I'll begin by thanking Joe Khatter [President, Australian Lebanese Chamber of Commerce], not just for inviting me along today but also for the leadership he provides to the business community.
Can I also acknowledge here today Lebanon's Ambassador to Australia, Dr Jean Daniel and my parliamentary colleagues Maxine McKew, Laurie Ferguson, Daryl Melham and Julie Owens, as well as your state representatives.
It's a privilege to speak to a distinguished group like this and a group of this size – with key business and community leaders here from Sydney and across the country. I know how hard you work to build social and economic links between Australia and Lebanon, building on the strong people-to-people and community connections we've had over many years.
Right at the outset I want to say I'm optimistic about the future of our economy and the future of our country. We have the ideal opportunity in the Asian Century to really maximise the opportunities that will flow from growth in our region.
The last couple of months have been an important time for economic reform in Australia. We've been reminded that the big reforms are always hard-fought. But when we come to the table with goodwill and the national interest at heart, we can achieve very important reforms for the country.
We have demonstrated what we can do when we build consensus in our community. Our new Prime Minister certainly understands that better than anyone and has not wasted any time putting into effect this approach to deliver a great outcome for Australia. Our mining tax reform is real reform – the biggest reform to mining tax arrangements for 25 years.
I will talk a bit later about why that reform is so critical to the prosperity of our mining sector and the broader economy. But I want to start by sketching out how I see our country's economic future playing out and to do that I need to give you some context around developments in the global economy and how Australia has been performing.
A Resilient Australian Economy
As you would know, the Australian economy emerged from the global downturn in a stronger position than any other advanced economy.
While just about every advanced economy sank into deep recession, we pulled together to keep our heads above water. In fact we grew by 1.3 per cent last year, the best performance out of any advanced economy.
While most other nations were rapidly shedding jobs, we were creating them – some 250,000 since the crisis began.
Last week I returned from the G20 meeting in Toronto. What this meeting really reinforced for everyone was that Europe faces a long, slow grind towards recovery – with near double-digit unemployment and a big deleveraging task still ahead. The reality of their situation is pretty bleak – but I think they are now really starting to understand the magnitude of their challenges.
Global financial markets have been telling us for months how uncertain they think the global outlook is – and they remain volatile. Of course, we are closely monitoring these enduring downside risks. We know Australia is not immune to turbulence on global markets.
But I'm immensely proud of the fact that we will return to surplus three years early – while many of our peers still face a daunting level of debt.
At the G20, all advanced economies agreed and committed to – at least – halve their deficits by 2013. Some have begun to reverse the extraordinary fiscal, monetary and financial interventions adopted during the crisis. For others, who are grappling with mammoth deficits, withdrawal will be a painful process and involve some very difficult decisions.
But Toronto showed Australia's recovery is leagues ahead of nearly all advanced economies. While the G20 goal for advanced economies is to halve deficits by 2013, we are so far ahead of the game we are coming back to surplus in 2013. That's terribly important when you consider the uncertainty in the international economic environment.
We were only able to achieve this because of timely fiscal stimulus which protected the Australian economy from the worst of the financial crisis. And of course because of the resilience of businesses like those represented around this room, and the workers you kept on during tough times.
We kept the economy growing. Which means we're now standing on a strong foundation – and not wading through the rubble of recession and double-digit unemployment. I doubt very much if we would now be delivering an historic tax reform agreement if we had failed to act during the crisis and seen unemployment rising to the levels experienced overseas.
I want to take this opportunity to thank you for your remarkable efforts throughout this tough time.
I'd like to make the point that the global recovery is not following an even path – we're still seeing economies running at different speeds. But as Europe faces a slow recovery, Australia is fortunate to be sitting on the edge of the fastest growing region in the world.
In contrast to the sluggishness we've seen in some parts of the world, Asian economies have been growing at a rapid pace. Asian economies expanded by 2.4 per cent in the first three months of this year and by 9.2 per cent over the past year. And we will continue to benefit from Asia's rise as an engine of growth.
But of course we need to be mindful that our own recovery is running at two speeds just like the global recovery, with different sectors growing at different speeds. The return of boom conditions in the mining sector makes things tougher for other industries like manufacturing, construction and tourism. They find it much harder to find workers and capital, and the stronger dollar makes them less competitive in their respective global markets.
Turning to Growth
So at home, our focus is shifting from supporting the economy to achieving broad-based growth and setting ourselves up for the future. The principal goal is to take the brakes off the slower lanes without restraining the ability of the mining sector to accelerate in the faster lanes.
Now, because we outperformed expectations, we're dealing with re-emerging capacity constraints earlier than other nations with weaker economies.
A key challenge is how we go about building additional capacity as the economy progressively returns to more normal levels of capacity; limiting the re-emergence of the bottlenecks that held the pre‑crisis economy back. These bottlenecks are a hand brake on growth. They add to inflationary pressures and constrain export growth.
In these conditions it's our responsibility to do what we can to broaden and strengthen our economy so that all sectors can grow sustainably. That's why – in the Budget – we continued our commitment to building the infrastructure we need to maximise our future prosperity.
Along with other infrastructure initiatives which I will touch on in a moment, I specifically wanted to mention the $70 million we allocated to the development of an intermodal terminal precinct at Moorebank here in Sydney. The terminal will address the critical shortage of intermodal capacity in Sydney and complement our substantial investments in rail.
It will provide a much needed integrated transport solution for the movement of freight to and within the Sydney basin which will boost national productivity, reduce business costs, and relieve bottlenecks and urban congestion. To give you an idea of what this means in practical terms, once fully operational, this project is expected to take 1 million trucks off Sydney's roads each year.
This is only one of many examples which highlights that no matter how well we've done relative to other countries, we still have much to do.
For example you'll all be aware that the Gillard Government is rolling out the single largest nation building infrastructure project in Australian history – the National Broadband Network. The NBN will revolutionise the way Australia does business – providing superfast internet for large and small businesses alike to connect to customers and suppliers both at home and in overseas markets.
The NBN is vital to boosting our productivity growth and helping to build a stronger and more internationally competitive economy. And many of you will have heard that the Government is making significant progress in the delivery of the NBN – with a breakthrough agreement recently reached between Telstra and the NBN Co which will pave the way for a faster, cheaper, more efficient rollout, with faster customer take-up.
It's just another demonstration of our constructive dialogue with Australian business – and our focus on building Australia through consensus.
Tax Reform a Key Ingredient
What these reforms demonstrate is that this Government is committed to doing the hard yards of economic reform. We believe that one of the reasons our economy has outperformed other advanced economies is that far-sighted governments over 25 years haven't shirked their responsibility to build a more resilient Australian economy.
So we should never lose sight of the magnitude of getting mining companies to sign up to an agreement which will see $10.5 billion returned to the Australian community.
We are going to experience elevated prices for our minerals for some time to come, and all Australians should get a better return from their resources. But what was just as important in our negotiations with the mining industry was maintaining Australia's attractiveness as an investment target and building a stronger, broader economy.
The MRRT will deliver that, and will still allow us to deliver a suite of fundamental reforms – helping so many of the businesses you represent. Particularly small businesses, which played such a huge role in keeping our economy ticking over in its darkest hour, and which continue to make a massive contribution to jobs.
I don't need to tell the people in this room that many small businesses still have it tough. That's why we're providing further tax relief to Australia's 2.4 million small businesses through a $5,000 instant write-off of assets – reducing compliance costs and saving them time. This allowance will immediately increase small businesses' cash flows, helping them to pay their creditors on time and reinvest for future growth.
We want to help Australia's small businesses get on with what they do best, so they can spend more time with their customers and their families. In the last week we've also announced the commencement of two initiatives that will further reduce the burden on small businesses:
- Small Business Super Clearing House – A free service that will enable small businesses to discharge their superannuation guarantee obligations with one simple electronic payment transaction.
- Standard Business Reporting – This will provide Australian businesses with a quicker, easier and simpler way to lodge reports with government agencies, such as the ATO and ASIC.
These services will deliver significant benefits to small businesses by reducing red tape, and move Australia one step closer to becoming a seamless national economy.
Of course our reforms also serve the vital purpose of building economic capacity. This is crucial if we are to grow our economy sustainably over time, without running up against the capacity constraints that put pressure on inflation and interest rates during mining boom mark I.
Some of the proceeds of the MRRT will go into supporting the resources sector, which is why we announced the state infrastructure fund worth a massive $6 billion over ten years. The $6 billion Regional Infrastructure Fund will start flowing in this financial year – and will start building export capacity now. The fund will be distributed in a way which recognises that resource-rich regions face large associated infrastructure demands.
Proceeds will also be used to bank some of the benefits of the mining boom to meet the challenges presented by an ageing population. You'll be aware we're stepping up the superannuation guarantee to 12 per cent over years ahead. Our tax package will deliver that. We're also increasing super concessions for low income earners and allowing increased contribution caps for over 50s so they can catch up. And we've announced a 50 per cent discount on interest income in the Budget.
The MRRT will also be used to reduce the company rate to 29 per cent in 2013-14, which will benefit some 770,000 companies. This reform will improve our global competitiveness across all industries, create new jobs and grow the economy. It stands in contrast to our political opponents who are proposing an increase in the company tax rate, lifting it to 31.7 per cent for large companies.
Of course, our commitment to reform continues in other critical areas as well, and I want to touch on those as well.
Reforms for Australia's Future
We're keenly aware of how housing affordability affects families, which is why the Government is serious about housing reform.
As Sydney-siders understand all too well, young families have been crying our for affordable housing for some time now. Australian house prices have grown strongly over the past 15 years, having more than tripled since 1995. This price growth has not been limited to our capital cities, like here in Sydney. Many regional and rural areas have also seen big rises.
Many of you may have benefitted from the strong growth in house prices, but you may also be seeing your children struggle to break into the market.
Much of the Government's efforts in this regard have been led by Jenny Macklin and especially the Housing Minister, Tanya Plibersek. They have helped introduce some big measures in this area:
- $6.2 billion under the national affordable housing agreement with the states to deliver affordable housing to the less well-off;
- $5.2 billion of stimulus money to build more than 19,300 homes and maintain the existing public housing stock;
- The National Rental Affordability Scheme to encourage institutional investors to deliver low-cost rental housing in our big cities;
- $512 million under the Housing Affordability Fund to drive reform among state and local governments' planning and zoning processes and infrastructure delivery;
- And more incentives for young people to save for their first home through First Home Saver Accounts.
I was also pleased to see the NSW Government recently announcing much-needed reforms to its planning processes and reductions in stamp duties.
These are all important steps and they will all contribute to improving the functioning of the Australian housing market and over time, the supply of low-cost housing.
Conclusion
Let me finish by saying that I'm optimistic about the future of the economy, but that optimism comes with conditions.
With our economic recovery underway, our abundant resource endowments and our links to the emerging Asian region, we have good reason to be hopeful for the future. But while the outlook for us is good, there is still a lot of work to be done. We have to work together to get the settings right and make the most of our position of strength – and translate it to balanced, sustainable growth.
And when the Australian people decide this year who's qualified to lead this – they'll see this Government already has runs on the board. We kept the economy growing through the global recession – leaving us with a balance sheet and unemployment rate that is the envy of the developed world. And we're already doing the hard yards on tough reforms like tax, while we continue to invest in our capacity and do our best to ease cost of living pressures.
I'm confident that organisations like yours will help prosecute the argument that we need new and better infrastructure, a greater pool of national savings, and tax relief for businesses that employ so many Australians.
I'll leave it at that – thanks again for having me, and I look forward to hearing some of your views.