Thank you for the opportunity to speak at this important summit.
I've been asked to talk today about "The Economic Reform Agenda after the Global Financial Crisis".
Introduction
There are some who argue that the economic crisis is already over, that we should declare victory and withdraw stimulus from the economy.
This view is very courageous indeed.
It is true that Australia has withstood the global financial crisis better than any other comparable nation.
Last week's national accounts showed a 0.6% rise in GDP in the June quarter, as well as a 0.6% rise over the year. In contrast, the US economy has contracted by 3.9% over the past year, the Euro area's by 4.7%, the UK's by 5.5% and Japan's by 6.4%. These figures highlight just what challenging conditions we're up against, and really put Australia's growth of 0.6% into perspective.
But now is not the time to enter into a Menzian type of complacency about this crisis or the future.
With 8 of our top 10 trading partners in recession or contracting over the last year (and with the other 2 experiencing a significant fall away of growth), it would be foolish to think for a moment that Australia will not be further impacted by this crisis.
Company profits were down by 7.8% in the June quarter, unemployment is still trending upwards and the balance of payments figures showed terms of trade have fallen by 11.6% over the past year, representing an ongoing challenge to national prosperity.
In the three months to June, export prices fell 15.8%, the largest quarterly decline since records began in 1959, reducing export earnings for the quarter by nearly $11 billion.
We must be careful not to let hubris take over from caution as our economy recovers.
To give you one example, in the US, over 400 banks remain on the watch list of the regulator, the Federal Deposit Insurance Corporation. As the Secretary of the Treasury has said, the potential for a second international shock remains real.
So, while some say we can declare victory over the economic crisis, I would regard such an approach as conceding defeat on unemployment.
To keep the unemployment rate steady, it is necessary to create around 20,000 jobs a month and grow the economy at 3% a year – a huge challenge in this international environment.
To withdraw stimulus now would be to make it ever harder for Australia to reach trend growth and begin to stabilise unemployment any time soon.
It would also be to deny Australia investment in productivity-enhancing infrastructure. For getting through this crisis is one thing, but it is productivity growth that will determine Australia's long-term economic success.
Today, in the time available, I would like to concentrate on two aspects of our long-term economic reform agenda: infrastructure and new federalism.
Infrastructure spending – turning crisis into opportunity
While the government's stimulus measures are crucially working to reinforce the economy by boosting demand and supporting jobs in the short term, it is important to note the dual role of infrastructure elements of the government's stimulus package.
The government's infrastructure spending will peak in the current quarter but, over coming years, we will continue to build, restore and upgrade the infrastructure that was so badly neglected in recent years.
Rahm Emmanuel's memorable phrase "you should never let a crisis go to waste" has been quoted many times.
He meant, of course, that a crisis can present opportunities for reform that might be difficulty in better times. In our case, we have not let this crisis go to waste in terms of infrastructure spending – so important for productivity.
Getting through this crisis is one thing – but productivity will be the key to longer term growth and prosperity.
And so, of course, 70% of our stimulus package is dedicated to infrastructure.
Roads, rail and ports are important in this program. Also, as you know, are schools.
Language laboratories, new classrooms, science blocks and libraries and, yes, school halls. As someone who has stood many times under a leaky awning on a rainy day in a school in my Western Sydney electorate with no school hall, encouraging children to pursue further education, I can tell you school halls are important to education outcomes and long-term productivity.
In the 2009 budget, the government committed new spending of over $22 billion to improve the stock of national infrastructure, bringing the total the government has committed to improving Australia's social and economic infrastructure to over $50 billion.
Infrastructure spending in the current economic climate will deliver a "double dividend": supporting employment now and, in the longer term, increasing the economy's supply side capacity and productivity.
New and upgraded infrastructure will help position Australia to take advantage of the opportunities that will emerge as the global economy recovers from the current crisis.
The government's more immediate stimulus measures are already winding down, as they were designed to do, transitioning to investments in longer-term economic infrastructure projects. These will provide a larger and more sustained boost to the economy, building on the economic stimulus measures already in place.
This is why the 2009 budget marks the start of this next phase of the government's stimulus program — providing the building blocks for Australia's future productivity and growth.
Our commitment to realising world-class infrastructure will help to drive a more diverse, competitive and sustainable economy that generates substantial and lasting economic, social and environmental benefits.
Productivity benefits of infrastructure spending
It is well established that efficient, effective and secure infrastructure helps to "crowd in" or stimulate private investment and economic activity.
In 2007, the Business Council of Australia estimated that infrastructure reform could boost our GDP by around 2% or $20 billion a year.
The International Monetary Fund has likewise estimated that increasing the public infrastructure stock by 1% leads to an increase in output by around 0.2%.
And, of course, an OECD report released this year also had a lot to say on the broader macroeconomic benefits of infrastructure investment.
Of the nine projects identified in Infrastructure Australia's priority list, seven received funding in the 2009 budget.
Infrastructure Australia has also identified 28 'pipeline' projects for further development and analysis before definitive funding decisions are considered by governments and private investors.
Infrastructure Australia will continue to focus on nationally-significant infrastructure priorities across a range of areas. These include infrastructure planning and investment, integrated supply chain networks and public transport systems.
But, if we are to maximise the productivity gains from infrastructure spending it has to be accompanied by structural reform - a vigorous program of ongoing microeconomic and institutional reform.
Removing "the tyranny of difference"
Just because, unsurprisingly, much of the time and energy of economic ministers has been devoted to getting us through this crisis does not mean that we have not been attending to the longer term.
That means cleaning up the inefficient burden of regulation that often arises from businesses having to comply with eight different sets of state and territory regulation and expanding Australia's productive capacity over the medium-term through competition reform.
We are a middle sized economy. Unharmonised regulations make our economy smaller, when our aim needs to be to make it larger.
For many years, Australia suffered from the tyranny of distance – the thousands of kilometres that separated us from the major markets of the US and Europe.
The re-alignment of the world economy with rapid growth in Asia means the tyranny of distance is no longer such an issue.
One of the major impediments to our economic growth is now the tyranny of difference. Tackling different styles and methods of regulation across state and territory border creates an unacceptable regulatory burden for businesses operating, or seeking to operate, across state and territory borders.
We need to work towards a seamless national economy by using the COAG process to tear down the regulatory barriers erected by more than a century of parallel laws enacted across Australia's nine jurisdictions.
Reforming longstanding and, in some cases, well-entrenched state laws is not always an easy process.
The level of co-operation between the federal and state levels of government has undoubtedly increased in recent times, with "new federalism" a priority of the Rudd government, but significant and ongoing effort is required to overcome the natural tendency towards inertia and the comfortable status quo.
As you know, it can be a challenge for us sometimes to get legislation through the Senate. So getting eight governments to agree on legislation and then seeing it through eight sets of parliament – as well as getting it through our Senate – isn't always as quick or efficient a process as we may like.
It took 150 years from when Earl Grey, the Secretary of State for the Colonies in London, recommended a uniform rail gauge be adopted in Australia, until the main Melbourne to Adelaide line was converted to standard gauge under the Keating government.
In many ways, the challenge of easing the regulatory burden on business of having to comply with up to nine sets of laws is the rail gauge challenge of the 21st century.
So, while the process is often not as brisk as we may like, as a government, we do not let the hurdles placed in the way of reaching agreement obscure the clear long-term benefits to the economy or divert us from the task of deregulation.
That is why we have been moving to streamline legislation in areas as diverse as occupational health and safety, licensing, and weights and measures. This has been a priority for the government, especially my colleagues Lindsay Tanner and Craig Emerson.
In my former portfolio of consumer affairs, a key priority was the development of a uniform national consumer law, which the Productivity Commission has estimated will benefit Australians by up to $4.5 billion a year.
In total, we have a list of 27 areas of business regulation requiring regulatory reform that we are working through and 8 priority areas of competition reform. These priority areas include transport, energy and infrastructure access reform.
Conclusion
There are positive signs the economy is recovering but it is too soon to consider the job done.
It would be a major mistake to cut back our infrastructure program, which is designed to leave us with valuable assets and productivity benefits for decades to come.
There is also, of course, the ever-present risk of a second-wave of instability.
While acting quickly and decisively to support the economy in the short-term, the Rudd government is also seizing the opportunity to lay the foundation for future prosperity, putting in place the building blocks for solid and sustainable growth.