TREASURER:
Quite clearly when it comes to the Budget, the Government inherited a mess. We have made a good start, there is much more to do but we are on the right track and we are determined to create more prosperity and more jobs for the Australian people. I want to say to you today that we are facing external headwinds during the course of this year. Those headwinds in particular are related to what we expected to be the iron ore prices for the forecasts in the Budget. Twelve months ago iron ore was at $120 a tonne. There were market expectations it would fall to $95 a tonne. We budgeted $92 a tonne. It's currently $63 and we are forecasting that it will remain around $60 a tonne for the foreseeable future. That more than 30 per cent fall in iron ore prices has had a big impact on the Budget, as has a 15 per cent fall in thermal coal and a 20 per cent fall in wheat prices since the Budget. As a result, the forecast decline in the Terms of Trade this year is the largest since records were first kept in 1959.
The Government has decided to use the Budget, which is stronger than it was 12 months ago, as a shock absorber for the biggest fall in our export prices in many years. If we don't use the Budget as a shock absorber for this extraordinary fall in the Terms of Trade, then Australians will lose jobs and we will lose our prosperity. So, this year it has been essential that we have strengthened the base of the Budget. The underlying Budget position is much stronger than it would have been if Labor were re-elected. Most significantly, despite the Labor Party opposing and blocking tens of billion of dollars of Budget initiatives, the Budget is able to cope with these external headwinds.
Now, it wasn't for nothing that we abolished the Carbon Tax and associated expenditure. It wasn't for nothing that we abolished the Mining Tax and associated expenditure and it wasn't for nothing that we made difficult but important decisions to make sure that expenditure in health, education, and welfare were sustainable because if the Budget can be used as a shock absorber for external pressures, then we can continue to maintain momentum in the domestic economy.
As my Budget statement will say tomorrow, we expect growth to remain around 2.5 per cent but strengthen to three per cent over the next few years. We expect unemployment to continue to grow, obviously, to levels that are a tick higher than what we forecast in the Budget, but this year we have seen a significant improvement in job creation. This year we have seen job creation run at three times the speed of last year. That's hugely important. If we had the same settings as the last year of the Labor Party in Government, unemployment would be at over seven per cent and more than 110,000 Australians would not be in a job.
Most importantly, going forward, what we are going to see is a strengthening of the Australian economy as a result of initiatives from this Government. Importantly, we're going to see the rollout of significant infrastructure right around the country, which is going to help to address some of the employment needs, particularly in construction and a range of other related areas. We are going to see a significant increase in the number of houses and units constructed in Australia over the next 12 months. Importantly, we're going to see new opportunities through Free Trade Agreements.
Next year will be stronger than this year and the year after will be stronger after that. Having said all of that, it is important that we allow the Budget to continue to be a shock absorber and I say to the Labor Party, the Greens and the independents: if you want to see the Australian economy cope better with the challenges that are beyond our control, work with us to strengthen the Australian Budget; do not continue to provide mindless opposition to the Budget initiatives because ultimately it reduces our capacity as a nation to deal with some of the headwinds that we are facing. Over to you – no questions?
REPORTER:
Mr Hockey, the [inaudible] – was that actually not budgeted for in May?
TREASURER:
We have seen, as a result of lower income growth across the nation – in part due to obviously falling export income compared to what we were expecting, there has been increased demand for family benefits, for childcare benefits. It is one of the reasons why in our next Budget you will see a focus on families and importantly, providing a flexible but properly targeted package of support for families, particularly those that want to participate in work.
REPORTER:
So you don't see that related to decrease in confidence?
TREASURER:
No, not at all. In fact, [inaudible] an illustration of the increase in childcare costs – there is an illustration of the fact that there is greater demand for childcare, and in part that's related to more people wanting to go into work, which is encouraging. REPORTER:
Mr Hockey, you have indicated that there won't be a surplus by 2018. Do you think you have broken a promise to the Australian people?
TREASURER:
No, I never set a target on a date for a surplus. I never set a target – that was implied by the Labor Party. We're not going to make the same mistakes that the Labor Party makes. Trust me, we don't do that.
REPORTER:
[Inaudible] selling the Budget. What specifically do you think you could have done better?
TREASURER:
In 2015, we will be having a conversation with the Australian people about the challenges that lie before our nation over the next 30 to 40 years. The Intergenerational Report will be an opportunity to engage in that conversation with the Australian people and to give them the chance to identify policies that are going to help to strengthen the Australian economy for the long-term and deal with some of the structural challenges we have, such as an ageing population and of course, the very positive opportunities associated with growth in Asia.
REPORTER:
You also said just before that what would happen if Labor was in power [inaudible] unemployment and you mentioned that unemployment figures were a tick higher than expected. Any specifics on that?
TREASURER:
No, you'll see the data tomorrow. The fact is, we have better job creation this year than last year. Last year, job creation under Mr Shorten was running at around 5,000 jobs a month. This year it's been running at around 15,000 jobs a month. If we hadn't of been running at around 15,000 jobs a month, and running at 5,000 jobs a month – as happened under the last year of Labor, unemployment would be about 110,000 higher and the unemployment rate would be around 7.2 per cent. Quite obviously, with the change of government, you have seen better settings that have helped to facilitate more job creation; that is good. Obviously, if you are running below trend growth, then it is going to put upward pressure on the headline unemployment rate, but we are going to do everything we can to address that. We inherited a mess. We've made a good start at fixing it. There is still much work to be done but ultimately, everything we are doing and everything we have done has been focused on job creation and greater prosperity in Australia.
REPORTER:
You criticised Wayne Swan in the past for inaccurate Budget forecasts [inaudible] going to be announcing such a variation, be characterised the same way?
TREASURER:
What Wayne Swan did was he overestimated revenue, he underestimated expenditure, he promised a Budget surplus that he never delivered. Joe Hockey has taken a more conservative approach to revenue estimates and been, thankfully, accurate in that regard, even though we could have gone further in relation to iron ore. We are trying to rein in Labor's waste. Most importantly, we have not set a deadline on when you're going to have a Budget surplus, but we have put in place structural reforms that improve the Budget position and allow us to use the Budget as a shock absorber for things that are beyond our control, and it is hugely important because that gives the Australian people and Australian businesses confidence that we can see through whatever challenges may lie ahead.
REPORTER:
In terms of the Paid Parental Leave Scheme or whatever you're going to characterise it as, when you looked at rebates being included for nannies, it was thought to be too expensive; is it cheaper now?
TREASURER:
You'll see our families package in due course but we want to make sure that it helps to facilitate greater workforce participation, particularly by women, and also the families package needs to be flexible because ultimately, we're not working normal nine to five, five day a week working hours, as your presence here clearly illustrates. Any others?
REPORTER:
Some backbenchers have been making some public criticism of the Prime Minister’s Chief of Staff. Is there actually an issue that needs to be dealt with here?
TREASURER:
I'm not commenting on comment.
REPORTER:
When the Coalition came into Government, the economic situation was described as a ‘Budget emergency’. If that was then, what would you describe it as now?
TREASURER:
We have put in place the structural reforms that have helped to strengthen the Australian Government's Budget. That in turn means that we can use it as a shock absorber to deal with some of the challenges that we have. I say again, we have had the biggest fall in the Terms of Trade in more than a half a century but we are coping and we are coping well because we strengthened the Budget; because we put in place reforms that have helped to make us a more prosperous nation. Now, without change, we are going to weaken ourselves. Therefore, we have to undertake economic reform to strengthen the Australian economy, to make us more robust to meet head on the challenges of the future. I have no doubt – no doubt, that Australia is better prepared today for the challenges of the future, than it was 12 months ago and certainly two years ago. The Budget is better prepared to meet head on those challenges but we are not going to be silly and pretend that more work doesn't have to be done; it does. We need to do more work.
REPORTER:
The [inaudible] is saying that the reduction in Government's agencies will mean its members will have trouble coping with reductions in health and stuff like that. What do you say to that?
TREASURER:
We don't see a reduction in services as a result of getting rid of a range of different government agencies. Agencies don't necessarily deliver services. It comes down to the core business of government and the core business of government should be delivered more efficiently. If you look through what was the reported list of agencies yesterday in the paper, you can see that there's a vast number of agencies that have a mission that is no longer core business for government and frankly, if we're asking the Australian economy to be more efficient, the Government has to lead the way.
REPORTER:
Do you think Australians are listening to the constant warnings about debt and deficit?
TREASURER:
Well, Australians have been listening to that and have been listening to the discussion that we've had about the challenges of fixing the Budget; they know that. Australians in their hearts know that if we can strengthen the Budget, we can strengthen the economy and if we can strengthen the economy, then we can better withstand the [inaudible] that come from offshore. To have the biggest fall in Terms of Trade in 50 years and still have employment growth strong, to still have an economy running at around 2.5 per cent –that is an indication that the key parts of our Economic Action Strategy are working, but there's still more work to be done. Nothing else? Great. Thank you very much.