3 July 2014

Making Australia 'Future Ready' Luncheon Address, 2014 Economic and Social Outlook Conference, Melbourne


Check against delivery

This is a transcript of the Treasurer's speech to the 2014 Economic and Social Outlook Conference in Melbourne.

This year marks the 50th anniversary of The Australian newspaper.

As someone who is not yet fifty years of age, I have particularly enjoyed The Australian’s republishing of stories from key events from the last half century ranging from the turmoil in Indo-China to the disappearance of Harold Holt.

Reading newspaper clippings and remembering these events has helped reinforce the point that the decisions of today always influence the events of tomorrow.

Australians in 1964 would not have been able to fathom the world that we currently live in.

Fifty years ago governments had enormous influence over every aspect of society, from censorship of the press to the exchange of money.

There were high tariff and non-tariff barriers to trade, and the government controlled the deposit and lending rates offered by Government owned banks.

In 1964 job security was effectively guaranteed with an unemployment rate of around 1%.

Prosperity was almost taken for granted.  And whilst geo-political tensions and significant social change were creating some community anxiety, there was a reassuring confidence around the growth of the economy.

I believe we stand at the dawn of another great age of prosperity, but it is a very different epoch to what anyone would have imagined in 1964.

Back then our biggest exports were wool, wheat, beef and veal. Today our biggest exports are iron ore, coal, education and natural gas.

In fact today we export the annual equivalent of 30 tonnes of iron ore for every man, every woman, and every child in Australia. An inconceivable achievement fifty years ago.

Of course back then we had strong and seemingly unbreakable ties with the United Kingdom, which was not only our largest trading partner but also our largest source country for immigration.

Today our ties with Asia are much deeper. China and Japan are our largest trading partners and India is our biggest source country for immigrants.

And an Australian in 1964 would not have fathomed that our news, our work, and our interactions with others would be done, to a large extent, through a globally interconnected network of mobile phones and computers. 

Newspapers understand this information revolution better than most.

Given this immense change in the last fifty years, what can we say, with any degree of certainty, about the next fifty years?

The truth is the new disruptive forces in our world, in particular new technology and truly globally accessible markets  – make it incredibly difficult, if not impossible, to predict the future.

Governments are expected to prepare nations for the future with less certainty and less control of the future than at any other time in the history of humanity.

We, and the community more generally, must accept that the role of Government in people’s lives is changing.

We cannot pretend that governing a country in 2014 is the same as it once was. Nor can we shape laws and policies based on a wistful longing for the good old days.

We must prepare for tomorrow.

Today citizens are less trustful of the Government and more truthful about their own destiny – they don’t want Governments to dominate their lives. They want more control of their own lives, and it is the Government’s responsibility to help them gain that control.

Therefore the primary role of modern government is to strengthen personal empowerment by reducing the influence of centralised control. For example more regulation and higher taxes strengthen the state and weaken the individual in a more deregulated and highly competitive world.

And the new role of government is to prepare policy that facilitates that personal empowerment. We must prepare our people now, more than ever, for their deep engagement with the global community.  Through better education, better technology and better infrastructure our citizens, individually and collectively, must be able to achieve their best.

I am prepared to back Australians in any fair global race.

We are an innovative people with a deep respect for tradition but a fearless optimism about the future.

We work hard and we embrace change.

To quote our unique vernacular we are prepared to “have a go” provided we get “a fair go”.

As a result of this new environment our community will be richer and people more prosperous.

And we will be able to provide the support services for those most in need on a more generous and sustainable basis than ever before.

That is the community dividend associated with change and reform.

So we must prepare now. Our public policies must prepare us for what may lie ahead. Because whatever the future brings it will come to us much faster than we expect.

As a result the Coalition Government has begun preparing Australia to meet head on and beat the many challenges we will confront over the next fifty years.

Our plan for Australia prepares us for many futures all of which will rely entirely on the effort and enterprise of the empowered individual in a highly competitive world.

How we are preparing for the future….

Since coming to office just over nine months ago we have reduced the debt burden on future generations by getting the Budget back in order and laying down plans that allow us to live within our means.

By making the tough decisions now, we will free up future generations to react to the challenges they will face without being hamstrung paying off the debt racked up in the last few years.

Our Budget goes a long way to achieving this by slashing projected Government debt by almost $300 billion over the next decade, saving $16 billion in interest payments per year by that time. This is even after prudently allowing for future tax relief.

We want to reduce the amount Australian taxpayers spend on interest and ensure that more of their tax dollar is spent on the delivery of front line services.

The Commission of Audit, released in early May, showed that without action Government would simply continue to become a bigger and more influential part of our lives with the funding for this either being raised through more taxes or more debt, which is future tax increases. The Budget highlighted how important it is to draw a line in the sand and get government spending back on a sustainable track. 

The benefit of making these decisions now is that, in the years ahead, we will be able to afford a sustainable quality of life.

By borrowing money today we are asking our children to pay for our current lifestyle when they have to repay the debt, with interest, in the future. That is unfair.

The Coalition is determined to reduce the role of government in people’s lives by better targeting spending and by reducing the overall burden of taxation below what it would otherwise be.

The first word is the abolition of the carbon tax. This will save the average Australian household $550 this year alone.

And we are getting rid of the mining tax, which has raised just 3% of its intended revenue, and it saves the Budget $13 billion by getting rid of most of its unfunded associated expenditure.

These taxes have acted like sand in the wheels of the economy. We will strengthen economic growth and encourage new investment by abolishing these totemic public policy failures.

At the same time we are building greater simplicity and more robust integrity into our tax system.

As Chair of the G20 we are working with our international colleagues to address the global issue of tax base erosion. We need a global solution to a global problem of profit shifting and tax base erosion.

By the end of this year I expect to see some positive global initiatives coming out of the work by the OECD and our own Commissioner of Taxation that facilitate greater information sharing about the activities of companies that do not pay a fair level of tax where they earn the income.

Domestically we are ensuring the structural integrity of our taxation system by proceeding with deliverable thin capitalisation changes. The initial program announced by the previous government last year was flawed. However with some changes to the package that do not harm Australian businesses we can limit the ability to shift profits out of Australia by the allocation of excessive debt to Australian operations. These changes are expected to be introduced into Parliament in July.

To prepare for many futures we need the infrastructure that facilitates growth and lowers the cost of competing.

We are kickstarting the non-mining sector of the economy by facilitating the building of $125 billion of productivity enhancing infrastructure across Australia over the next decade.

This investment will boost economic growth and jobs today, and it will lower business costs and improve the quality of life by easing congestion.  It will also increase the productive capital of the economy and raise the “speed limits” to growth in the future.

Productive infrastructure for our economy is an investment in our future. If we must borrow today it is essential that we at least leave some identifiable benefits for future generations. Better infrastructure is a step in the right direction.

We must prepare our citizens for the work environment of the future.

We want to lift workforce participation through work for the dole, changes to the social security safety net, and incentive payments to get our older Australians back into a job.  It is good news that some of these reforms started this week and it builds on our collective efforts in the first five months of this year to generate over 100,000 full time jobs across the economy.

However there have been challenges. We have inherited rising unemployment and a more regulated workplace.

As a result, and to prepare for the future, we are undertaking modest but significant workplace reform including re-introducing the Australian Building and Construction Commission.

And, given that we need to increase workforce participation, we have initiatives such as a fair dinkum paid parental leave scheme that ensures people can still balance family duties with commercial obligations.

According to the Grattan Institute “if Australian women did as much paid work as women in Canada…Australia’s GDP would be about $25bn higher” than it is today.

But let’s face the reality, unlike our parents, our generation and those that follow will not be able to afford a home in a capital city on just one household salary. Self evidently the mortgage still comes in whether you are on parental leave or not.

We need Australians to work but we also need Australians to have more children and the best way to encourage that is to give them confidence and a sense of income security during the high cost days of raising a family.

Our social safety net must be better prepared for the future as well.

This financial year, taxpayers will spend $146 billion on social security and welfare, or over $6,000 for every Australian.

Our current system of welfare payments is too complex and too difficult to navigate. There are around 20 income support payments, 55 supplementary payments, and several tax concessions. There is also a range of other Government services including subsidised medicines and health services, subsidised education or training, and subsidised access to public facilities.

As a society, we have a social and moral duty to provide for those who cannot provide for themselves. However, to ensure that the welfare system is sustainable we must ensure it targets assistance to those who need it most and that it encourages those who can to lift themselves back up through either work or study.

The changes to the welfare system in this year’s Budget are a first step toward making the system sustainable. But there are significant gains to be made in the way that welfare support is delivered.

The current system is outdated and has limited flexibility and efficiency.

Assistance and requirements are often based on payment category, rather than the capability or needs of individuals. 

It is not easy to work out the precise mix of payments and services which would suit each case and it is not easy to see the total package that each individual receives. 

We need a major reform effort to develop suitable information technology infrastructure that increases the efficiency, flexibility and transparency of the system, and delivers precisely tailored assistance to meet individual requirements.

We need a sustainable health system that can deliver the treatment and cures for the fastest growing and most malevolent chronic diseases of the future.

That’s why we are investing in the future health of our nation by creating a growing pool of funds for new medical research. Savings from the health Budget and the modest $7 co-payment when we visit the doctor will be invested in the fund.

And we need an education system that best prepares our citizens for the future.

We have started the process of university deregulation that will allow Australian universities to compete unshackled with their counterparts around the world.

Our reforms will mean that better and more appropriate courses will be on offer to more people at a price which reflects their economic value. 

There is a very strong link between the level of education and outcomes for employment and income, and this Government wants to create an environment where all Australians have more choices about the investment they make in their own future.

We are supporting more courses at more institutions, including sub-bachelor courses at TAFEs. It will help build a higher skilled workforce with a greater capacity to help build a better and brighter future.

But our reforms go beyond the student. It’s also about building specialist skills at appropriate universities from medical research at hospital linked campuses to new tropical science research at our northern universities.

And to build a better future we need to open new markets.

The Abbott Government has strengthened our relationship with our Asian neighbours through closer collaboration on trade, education and investment.

Our strong push to finalise free trade agreements with Korea, Japan and China will build on the increasing internationalisation of commerce. We are determined to broaden our business opportunities across Asia from resources and energy to agriculture and agribusiness; from services sectors such as health and medical research to financial services, tourism and aged care. 

These initiatives will also provide opportunities for international businesses to expand in the Australian market. This means more jobs and a more competitive market for consumers.

The Coalition Government is using our Presidency of the G20 to promote strong growth initiatives, with the ambition of collectively lifting global economic output by an additional 2% over the next five years.  This will add more than $2 trillion to the world economy – and create tens of millions of new jobs around the world.

We are driving this agenda hard because, as a medium sized open economy that produces much more in goods than we consume, what is good for the world is also good for Australia.

It is part of an economic action strategy that will build a stronger economic future and create prosperity.

But to be at our best to take advantage of the future our policy platform must reach beyond the Budget.

Accordingly our upcoming policy work on the Federation, the taxation system, workplace laws, the financial system and competition policy will help lay down an agenda for growth and further improve the productive capacity of the nation.

These methodical reviews of the vital economic structures will stand Australia in good stead for the next half century. 

I remain very positive about Australia’s future notwithstanding the challenges of the present and the burdens of the past.

We live in the fastest growing region in the world.

For the first time in our history our geographical location is a great advantage.

And our massive natural advantages in agriculture, resources and energy will, with some reasonable effort, continue to provide a sound base for prosperity.

It remains the case that the massive growing middle classes in China and India, Indonesia and South East Asia will want what we have, from good quality health and aged care to a corruption free legal system to a safe and secure community. They will want clean air, clean water and better housing. They will seek out a quality of life that we never take for granted.

We can take advantage of this demand.

Australia has much to offer – a vibrant tourism sector, a sophisticated financial and wealth management industry, safe and secure energy supplies and a stable political environment.

Through e-commerce in particular I want Australia and Australian business to be a key part of meeting the growing demands of the emerging Asian middle class.

China alone represents a massive growth opportunity.

With over 600 million Internet users, 80 percent of whom access the web via their smartphones Chinese citizens will be empowered to engage in commerce on a scale never previously imagined. And the growth will continue with some 400 million smartphones to be sold in China this year, accounting for nearly a third of all smartphone sales globally.

China already has become the world’s second largest e-commerce market. These middle class consumers are already using the internet to seek out the best products the world has to offer. 

The rise of e-commerce has fundamentally boosted the forces of competition and increased consumer sovereignty.  Consumers can now shop for the best products at the best prices anywhere in the world.

This has led to what the Chief Economist at Google, Hal Varian, has termed the ‘micromultinational’ – small companies that operate globally. While that means the tailor in Bondi is now competing with the tailor in Bangalore, it also means the picture framer in St Kilda now has the option of purchasing materials direct from the manufacturer in Shanghai.

Businesses are now much more global in operation and in some ways are beyond the control of any single sovereign government.

The pace of change has dramatically accelerated.

Consumers, not governments, have redefined commerce and markets so it is obvious that we must respond appropriately with laws and policies that facilitate change rather than hamper or impede change.

We know that governments will not help the progress towards a brighter future by looking in the rear view mirror and trying to roll back the clock to policies of the past.

And we know that paternalistic interventionist governance is the wrong model of government in an ever changing and unpredictable world.

That has been reflected in our approach to industry assistance requests.

It has been reflected in our determination to cut red tape and speed up environmental approvals.

It has been reflected in our approach to government finances.

Governments and regulators must adopt a new mindset which facilitates change and reform that ultimately is driven by demands from the community rather than dictates from intrusive government.

Resisting reform will inevitably mean that political attitudes and governance structures get left behind and become irrelevant.

Just as there is no limitation on human aspiration -there is no finishing line on change and reform.


As your newspaper has done over the last few weeks Australians should remember our past and celebrate our success.

The lessons of yesterday endure today.

We must earn prosperity and we cannot take our future for granted.

And we know that the pace of change will speed up, not slow down.

So we recognise that many of the changes arising from increased globalisation, new technology, and increased power for the consumer are outside the direct control of government.  We welcome that.

But it also means that the role of government must change so that we facilitate change and not stand in its way.

The new Coalition Government has begun to redefine the role of government in people’s lives so that the community can have more direct control over our nation’s prosperous future.

We will strengthen the safety nets and build better infrastructure.

But we will also reduce our control of people’s lives by reducing regulation and giving Australians more control of their own finances.

The work has started but there is more to be done.

With an end to the age of entitlement comes a new age of opportunity.

This is when Australians can be their very best.