown on banks which try to lock customers in, so the banks are now on notice that ASIC will take them to court if they try to profit from mortgage exit fees, or gouge customers. And, if a bank simply tries to re-badge their current mortgage exit fee as upfront entry fees or any other fee, ASIC will also have powers to pursue them. The big banks know the writing is on the wall for unfair exit fees - that's why we saw the ANZ and NAB directly respond by abolishing their exit fees - a real win for consumers.
We know there is still more work to do to build up competition in the banking sector. I'll soon be announcing a carefully considered, effective plan to promote more competition and give people a fair go. The banks shouldn't mistake our methodical approach for a lack of determination to do even more to make the banking system work for Australians. It's critical we get these reforms right so they are effective and enduring.
A final development to update you on was the second meeting of the Multi-Party Climate Change Committee which took place on Wednesday. A key issue for the committee to consider in designing a carbon price is providing business with the confidence it needs to undertake long-term investments in low-emissions infrastructure. This will reduce cost pressures over time, as well as keep Australia at the cutting edge of new technologies and attract global investment. At the meeting, the Committee considered a detailed paper on the actions being taken by other countries to put a price on carbon and reduce emissions. Around 85 countries, accounting for more than 80 per cent of global emissions, have already committed to reducing emissions under the Copenhagen Accord. The Committee has also released presentations from three of its expert advisers covering climate change economics and science, to help inform the public debate. A key message is that a carbon price is the cheapest way for Australia to reduce its emissions, and that alternative policy approaches would only put more pressure on the economy, particularly in areas like electricity prices.
Deputy Prime Minister and Treasurer of Australia
Sunday 14 November 2010