Thanks very much Treasurer [Cameron Dick] for your generous introduction and for bringing us all together today.
I was really happy to accept Cameron’s invitation – as a fellow Queenslander, as a colleague, but especially as a friend.
Our relationship stretches back a fair way before we started working together as treasurers.
For those who don’t know, Cameron’s electorate of Woodridge is in the same area of the country that I’m proud to represent at a federal level –
Now we both find ourselves at the pointy end of government.
And for the first time, Logan has two treasurers.
We come from the same place, we share the same values, and we’ve got a lot of the same objectives –
Which is why I’ve appreciated the opportunity to work with him through the Council on Federal Financial Relations.
Cameron is one of the more seasoned Treasurers on CFFR in a group that includes five of us appointed just this year.
And we’ve benefitted from his experience, as we’ve sought to address some of the country’s biggest challenges.
He knows and I know, that there are good reasons to be optimistic about the future of our economy and our people – and we are – but that first we need to navigate together some tricky terrain – and we will.
I know Cameron is passionate about investment, particularly finding ways to unlock further investment in energy and housing –
And he’s brought that passion to the work we’re doing on the levers our governments can pull to attract capital into these areas.
It’s this kind of national priority investment – in energy and affordable housing – that I’d like to talk to you about today.
Before I do that, I’d like to spend a bit of time setting the scene for the Budget I’m handing down later this month.
The global economy
This forum that Cameron is hosting today comes at a critical juncture for our country and the global economy –
With a combination of incredibly complex challenges and incredibly exciting opportunities –
Including through investments that can offer great returns, build the resilience of our economy, and advance our national interests.
I’m pleased to be here after three days of ERC meetings in Canberra.
There, over fourteen hours of meetings, my colleagues and I inched closer to finalising preparations for the October Budget – now only 18 days away.
Between now and then, I will be heading to Washington for the G20 meeting of finance ministers and central bank governors.
It’s a valuable opportunity to confer with my counterparts at a critical time for the global economy –
And to make sure that our Budget is informed by the best, most accurate, most up‑to‑date assessment of what’s to come.
I’ll be discussing the outlook for inflation and growth with Federal Reserve Chair Jerome Powell –
Food and energy security with Indian Finance Minister Sitharaman –
And I’ll be the first Australian Treasurer to participate in the Coalition of Finance Ministers’ meeting for Climate Action – something that’s been long overdue.
These conversations will be coloured by rising concerns about the broader economic outlook.
The hard truth is that these global economic storm clouds are darkening, not clearing.
The risk of major economy downturns is rising, not receding.
And the impact this has on Australia’s economy and budget is hardening, not softening.
This will be clear in the Budget I hand down later in the month.
It will show that Treasury’s global growth forecast has been downgraded by ¾ of a percentage point in 2022 –
1 percentage point in 2023 –
And a ½ a percentage point in 2024.
This means that global output will be around $2 trillion lower in US dollar terms by the end of 2024 than previously expected.
This is on the back of recessionary risks rising across several major economies, including the US, UK and in Europe.
The growth outlook in China is also weakening, with considerable risks to the downside.
The rapid price increases induced by war and the pandemic have been responded to with blunt and brutal force by the world’s central banks –
The steepest, most synchronised global monetary tightening seen in the inflation targeting era.
Rate increases in the United States are of a scale not seen since the “Volcker Shock” in 1981.
In Europe, the ECB has put in place the steepest set of rate rises in its history –
While the UK hasn’t seen more extensive monetary tightening since Bank of England Independence.
The pace and uniformity of these rate rises makes this a rare moment in economic history –
And it’s no surprise that investor sentiment is down on the back of this.
By some measures global equity values have fallen by around 20 per cent since this time last year.
This picture is dynamic, it’s increasingly dangerous, and it sets the scene for new problems which can emerge without much warning.
We all saw that recently, when the Bank of England intervened with force to dampen fears that skyrocketing bond yields would threaten financial stability –
A cautionary tale from abroad about the costs and consequences of misjudging the impact of policy choices in a world already awash with uncertainty.
Outlook for Australia
No responsible government could ignore the global context for the coming Budget.
Here at home, we must be careful not to misalign fiscal and monetary policy.
Like everybody else, we’re exposed to the impacts of synchronised global tightening.
Aggressive rate hikes from the Fed in particular, have put pressure on the value of our dollar –
And weakness in the currency means that some of the things we buy from overseas become more expensive – making the already hard job of the RBA harder.
Higher rates and cost of living pressures have led to the first fall in household wealth since the start of the pandemic.
Supply chain issues also linger, pushing up the costs for business and consumers alike.
So, we aren’t being spared from the deteriorating global outlook –
And we can’t hope to escape further storms unscathed.
The good news is, that we’ve got a lot going for us here at home that will help –
Significant advantages which we can leverage to our benefit.
More Australians are finding it easier to get into work than ever before –
Reflected in the lowest unemployment rate in close to 50 years.
This is creating opportunity and shoring up our economy.
We’re also benefitting from high prices for the things that we sell overseas –
We’re experiencing solid growth –
And most importantly, we know what we need to do – the areas we need to invest in – to build a stronger, more sustainable and more resilient economy for the future.
The Budget
Australia’s existing strengths will help steer us through the coming economic storm.
But on their own, they aren’t enough to overcome a structural and entrenched deficit currently built into the Budget – burdened by spending pressures that are constant and compounding.
The additional welcome boost to revenues from high commodity prices can’t be relied upon to fund the things we most value –
Even with improvements in last year’s Final Budget Outcome, the budget was still $32 billion in the red in 2021‑22 with deficits forecast over the forwards and beyond.
The fiscal strains that we’re under are intensifying rather than easing.
And this fact hasn’t escaped our state colleagues.
All levels of government appreciate that the seriousness of the problem requires that we work together.
I heard that message after Cameron and I and our colleagues were asked by National Cabinet to brief them on our five big spending pressures at the federal level.
My contribution focused on the big five of debt servicing costs, aged care, disability care, hospitals and defence.
For example, interest payments that will grow at around 14 per cent per year on average over the next four years – with higher yields sending that cost in only one direction.
Defence spending will rise 4.4 per cent per year over the same period.
We’ll also see spending grow by 12.1 per cent per year for the NDIS, 6.1 per cent for hospitals, and 5 per cent for aged care.
All spending that is either desirable or unavoidable or both – and must be paid for.
The fiscal position we find ourselves in means that we will have to make some difficult decisions with this Budget –
Difficult decisions for difficult times.
The right calls for the right reasons –
Following the responsible path; not the path of least resistance.
We must be serious about rebuilding our budget buffers – particularly given the deteriorating global outlook.
So, we’ll put a premium on affordable, responsible, sustainable, spending.
Not fancy or flashy – but fair and future‑focused.
Above all else – this Budget will be about responsible economic management at home at a time of uncertainty around the world.
We’re facing the prospects of a third global slowdown in the last 15 years.
The first was a financial crisis that became a demand shock.
The second was a health crisis that became a supply shock.
The third could be an inflationary shock and a hard landing brought about by rapidly tightening monetary policy.
Each is different in meaningful ways; the response should be different too.
This time our response will be more targeted, more measured, and more supply‑side focussed so it isn’t counterproductive and doesn’t put extra pressure on the independent RBA.
That’s why we’ll deliver cost of living relief through initiatives like cheaper childcare and medicines –
Reforms that will offer a real economic dividend without putting excessive pressure on demand.
It’s why we’ll also up our investment in skills and training: preparing people for higher‑wage opportunities and supporting pay rises in the care economy – and why we’ll invest substantially in cleaner, cheaper, more reliable energy.
Investing in the future
I’ve spent a fair bit of time today talking about the global outlook, and the near terms issues confronting our economy.
There are also some longer‑term trends in the Australian economy that we can’t ignore.
This includes weaker business investment than we’d like to see –
Now, at its lowest levels since the early 1990s.
Investors are a big part of the solution here, and we need your help to turn this around –
If we start to reverse this trend, and I’m confident we can, there is cause for optimism.
Given our fiscal position, not everything can be solved solely by more government investment.
It will take cooperation, collaboration, and partnering with private investors and institutions.
There are plenty of profitable opportunities out there in some pretty key areas –
Take housing, for example.
Here, in Queensland, I know that the state government will hold a Housing Summit in October to explore issues with housing supply –
And that the Australian Retirement Trust is already partnering with investment manager QIC to fund a $500 million portfolio of affordable housing.
Then there’s the energy transition.
Our journey towards net zero will require at least 10,000 km of transmission alone – which our Rewiring the Nation Plan helps to deliver through $20 billion of low‑cost financing.
And the Blueprint for Queensland’s SuperGrid released last week showcased the level of planning required to ensure investments in generation, storage and transmission are synchronised.
Treasurer's Investor Roundtable
So, opportunities for profitable investment in national priorities exist –
We just need to work together to make them happen.
That’s why back in August I first flagged my intention to establish a Treasurer’s Investor Roundtable.
To get all the people who need to be in the room, together –
To find opportunities that deliver for the interests of investors and for the national interest –
And to chart a way through the challenges that are currently preventing the scale of investment we all want to see.
Today, I can announce that the government will host a series of Investor Roundtables from November 2022 to September 2023.
Each one – held every three to four months – will focus on a different area of national priority investment.
The first, in November, will address social and affordable housing.
To make sure our conversations are targeted, productive and have a degree of continuity, the roundtables will have twenty core participants –
They include the CEOs of our big four banks, along with the heads of some of our largest superannuation and investment funds.
Participants in the roundtables represent institutional investors, including super funds, with over $2 trillion in assets under management.
And all participants have the smarts, insight, and diverse range of experiences, to make these roundtables a success.
Importantly, none of us will be starting from scratch here when we gather to discuss housing in November –
But we’ll need everybody to bring something to the table – at the Roundtables, and beyond them as well.
In the lead up to the Budget and afterwards, Julie Collins and I will be drawing together representatives from industry and government:
Our state colleagues –
Local government –
The investment community –
And the construction sector.
And we’ll be seeking an agreement with all these important players on a mix of short and long term actions to address the supply problems in Australia’s housing market:
By managing planning processes and access to land –
Making sure affordable housing is energy efficient –
And underpinning all of this with more institutional investment in housing while delivering good returns to investors.
In the world we’re in – with growing social need and tightening fiscal constraints –
There’s a call for all of us to develop more creative solutions –
Which is why part of our contribution is exploring and expanding opportunities to collaborate and pursue co‑investment.
Again, creating partnerships that can provide an investment dividend and a national dividend.
Conclusion
Investors, and Australians broadly, want us working together to confront the challenges that are in front of us, and grasp the opportunities that lie beyond.
That’s what today’s about.
That’s what I want my Investment Roundtable to be about.
That’s what the Jobs and Skills Summit last month was all about.
It’s what this coming Budget will be all about.
Because it’s what the Prime Minister and his government are all about, and Cameron and the state government too.
Working together, listening to ideas, reaching consensus and bringing people with us.
Because we know that to build a better future, we need to build it together.
Thank you.