Introduction
Economic growth doesn’t fall from the sky. It must be earned. It must be won. It must be worked for.
It is the result of the application, innovation and determination of the Australian people to make the right choices to secure their economic opportunities.
It occurs where businesses are given the confidence and freedom to take new ground, unburdened by unnecessary regulation and an uncompetitive tax regime.
It is the upshot of positioning ourselves in the global economy so when good times abound, we flourish as a nation, and when the inevitable headwinds do arrive, we are sheltered from the worst.
For years now, the Australian economy has been running hard into a stiff headwind. But nonetheless, growth has been achieved, it has been hard won, while many of our global peers have merely tracked sideways.
Our Budget reflects the need to be proactive so that this hard-won growth is not simply maintained, but is built upon, so all Australians can share in our nation’s continued growth story.
In my Budget speech I stated that success cannot be taken for granted. We must be determined to secure our opportunities. I said the Budget was about making the right choices to secure the better days ahead.
And that our first choice must be to focus on growing our economy to secure more and better paying jobs. And that we must not succumb to the laziness that thinks growth will take care of itself.
This year’s Budget, like last years, has been designed with growth at its core; evidence that the Turnbull Government is focussed on getting on with the job of building Australia, of giving the nation the infrastructure it needs to boost the economy, create new job opportunities, and provide greater connectivity.
It is also a Budget that businesses can draw confidence from, because it champions their cause, and seeks to ensure the benefits of their success flows to all Australians, in more and better paid jobs and guaranteed essential services.
And importantly, it is a budget that is honest and fair, that ensures the Government lives within its means and deals with the practicalities of modern politics and our parliament.
This honest, practical and fair approach has already ensured that our AAA rating has been maintained by the three main ratings agencies.
Now that is something our opponents, many commentators and much media reporting said was unachievable barely six months ago. It was gone, they said. No hope of hanging onto it.
Only a few weeks ago, the Commonwealth Bank claimed there was a “high probability” Australia would be downgraded to AA+.
I note that partly as a consequence of the Government’s success in maintaining our AAA credit rating, our four largest banks and Macquarie have all retained their credit ratings as well.
Maintaining our AAA rating is not only consistent with the practical approach we are taking with budget savings and expenditure, it also sends a pointed message to the Senate that it needs to do its part to meet the Government in the middle and support our measures so the government can continue to live within its means.
Living within our means is no better demonstrated in this Budget, not just by our projected return to surplus but by the fact that in 2018-19 the Commonwealth Government will no longer be raising new borrowings to pay for everyday expenditure like welfare payments.
This has not occurred for a decade, and has been the biggest risk to our ongoing financial sustainability.
Since 2008, when the Rudd Government put Australia back into deficit, more than 75 per cent of our gross debt, or around $370 billion, has been raised to pay for everyday expenditure in welfare, health and education.
From 2018-19, ten years after Labor put us on that track, we are getting off it and will no longer be putting every day expenses on the credit card. That is what living within your means is all about.
Under Labor they accumulated deficits of just under $240 billion in six years or 16.9 per cent of GDP. Under the Coalition, over six years from our first budget in 2014-15, our deficits are $70 billion or around 30 per cent less. The other key difference is Labor inherited the Liberal gift of a structural surplus and we inherited the Labor curse of baked in spending and a structural deficit.
Net debt is projected to peak in 2018-19 at $375 billion or 19.8 per cent of GDP, before declining to 8.5 per cent of GDP over the medium term. The increase in gross debt reflects the Government's borrowing to support infrastructure and defence capability and borrowing over the medium term to avoid drawing down on the Future Fund to pay for unfunded superannuation liabilities, that will save a century of taxpayers from having to meet these costs.
Under the Coalition we have cut the growth in our Gross Debt by two thirds - from over 34 per cent under Labor to less than ten percent in this budget.
And for those who have expressed concern about spending in this budget, there is another nugget of truth to consider – real growth in spending in this Budget at 1.9 per cent over the budget and forward estimates is lower than the 3.7 per cent we inherited from Labor.
In fact average real growth in spending under this Coalition Government is lower than the average of each of the previous five governments, extending back almost fifty years.
When we were elected we were looking at payments as a share of the economy rising to 26.7 per cent, having already reached 25.6 per cent and remaining there until 2015/16. This year it is estimated to be 25.1 per cent, and will fall to 25.0 per cent over the forward estimates after absorbing the increased payments caused by the reversal of the $14.7 billion in savings measures rejected by the Senate.
There are better days ahead for the economy, and for those Australians who may be frustrated at not getting ahead.
And that growth is already tangible.
Our businesses continue to grow in confidence as they feel the winds of change within the global economy.
On the eve of this month’s Budget, the NAB Monthly Business Survey saw its business confidence figures jump to a seven-year high, strengthening from the solid results recorded in the previous month and confirming a new reality in the business sector - that growth is the new black.
Importantly, this was the first survey to occur after the Turnbull Government’s success in legislating substantial tax cuts for 3.2 million small and medium businesses.
Clearly, there is a deep understanding that such tax cuts will drive economic growth and deliver more and better paid jobs.
There can be no doubt that this is the right strategy to help propel this nation into its 27th year of economic growth.
Two days after the Budget, I reintroduced legislation to the Parliament to extend our Enterprise Tax Plan to all businesses.
If fully delivered, the plan will add around $17 billion in today’s dollars to GDP, permanently, and fuel productivity that will lead to a jobs and wage boost across the economy.
Deloitte’s Chris Richardson anticipates that for every three dollars that large businesses save through tax relief, two dollars goes into the pockets of workers, current and future.
If we don’t act, we risk our businesses becoming vastly uncompetitive in global markets, where our trading partners and fellow G20 countries have slashed company tax considerably in order to breathe life into their stagnant economies, to create jobs, and to lift wages.
Even in France the company tax rate is legislated to fall to 28 per cent by 2020 and under a new socialist-styled leader President Macron it is set to decline further to 25 per cent. The United Kingdom is heading to 17 per cent, Singapore is already there and President Trump recently signalled his intention to slash the US company tax rate from 35 per cent to 15 per cent.
This new global phenomenon should sound alarm bells across the nation, and compel stubborn proponents of high taxation to stop crippling Australian businesses with an out-dated and ideological argument that the world has got up and walked away from.
For the national interest. Before it is too late.
It makes it increasingly difficult for companies to consider investing in Australia and exposing themselves to a 30 per cent tax when they can invest in one of our peers and pay half.
We need to incentivize them to come, and incentivize them to stay.
The same is true for personal tax rates.
Bill Shorten wants to take away any incentive for Australians to work hard and build success. He has already declared that under a government he leads, many workers will be slugged with a 49.5 per cent tax rate, meaning they will be working one day for the government and one day for themselves.
Labor also wants any increase in the Medicare Levy to pay for the NDIS to only kick in at the $87,000 income threshold. We don’t accept playing politics with the NDIS.
In addition to this, Labor’s plan creates a steep tax cliff, that must be climbed, as soon as someone earns over $87,000 - hardly a millionaire. This will dampen aspiration.
Higher company taxes and pushing Australia’s personal income taxes towards 50 per cent, where you work one day for the Government and one day for yourself will do four things:
- Render Australian businesses uncompetitive for capital, forcing Australian jobs and investments offshore
- Cause a brain drain within our economy, encouraging successful Australians to relocate overseas to start and run their businesses there, where tax regimes are lighter;
- Discourage new parents from returning to work at the level they wish, because it just won’t be worth their while; and
- Create greater incentives for people to retire early.
Such an imposition is not fair, nor does it benefit the economy.
Higher taxes don’t drive economic growth. That’s why we will continue to stand against those who would seek to saddle our country with the prospect of ten years of higher taxes on Australian companies and hard-working salary earners.
Building a strong economy secures more and better paid jobs
In the last 12 months, 192,000 Australians have secured a job, with around 37,400 finding work in the month of April. That is the seventh consecutive month of job creation.
Here, we have some decent runs on the board, with more than 633,000 jobs created since the Government came to office in September 2013.
According to the ANZ, job advertisements have grown by around 10.1 per cent in the past year, while the NAB business survey points to around 20,000 jobs being added to the market each month.
Given jobs figures are usually lagging indicators, we anticipate even further growth when our small to medium business tax cuts begin to show up on the screens.
This is what happens when you invest in our businesses.
We firmly believe that when we invest in businesses and stimulate growth in the economy, encouraging small businesses to innovate, expand and take new ground, Australians as a whole benefit.
They benefit through increased job opportunities, as we are seeing across the nation. And they are more likely to get a bump in pay.
This is the primary purpose behind our tax cuts, and is the reason why in this Budget we have extended our popular instant asset write-off scheme, where businesses can immediately write-down spending up to $20,000 in any tax year.
And it is also the reason why we will keep ripping up red tape. We’ve already managed to slash $4 billion in business red tape, easing the regulatory burden on the shoulders of small business owners.
Now we plan to reward State and Territory governments who are actively reducing the red tape nightmare, with $300 million of generous incentives on offer if they can make a difference on the ground.
Of course, our role is not just to create an environment where jobs growth can occur, but to protect the jobs we already have, and ensure Australians are job-ready in sectors that are traditionally reliant on skilled foreign workers.
It has been far too long since many Australians have received a decent pay rise.
Wage growth remains subdued, and that is about as positive as you could describe it.
We remain mired at around the two per cent annual growth mark, picking up only marginally in March quarter with 0.5 per cent growth compared to 0.4 per cent in December.
Private wage growth was 1.8 per cent through the year, which remains at a record low.
While that resulted in a few dramatic headlines last week, it was wholly unsurprising. We have maintained conservative forecasts on wage growth and our prediction for two per cent growth in the current financial year remains stubbornly on track.
In the near term, our wage growth predictions are broadly in line with consensus, and by 2018-19 we are now forecasting a return to three per cent growth, having slightly eased back our forecast since the mid-year economic update.
There are three things that will propel us towards that long-awaited return to trend growth.
Firstly, we are yet to see the full impact of the first stage of the $24 billion worth of tax cuts we gave small to medium size businesses in March. Once that starts to flush through the system, we anticipate some upward pressure on wages across the 3.2 million businesses that are now paying lower tax.
Secondly, as RBA Governor Phil Lowe described recently, we are around 90 per cent of the way through the downturn from the peak in the mining investment boom that was a substantial anchor on the economy, particularly on the ground in Western Australia.
In that State alone, wage growth is running at a frustrating 1.2 per cent. Better days are just around the corner.
And thirdly, we are building Australia by delivering $75 billion infrastructure investment over 10 years. If we make the right choices on key infrastructure, we can deliver an injection of productivity into the economy, ensuring job creation remains durable into the future, and wage growth gets a shot in the arm.
This is a productivity-enhancing budget.
We are building two mammoth infrastructure projects - the Western Sydney Airport and the Melbourne to Brisbane Inland Rail - the second of which will have significant benefits not just for Melbourne and Brisbane, but every region that is connected along the way.
We are upgrading the Bruce Highway in Queensland. We are spending $1 billion on road and rail projects in Victoria, including a $500 million regional rail package with $100 million to duplicate the Geelong-Waurn Ponds line, and $30 million to get planning done for the Melbourne Airport Rail Link.
And we will establish a $10 billion National Rail Program that will stand ready to invest in proven major rail projects throughout the country.
Planes, Trains and Automobiles, if you will.
And that’s just to name a few headline acts.
Our infrastructure plan is unprecedented in scale, benefits every State, and is set to deliver a boom in productivity across major regions that could lead to prolonged economic growth and a surge in employment.
Under Labor, infrastructure spending averaged at $6 billion per year. Under the Turnbull Government’s plan, average infrastructure investment lifts to $7.5 billion a year.
This plan is practical in its approach, and wise in its judgment.
In an era of subdued revenue growth, governments can no longer afford to just kick the money out the door.
Such a hands-off approach has left governments either missing out on valuable investment returns when projects succeed, or watching from a distance when projects fail to deliver on their potential.
Our new approach to infrastructure will be to stay on the job and finish the job.
We will, where sensible, remain involved as an active participant, whether that is as sole investor and owner, or partner and facilitator. And this can already be seen in our approach to delivering the new airport in Western Sydney.
It is important to invest in infrastructure, but it is just as important to make the right choice on projects, to ensure we maximize the economic benefits these projects deliver.
The establishment of our new Infrastructure and Projects Financing Agency will assist the Government to make and implement the right choices on infrastructure, in discussion with key groups such as Infrastructure Australia.
Importantly, the agency will offer insights to the Government on the best way to participate in major projects, ensuring we use taxpayers’ money in the smartest way possible.
Making the right choices on infrastructure means our cities and regions will reap the benefits through greater connectivity, less congestion, and more importantly, economic growth that creates more and better paid jobs.
Conclusion
The choices we have made in the Budget to grow our economy have been well received by the Australian people
As the Prime Minister and I have travelled since the Budget, it is a similar refrain we hear from people who have had a chance to digest the budget in its entirety.
Whether they be small business owners thrilled with the continuation of the instant asset write-off, parents of disabled children who now have certainty over the NDIS, first-home buyers who we are helping to save for a deposit or commuters stuck in traffic north of Brisbane, they understand that the decisions we have made in this budget are the right choices to secure the better day ahead.
It now remains for the Parliament to put the politics aside, meet us in the middle to legislate this plan and get on with the job.