The current issue of The Economist has this to say:
"Each month The Economist surveys a group of forecasters and calculates the average of their predictions for economic growth, inflation and current-account balances for 15 countries and the Euro area. The table also shows the highest and lowest projections for growth. The previous month's forecasts, where different, are shown in brackets. The panel has yet again reduced its 2002 forecasts for everywhere except Australia, which it has revised up slightly to 3.2% - the strongest growth of any country in the table."
It is not just that Australia is forecast to have the highest growth of the 15 major economies surveyed by the Economist. It is that it is forecast to be so much higher - almost twice the forecast growth of the second highest growth rate and around 3 times the average.
We all know that sometimes forecasts are met. Sometimes not.
So let us not dwell on forecasts. Let us look at outcomes over the course
of 2001 to date.
To put Australia's growth performance in an international perspective:-
- Australia's economic growth this year comes at a time when the US economy and many of our other major trading partners are in, or close to, recession.
- Over the first three quarters of 2001 Australia's economy grew by 2.9 per cent.
- The US grew by only 0.1 percent over the first three quarters and has now gone into recession.
- Japan's economy contracted by 0.7 per cent over the same period and has been in recession since mid year. Elsewhere in Asia, Malaysia has contracted 2.5 per cent, Singapore contracted 8.1 per cent and Taiwan has contracted by 4 per cent.
- Growth in Europe is also very weak with the German economy recording no growth in the June quarter and contracting in the September quarter.
- The average growth rate of the G7 countries over 2001 has been 0.2 per cent, less than 10 per cent of Australia's outcome.
Against this backdrop Australia's performance is remarkable.
But the World Economy is very weak.
On the last occasion when our economy was tested like this - the Asian Crisis in 1998 - Australia proved to be very resilient and performed remarkably well.
That was a regional recession. Now we have all the major centres of the world economy in a synchronised downturn. We have continued to grow strongly. This week both business sentiment and consumer sentiment rose strongly.
The US economy has suffered significant imbalances, especially with its stock market, exchange rate, current account and its investment in information technology.
- The broad US stock market indexes declined by approximately 25 per cent from their peak, where Australia has only fallen by around 5 per cent.
- The US trade weighted index appreciated significantly in recent years and continues to remain at a very high level, where Australia's exchange rate has been exerting an expansionary influence.
- A rapid increase in the physical investment in IT equipment in the US, and the excess capacity associated with this, has resulted in a significant decline in US investment over the last year. Australia on the other hand has witnessed subdued investment over the past two years, with the outlook for new investment quite positive.
And those economies, such as Malaysia, Singapore and Taiwan that focussed on ICT manufacture for export to the US have been savagely hit. It was only twelve months ago that there were Australian commentators lamenting how far Australia was behind in ICT manufacture and how it needed desperately to catch up!
I do not wish to downplay the risks posed by the international environment. After recent meetings of the G-20, IMF and World Bank in Ottawa I am acutely aware of the concern of authorities in Japan, North America and Europe. And I do not want to tempt fate. But I think I can say that in the world environment of 2001, the performance of the Australian economy was a stand-out.
And you will recall all this occurred at a time when we were implementing the greatest tax change in Australian history.
For most of 2001 the Labor Party was claiming that Australia would go into recession as a consequence of GST. I guess they thought there was a chance of recession (as a consequence of the world downturn) and they could extract political advantage by blaming it on tax reform.
They were wrong. But no one could accuse them of not trying. The Labor Party's campaign against tax reform was one of the most cynical episodes of Australian political history. Labor systematically opposed the national interest for partisan advantage.
I was intrigued to read in a newspaper commentary recently that Mr Crean has ditched "Rollback" and was "never too keen" on it anyway.
If that is true, he deserves an Oscar.
No forum was sacrosanct, no stunt too undignified for his cheap campaign against tax reform. Before he airbrushes his role out of history do not forget how he came into the Parliament with pyjamas, and lettuce leaves and packaged salads. Do not forget his tawdry efforts on a daily basis opposing tax reform without advancing one positive amendment, one positive suggestion or one day of bipartisan support for the national interest. As I said at the time, his Party was once the Party of Curtin and Chifley.
I am proud to say that this Government had the courage and resolve to address much needed taxation reform.
There is no doubt that the indirect, personal and business tax reforms implemented by this Government represented a generational change in the Australian taxation system.
These reforms saw the demise of an old, outdated and clearly unfair system.
For business the new arrangements create a modern, competitive and fair
tax system. The system creates an improved environment for investment
and a sustainable revenue base.
As well as replacing the arbitrary wholesale sales tax with GST and lower income taxes, the reforms included:
- reducing the company tax rate from 36 per cent to 30 per cent, among the lowest rates in the region;
- reducing capital gains tax for individuals, improved venture capital and scrip for scrip measures to assist start-up and innovative enterprises; and
- abolishing Financial Institutions Duty.
The reforms for business were developed after extensive consultation with and input by business.
Significant draft legislation on business tax reform has been put out for public comment. The Board of Taxation has been set up to oversight consultation processes. Senator Coonan, the Minister for Revenue, will be responsible for progressing the remaining Business Tax Reform measures, including the introduction of consolidation.
In recognition of the time it will take groups to prepare for consolidation, the Government has decided that eligible groups will no longer be required to notify their decision to consolidate within 28 days of the commencement of the new regime on 1 July 2002.
Instead, eligible groups will be able to notify the Tax Commissioner of their decision to enter consolidation for the 2002-03 year at any time up until they lodge their first consolidated income tax return. For most taxpayers this will be no earlier than December 2003.
This change will greatly assist businesses preparing their accounting and IT systems to enter consolidation.
Senator Coonan is currently considering other issues with respect to the consolidation regime. I expect that Senator Coonan will make further announcements on consolidation shortly and that draft legislation and other explanatory material will be released in the New Year.
This brings me to the Government's current agenda. What is clear is that despite a record of great achievement there is no room for complacency. The momentum for reform will need to be maintained.
In this context, the Government has highlighted a number of key priorities over its next term.
We see a great importance in improving international taxation arrangements.
An example of how the Government may assist is seen in the recent renegotiation of the double tax convention with the United States. As a result of this, withholding tax on a large part of dividends paid from one of Australia's major areas of overseas investment markets will be removed.
The Government is also further improving arrangements for venture capital investment in Australia by broadening the existing venture capital non-resident CGT concession. The Government proposes to provide venture capital limited partnerships with flow through taxation treatment from 1 July 2002.
Further, the Government will remove a number of income tax impediments to attracting highly skilled workers from around the world. These impediments relate to the treatment of the foreign source income and the application of CGT and foreign investment fund rules in respect of expatriates.
The Government recognises the importance of building on action in these areas by reviewing our current international tax regime. That review will focus on issues that affect the decisions of businesses to remain in Australia or locate here in preference to other countries.
This review of international tax arrangements is being treated as a priority by the Government.
The Government will be continuing with its policy of full public consultation on the implementation of new business tax initiatives.
The Government will be putting in place arrangements for the new Inspector General of Taxation. The Inspector General will play an important role in resolving disputes about the administration of tax law by the ATO. This will complement the present role of the Board of Taxation whose focus primarily is on facilitating better tax law outcomes and broader issues affecting the operation and integrity of the tax law system.
A further initiative announced during the election campaign was our plan to improve the structures and governance practices of all Commonwealth statutory authorities and office holders, with a particular emphasis on those that impact on the business community.
By focussing on the internal processes of the Government's key statutory authorities, we will seek to ensure efficiency, openness and high standards of accountability without compromising necessary statutory independence. These reforms, which will be undertaken on a whole of government basis, will greatly enhance the regulatory environment.
I encourage business to become actively involved in this process as it gets under way.
The Government will also hold an independent review of the competition provisions of the Trade Practices Act and their administration.
The Government recognises that Australian businesses, both large and small, need to be assured that legislation and administrative practice will not act against continued growth and productivity. Adequate protection must be provided for all.
Equally, Australia should have laws and processes flexible enough to assist individual companies and those in regional Australia attain national and international competitiveness.
The Government wants to ascertain whether the legislation and its administration continue to encourage an environment where Australian businesses can grow and compete internationally; provide adequate protection for the balance of power between small and large businesses; support the growth of businesses in regional Australia; and deal fairly with affairs of individual companies. Further details on the inquiry and its terms of reference will be announced in due course.
Further the Government has determined to push ahead with further substantial labour market reform.
In this term, Senate willing:
- Employees will be entitled to a secret ballot before strike action
- Trade practices law will be strengthened against secondary boycotts
- Fair dismissal laws will be created
- Access to youth wages will be retained and expanded
Unlike Labor we will not outsource wages policy to the ACTU nor give the green light to strikes or economic boycotts.
Education is a further key to Australia's international competitiveness. The Government has pursued a comprehensive programme since 1996 to achieve widespread improvements in the performance of Australia's education system. That activity has involved additional funding carefully targeted at the particular needs of the system plus structural reforms to improve the standard of education provided to our young people.
The combined expenditure by Australian governments on education amounted to $33 billion during 2000-01, which compares with around $10.5 billion on defence matters. In international terms, expenditure on education in Australia equates to around 5.5 per cent of GDP, which is equal to the OECD average (when differences in expenditure on pre-school education are accounted for).
With these expenditure levels, Australia's education system performs well according to international comparisons. For example, young Australians are rated with the world's best in literacy, numeracy and scientific knowledge. These results suggest that our young people are well trained with the generic skills they need to participate in the community.
But the education debate of the future is not going to be about resources. It is about standards. It is going to be about flexibility, choice and competition. And most of all it has to direct itself to those who are the consumers - the children and the parents - not the producers - the teachers and the education Departments that administer the system.
The legislative agenda of the last term of office was the largest legislative reform in our history. We cannot repeat that, but in the area of tax, business regulation, labour relations, education and economic management there is still much to be accomplished. From the Government's perspective much has been done but much remains to do.