It's always good to get home to Australia's greatest city. Especially having just flown this week from Canberra, to Melbourne, to Perth, to Adelaide, and to Sydney. So believe me when I say: this time it's very, very, very good to be home! In four days I've flown about 8,000 kilometres and will end up giving nine speeches and a dozen interviews.
As I've flown from one part of the country to another, my belief in Australia's capacity to capitalise on the opportunities and meet our challenges has been reinforced, provided we get the economic foundations right.
Now, this week is what the more cynical journalists call the big Budget 'sell'. But I see it differently – as an opportunity to outline for you, some of the major wealth creators of the Australian economy, the Rudd Government's plans to begin genuinely investing in the more modern economy that we need for the future.
And being back at home after this week does provide me with a good opportunity to reflect on the Budget. In particular, it gives me pause to think about how we ultimately want this first blueprint to be judged. And when the people of Australia look back on it, I encourage them to judge the Government on three “Key Performance Indicators”:
First KPI: Did it succeed in restoring economic responsibility after years of reckless spending? Did it help rein in inflation?
Second KPI: Did we keep our promises to the Australian people?
Third KPI: Did we pass the foresight test which our predecessors mostly, unfortunately, failed? Did we prepare the country for the future? Did we capitalise on, not squander, the proceeds of the boom?
This is the perfect place, and the perfect time, to consider these questions.
When I look at Queensland I see the economic future of the nation. I see the Sunbelt stretch along our coasts – and the communities which will play such an important part in the national economy.
I see many thousands of people seeking a new lifestyle, without letting go of their careers or their aspirations for their kids.
I see rejuvenated mining towns and regional centres. I see communities of the aged. I see decent universities, hospitals, schools and TAFEs, that can still be so much better.
I see the pressure growth places on infrastructure. I see what we need to do to build better roads and ports and railways and faster broadband.
I see a chance to create new, high-skill jobs. I see the potential for a modern economy, with world's best education and first class infrastructure at its core.
I see an opportunity to invest the proceeds of an extraordinary boom, in the future of our kids.
These are truly national aspirations. But they're highlighted in Queensland, where so many of our national challenges and opportunities, seem starker.
The effect of the mining boom and rapid population growth puts particular pressure on infrastructure of all types. The skills shortage is keenly felt. And inflation is running at 4.8 per cent in Brisbane, compared to 4.2 per cent nationally.
The population growth Queensland has experienced has been simply phenomenal. The national population growth rate over the year to September 2007 was 1.5 per cent, whereas here it was 2.2 per cent.
And Queensland has enjoyed the best of the mining and construction boom – growth has been strong and unemployment is low. The unemployment rate – 3.7 per cent – is well below the national average of 4.2 per cent.
The challenge in Queensland now, and nationally, is to make sure our success continues – to front up to the challenges of high inflation, and capitalise on the opportunities of the boom.
That's what the Budget KPIs are all about, and I'll deal with each of them in a moment.
The Budget Backdrop
But first, a bit of national economic context. This Budget has certainly been framed against a challenging macroeconomic backdrop. The Australian economy is being buffeted by powerful countervailing forces – high inflation at home and turbulence abroad – pushing and pulling our economy in different directions.
Our economy is about to enter its 18th year of expansion, built on the structural economic reforms of the past quarter century, the strength of your businesses, and the efforts of working Australians.
In the March quarter underlying inflation reached 4.2 per cent over the year – the highest rate in more than 16 years. Interest rates have risen eight times in three years. That's why the Government made the fight against inflation a key priority.
Tighter credit markets and a weaker global outlook are expected to result in economic growth moderating here, to 2¾ per cent in 2008-09.
Ongoing financial market turbulence, or a sharper or longer than expected slowdown in the U.S. economy, could have a significant negative effect on the Australian economy. But counteracting this, robust growth in emerging economies is expected to drive Australia's terms of trade to new highs. These improvements to the terms of trade will further boost income and add to already heightened price pressures.
In the longer term, there are other critical challenges that we need to begin preparing for today.
Climate change will bring significant economic and social consequences – and addressing it will permanently transform the Australian and international economies.
As the population inevitably ages and the number of people in the workforce falls, economic growth is likely to slow and budgetary pressures increase.
These challenges, and the countervailing forces confronting us, underscore the importance of a careful, steady Budget that invests in the future and helps tackle inflation.
It also points to a common solution. That is, the need to modernise our economy; to make it strong enough to withstand the countervailing global pressures that confront it, and deliver strong, sustainable, low-inflationary growth here and across the nation.
KPI #1: Responsible Spending
Now, you can't modernise the economy without solid foundations. That's why the first KPI we apply to ourselves as a Government is the test of iron fiscal discipline, and economic responsibility.
It is also a benchmark we ask to be judged by.
We ran as economic conservatives in the election, and the Budget demonstrates we are governing as economic conservatives.
Our commitment to economic responsibility is driven by an understanding that we will only be able to do all the good for society we aim to if our economic foundation is strong and our macroeconomy stable.
The first Rudd Budget is a testimony to economic conservatism – and what it means in practice. The Budget delivers a surplus of $21.7 billion – or 1.8 per cent of GDP. The last Budget of the previous government forecast a surplus of just 1.2 per cent of GDP. This strong surplus is built on substantial savings – which more than offset our new spending priorities.
Whereas the previous government typically spent its way through all upward revenue revisions, we took the responsible decision to bank them. It's been a long, long time since a federal Budget has contained that kind of discipline.
The flabby fiscal policy of the past has been to boot camp.
And we are very proud of the results: a leaner, stronger economic blueprint for the nation.
And the search for savings will continue into the future – with the second stage of our review of government expenditure to be undertaken over the remainder of this year.
For us, economic conservatism is a day-to-day reality – not a fleeting catch phrase.
We understand the budgets are about priorities, and often about tough decisions. That's why we appreciate what our opponents don't: that you can't believe in lower taxes and at the same time oppose means testing welfare for millionaires. You can't take the easy way out when it comes to these big calls.
We're heartened by the positive response from the financial markets. Next year's Budget, and those that follow, will also be subject to the same fiscal rigour as this first one.
KPI #2: Keeping Promises
Responsible economic management has also given us scope to deliver our election commitments – this is the second KPI.
It's been a long time since a new government could say they looked the Australian people in the eye and did what they said they would do. We have done just that. And we're proud we did.
We promised an Education Revolution, and we have begun delivering one – $5.9 billion across the whole system, from early childhood education and care to universities.
To help address current and future skills shortages, this includes $2.0 billion for vocational education and training, primarily to deliver up to 630,000 new training places over five years.
Plus the Budget invests $1.8 billion for higher education, including a new investment of $500 million to help universities upgrade and maintain teaching, research and other student facilities.
During the election, we also promised to face up to the challenge of climate change – and we have done that too. We recognise that the costs of inaction on climate change far outweigh the costs of action. That's why the Government will provide $2.3 billion over five years from 2007‑08 to make sure we reduce greenhouse gas emissions and adapt to unavoidable climate change.
Innovative technologies will also be an important part of the transition to a low-emissions future. The Budget invests around $880 million in low-emissions technology, including through the Renewable Energy Fund, the National Clean Coal Fund, the Energy Innovation Fund and the Green Car Innovation Fund, and we'll implement a 20 per cent by 2020 Renewable Energy Target.
We also promised the Australian people we would work with the States to fix the health and hospital system in this country – we're doing that too. Like the Australian people, we understand that a strong public hospital system is central to ensuring that all Australians have access to high quality and affordable health care.
The Government's $3.2 billion National Health and Hospitals Reform Plan and other initiatives in the Budget will ensure government spending on health reflects the needs of the broader Australian community. This includes investing in the public hospital system, providing $1 billion to relieve immediate pressure in the system, and a further $600 million to slash elective surgery waiting lists.
The Budget also provides for better patient care, through the delivery of GP Super Clinics across the country, and investments in better dental services, including by creating the James Cook University Dental School in Cairns.
Our commitment to deliver better hospital and health services was bound up with our commitment to end the blame game between the Commonwealth and the States.
In just six months, we have already made significant progress on this front. Progress which will lead to greater cooperation and innovation across areas which are critical to the functioning of our economy: human capital formation, resource management, infrastructure delivery, and business regulation.
The challenges that we face as a nation require a united response. We recognised that in Opposition and we are taking the steps to ensure that happens now that we are in government – just like we said we would.
KPI #3: Investment in the Future
So we are governing as economic conservatives, and we have ticked off each of our promises. But for a new Labor Government that is not enough.
The most important judgement of this Government will be made by future generations of Australians – those who reflect on today and ask whether we did enough to sustain prosperity beyond today's mining boom.
This is the third KPI.
Last Tuesday's Budget marked a shift in Australian policy-making – away from the myopia of the last decade, and towards a new era of foresight and nation building.
As you know, we earmarked more than $40 billion in financial resources to help remake Australia over the coming decade. $40 billion in critical, essential, overdue nation building. This will allow us to embark on a massive modernisation of the Australian economy.
The $40 billion from the 2007-08 and 2008-09 surpluses will be set aside to establish:
- A $10 billion Health and Hospitals Fund – to invest in health and hospital infrastructure;
- An $11 billion Education Investment Fund – to help build a better university and higher education system; and
- A $20 billion Building Australia Fund – to undertake unprecedented and sorely needed investments in critical economic infrastructure, including roads, rail, ports and telecommunications.
The Australian economy is crying out for infrastructure investment, particularly here in Queensland. And that is why the Building Australia Fund is particularly important to the Sunshine State. Investment in Queensland infrastructure needs to start as soon as possible.
To make sure that happens, the Budget also provides over $20 million in 2007-08 to fund feasibility studies on two high-priority projects in Queensland which may be funded from the Building Australia Fund: the upgrade of key sections of the Bruce Highway and the Gateway Motorway missing links.
Which brings me to how the funds will be managed and how proceeds will be invested.
To maximise national benefits, all spending from the funds will be subject to rigorous evaluation criteria. This will ensure only the best projects go ahead and that funds deliver value-for-money for taxpayers.
We will use the funds to finance both Commonwealth and State capital projects.
For State projects, all funding will be channelled through the newly created COAG Reform Fund, which will also be a vehicle for National Partnership Payments made by the Commonwealth to the States.
We must complement, not crowd out, the private sector – that's why we will make sure any investments we make will supplement not substitute those made by the state and private sectors.
Through Infrastructure Australia, we want to work with companies like yours to build the infrastructure Australia needs.
And we want to work with you in another key reform area – tax.
In building the best possible platform for future economic growth, the Budget also set in train the most far reaching review of our taxation system in at least the last 50 years.
The tax system isn't just a mechanism through which the Government raises revenue. It is also a critical component of our nation's economic architecture.
The objective of the review is to build a modern tax system for the 21st Century. A tax system that will give Australian business the platform to not only flourish domestically, but also on the global stage. A tax system that will reward the efforts of your employees, and provide them with the incentives to enhance their skills and productivity. A tax system that takes into account future economic and environmental trends and puts in place the most efficient system to help you respond to it. An integrated tax system, taking into account international trends for lower marginal rates of tax applied across a broader base.
For the tax review to work, we need businesses like yours to contribute. Only then can we build a tax system that plays its proper role in the thriving, growing, seamless national economy of the future.
Conclusion
So that's a tour of the Budget measured against the three Key Performance Indicators I asked us to be judged against a moment ago.
My colleagues and I are confident we met each of the KPIs and delivered the Budget the nation now needs. In doing so, we made sure we focussed on long term prosperity, not short term popularity. We looked to the next decade, not the next opinion poll.
And in many ways, what guided us was perhaps the most KPI of all – a very simple measure that our kids will judge us by, and it is this: Did we do our bit in 2008-09 to invest in the modern economy of the future, and hand them a modern growing economy, new jobs, and low inflation?
Can we look them in the eye and tell them we did the right thing by their generation when we were presented with the proceeds of the mining boom? I'm confident we can.
But there's so much more to do. This is just one Budget in a series of Budgets.
Our challenges and opportunities require constant attention. And we'll never rest until we build for coming generations the modern, dynamic economy their future demands.
Thank you.