It is just over a month since the Liberal National Coalition led by Tony Abbott achieved an emphatic victory in the Australian election.
While we are a new Government, we do not lack experience. Many of us were ministers in the previously successful Howard Coalition Government.
In coming to office, we have inherited an economy on which the scorecard is mixed. Some of our fundamentals are sound, reflecting almost three decades of bipartisan structural reform.
Yet our economy is growing at a below-trend pace and it looks likely to remain at that level for some time. Further structural reform is needed to lift the underlying potential of our economy.
With a rising unemployment rate, Australia’s failure in recent years to embrace structural reform has seen our productivity performance deteriorate over and above the temporary dampening impact we would have expected from the receding investment phase of the mining boom.
The ageing of our population, the implications of which we have been discussing for a decade, is now a reality – and it poses new and significant participation challenges for the economy.
And fiscal policy credibility has been undermined by the previous Government’s failure to deliver on debt limits and timetables to surplus.
Ultimately the decisions that were taken in managing the economy, or more particularly the decisions not taken, were ad hoc and often poorly thought through.
The Abbott Government will not repeat these mistakes. We intend to adopt a wide-ranging and methodical approach to economic management.
Consumer and business confidence also needs to be restored.
Initial indications from private sector surveys are that we have seen a general rebound in business confidence with the recent change of government. Whilst this is encouraging we are mindful that decisive action is required to build on these positive signs.
I have a clear message for you today; Australia is open for business, open for investment and is going for growth.
So what is the plan?
We have a program of short, medium and long term actions.
To start the process we will abolish the Carbon Tax and the Minerals Resource Rent Tax.
Both of these taxes have made the cost of doing business in Australia more expensive. They have been poorly designed and badly implemented - adding unnecessary regulation to enterprise.
Both taxes have weighed down our economy and both taxes have failed.
So from 1 July next year both taxes will be abolished and they will not be replaced.
Secondly, my Assistant Treasurer Senator Arthur Sinodinos and I have been methodically going through every previously announced taxation policy that has not been legislated. There is a backlog dating back to 2001. We are cleaning up that backlog and ensuring that stability and certainty in tax policy become enduring themes for the new Coalition Government.
Thirdly the Coalition is going to initiate a new era of reform prior to the next election in 2016.
We will consult widely with key stakeholders and deliver a taxation reform program that keeps to our core principles of fairness and simplicity. We will then seek endorsement from the Australian people for our plan at the next election.
When it comes to fiscal policy the new Australian Government is determined to bring the Budget back to surplus.
We must have a realistic timetable that properly recognises the real state of the Budget.
Undeliverable expenditures promised on the ‘never-never’ and taxes to be raised with legislation that is virtually undraftable will be jettisoned.
Moreover we will have a more realistic assessment of the impact of external factors on our Budget so that the revenue forecasts start from a more appropriate base.
There were many decisions the previous government never had the courage to deal with. I suppose this is the burden of a new Government.
Bearing in mind the current debate in Washington you can imagine how happy I am to be left with Government debt rising to $370 billion with a legislated debt ceiling of $300 billion.
The previous Government’s budget papers clearly showed that Gross Debt issued subject to the cap would hit the $300 billion limit before Christmas. However they did not have the courage to raise the debt limit before the election.
The ongoing deterioration in the fiscal position suggests debt could rise even faster than this unless swift and decisive action is taken.
The Labor government changed our debt limit on four occasions – to $75 billion, then $200 billion, then $250 billion, then $300 billion. They gave a recent undertaking that the debt would not exceed $250 billion. Ultimately they didn’t plan for the future because they didn’t think they would be around to have to deal with it.
In short they refused to restrain their spending and balance the books to live within their means.
That approach of constantly changing the debt limit only adds to uncertainty.
We believe the debt limit needs to be set at a level that provides sufficient headroom to accommodate likely events but also to provide discipline to budgetary management. And once set, the debt limit must be adhered to through prudent management of the nation’s finances. It must be the case that debt limits should only be altered when unexpected significant events necessitate a call on the markets.
In order to prevent this from occurring spending must be restrained and any additional revenue should be used - in part - to improve the Budget bottom line.
The Coalition will meet this challenge.
Leaving future generations with a heavy burden of debt puts that dream at risk.
So fiscal sustainability is a high priority.
Restoring fiscal sustainability will provide added resilience against the inevitable shocks to come.
To further strengthen our defences, we are reviewing the operations of the key government agencies to ensure they have all the tools necessary to meet the challenges of the continued volatile economic and financial environment.
The Coalition will not shy away from the hard decisions that are necessary in this regard.
The first round of all these decisions will feed into our Mid-Year Economic and Fiscal Outlook which I expect to release before Christmas. This will reveal the true updated state of the books and will establish the budgetary base on which we can build a sustainable future.
We will soon undertake a National Commission of Audit.
The Commission will examine spending line by line to ensure taxpayers receive value for money. It will review the government sector from the top down to identify overlaps and inefficiencies and ensure the process of government delivers the services and support the people need in the most effective and efficient way.
The recommendations of the Commission will lay the foundations for a more efficient and prudent Australian Government.
In addition to the fiscal repair work that needs to be undertaken, the new Australian Government is determined to prepare for the economic cycle by delivering structural reform in key areas of the economy.
As we know from recent events no area is more important to economic growth than a smoothly functioning financial system.
The Government will soon initiate a Financial System Inquiry that will address, amongst other things, the capacity of the nation to fund its growth and investment needs over the decades ahead.
Our Financial System Inquiry will undertake a general health check on our industry which has come through the Global Financial Crisis in exceptional shape. Most importantly however we must prepare for the future and our once every fifteen year review will help to fashion the future of our financial services industry in a positive and co-operative environment.
At the same time we need to improve the Australian competitive environment. We are having a root and branch review of our competition policies and we are determined to ensure that there is a simple and predictable regulatory environment for new and existing market participants across all sectors of our economy.
To this end we will lighten the regulatory burden on business with a comprehensive de-regulation agenda.
We will have dedicated “Deregulation Units” in each government department to identify regulations that can be removed. In Treasury alone we have already identified over 1000 regulations ready for abolition.
And we will deliver simplicity in process with a one-stop shop for environmental approvals which will cover both State and Federal obligations. Our commitment is to reduce the regulatory burden on business by $1 billion a year.
Growth Plan
We are also developing a plan for growth that will be centred around infrastructure.
There will be short, medium and long-term infrastructure priorities. We will be known as an Infrastructure Government.
We will invest additional money in new and existing productive infrastructure. We will fast track key projects to build the roads, bridges and freight rail projects desperately needed across Australia. There is much work to be done with an estimated pipeline of $800 billion in infrastructure needs.
The Coalition has already committed to over $20 billion in new or upgraded infrastructure projects including investing almost $5 billion of additional funding over the next 4 years.
These are funded by making managed and responsible savings across Government, which were outlined during the election campaign.
Across the world, both developed and developing, governments on their own cannot deliver all the infrastructure that is required. If there were any question in this regard, my various meetings over the past few weeks at APEC, G20, IMF and the World Bank have put this to rest.
The challenge is to remove the impediments to private sector investment in infrastructure.
So in the Australian context, the Government will consult with the finance sector and key stakeholders, including the state governments, to investigate alternative financing options which will encourage further private sector involvement.
This will help to boost the provision of new infrastructure beyond the levels that can be achieved with Government funding alone.
Other Initiatives
The Government has a broad range of other initiatives that will bear fruit over the medium to long term.
We will improve Australia’s education and training so that the people have the skills and knowledge to meet the needs of globally competitive businesses. Our New Colombo Plan will ensure that Australian students spend meaningful time in Asian universities learning the language, culture and building the relationships to reinforce our regional integration. Think of it as like a Fulbright Scholarship program with an Asian focus.
We will look at adjustments to workplace relations laws to help business to grow, create new jobs and deliver high real wage growth while maintaining Australia’s strong and enforceable safety net for workers.
Facing similar demographic challenges to the rest of the developed world, the Australian Government will address Australia’s ageing population by increasing participation in the workforce through policy innovation.
A Paid Parental Leave scheme extended across the workforce will encourage more highly skilled women to remain in the workforce while they have families. Our policies will provide an incentive to employers to hire mature Australians that will help keep experience and wisdom in the workforce.
We are intent on pursuing freer international trade and look towards a speedy conclusion of the Trans Pacific Partnership and other regional free trade agreements.
Improving productivity in Australia requires increased investment from the private sector in new technologies and new ways of doing business.
Increased investment in the non-mining sectors will be key. Australia does not save enough to fund all of its investment needs and foreign investment is crucially important.
The need to boost growth and create jobs, lift productivity and improve the quantity and quality of infrastructure has been a central theme of the conversations I have had with finance ministers from around the world that I have met in the past month. At the same time, there is a strong commitment to strengthen their fiscal position and to begin to stabilise and to pay down government debt.
The policy responses needed to confront these challenges have much in common.
I believe economic prosperity stems from sound macroeconomic and fiscal management; the fostering of strong domestic and international competition to create the incentives for innovation and entrepreneurship; unleashing the power of the private sector through lowering taxes, and removing regulation; and through investing in appropriate infrastructure and skills.
These issues must continue to be advanced through international forums such as the G20.
Australia views the G20 as the pre-eminent international economic forum and we attach a great deal of importance to our role as Chair of the G20 in 2014.
In Chairing the G20 Finance Ministers’ stream, I am looking to build a tight, well-focused agenda that leads to genuine action and tangible outcomes.
Financing for investment, especially for infrastructure, will be a focus during our host year. Unlocking long-term finance for investment to build modern infrastructure networks will be key to achieving these aims.
There will also be a focus on the erosion of the integrity of corporate tax systems and on completing and implementing the core financial regulatory initiatives that have been developed in response to the Global Financial Crisis.
Across the G20, investors need to have confidence that our economies are open for business.
This includes developing innovative market financing instruments, better using public and development bank resources, and utilising public-private partnership agreements.
We also need to strengthen the G20’s broader structural reform agenda, which is critical for ensuring a durable global recovery.
A collective resolve for action to address the key barriers to growth can help provide support for domestic reform agendas.
Removing the impediments to an even freer flow for global private sector trade, investment and competition are critical. Ensuring global tax integrity will be part of this.
Conclusion
Our new Government has hit the ground running.
We have an ambitious agenda. It’s an agenda based on boosting economic growth and creating jobs, unleashing the private sector innovation and investment and restoring sound government finances.
This is not just a domestic agenda but one we share with all our international partners. We will work closely with them to foster these goals more broadly especially given our chairing of the G20 over the year ahead.
A strong international economy is good for Australia.
Unquestionably in Australia and around the world people are crying out for a period of economic and political stability. The new Government in Australia is very mindful of that fact.
So whilst our agenda is busy our plans are clear.
Australia is determined to be open for business.
As a nation and a people we know our economic future is based on policy principles that allow business to have a fair chance to go for growth.