Thanks, it's great to be home after the long budget haul in Canberra.
It's fitting that this year we're again starting the post-budget conversation at an organization like CEDA – which is squarely focused on the long term challenges and big picture policy ideas that shape our nation. It's also great to kick off the discussion in Queensland, a state that not only embodies the resilience of our country, but epitomises the big transition underway in our national economy. I've been talking a lot recently about this transition – with the resources boom shifting into a new gear and the rest of the economy moving towards non-mining sources of growth. While the resources sector is set to continue playing a huge role in Queensland for years to come, we also know that this state of ours is no one-trick pony which relies on one industry or one commodity. There are vast and varied opportunities right on Queensland's doorstep, in the short term as the economy rebalances, but also in the long term. Queensland is in a prime position to capture the possibilities of the Asian Century as the global economy gravitates further towards our region. But in order to grasp these opportunities successfully, we must be prepared, and sprint to keep up with the rapid changes around us.
The Budget I handed down on Tuesday night is all about setting our country up for the decades ahead. It's a Budget that keeps our economy strong by supporting jobs and growth and continues building our fiscal strength for the long term. It's a Budget that says we can always be better tomorrow than we are today if we commit to making the investments we need for the future.
Over the next week I'll be speaking in a bit more detail about how this Budget is a long-term plan for Australia to build:
- A stronger economy – with transformational economic investments to boost our productivity growth performance;
- A smarter nation – by making historic investments in our children and schools in order to win the education race; and
- A fairer society – through the historic creation of DisabilityCare, to ensure that Australians with a significant and permanent disability are no longer left behind.
Today I'll focus on the first of these themes – the balanced approach we're taking to make our economy stronger and further advance our rising position on the word's economic league tables. I'll spend a bit of time talking about how we're improving the strength of our fiscal position in a way that doesn't compromise our economy in the short term, or starve the productive base of the economy over time. But first I want to give you a bit of a sense of the economic and revenue context in which we framed this year's Budget. As a nation, we've been through some huge economic adjustments in recent years, and on the whole I think we've managed them pretty well.
If you'd told any economist 10 years ago we'd go through a once-in-a-century terms of trade and business investment boom and come out with contained inflation and record low interest rates, they'd have laughed. If you told them we'd also get hit with the worst global crisis in three generations and come out the other side with an economy over 13% bigger and 960,000 more jobs, they would have shown you the door. So I think we can all be proud of the success we've had in navigating some of the most extraordinary years in the economic history books. Our strong performance as a nation should give us the confidence to take on the challenges we've got in front of us.
As a nation, we've got two big transitions we've got ahead of us. Here in Queensland, we'll not only be right at the coalface as the mining investment boom matures and the next phase ramps up, but lower rates will also start to flow through to better activity in our property sector. Of course, big transitions like these are almost never seamless and it's likely that we'll feel a few bumps along the way. You've all seen this up close here in Queensland where we've been on the front line of the export economy with profits taking a beating from the doggedly high Australian dollar. Obviously the high dollar has made life tough for a lot of businesses.
But it's also given many businesses more incentive to adjust, boost productivity and tap into new emerging markets like those in our region. So I think the challenge of the high dollar really comes down to this: while we can't directly control it, we can control our response to it. That's not just the challenge for business, but also for the Government. The high dollar has created competing tensions for the nation's budget. On the one hand, the sustained high dollar has hit company profits hard and that's made a big contribution to the dramatic fall in our revenues. On the other hand, the high dollar further underscores the need to make room for productivity enhancing investments which will help our industries thrive in the face of the new pressures of the Asian Century. Now, I know some commentators have made the point that the dollar has remained broadly stable since our last budget update, and have questioned how it can suddenly savage our revenue base. But the fact that the dollar has remained high is exactly the point – it's been unusually high given other changes in our economy, like falling commodity prices and record low interest rates. As a result, the dollar is having a more pronounced impact on prices, profits and government revenues than previously expected. There's no doubt that export and import-competing industries like manufacturing and retail have felt the full brunt of this impact. With the dollar putting downward pressure on prices, these sectors have been forced to absorb increases in costs that they might otherwise have been able to pass on. Over the past year, we've seen this contribute to a 16 per cent decline in manufacturing profits, and retail profits growing at a very subdued 1.9 per cent – well below their 10-year average of 6.5 per cent. When you consider that manufacturing and retail are the fourth and sixth largest taxpayers by sector, it's not hard to see why the hit to profits they've taken has had such a huge impact on government revenues.
The high dollar is also impacting on the economy through a number of indirect channels. For example, trade-exposed firms are choosing to buy less or pay less to suppliers and service provides, which in turn is affecting prices and profitability along the supply chain and compounding the revenue hit.
In response to the second largest revenue write-down since the Great Depression, we made some defining choices. We made the choice to support jobs and growth by bringing the budget back to surplus on a more gradual timeframe. And we made the choice to keep our public finances strong through $43 billion of savings, for a total of $180 billion of savings over six years. We made the choice to explicitly identify savings to fully fund our priority investments in schools reform and DisabilityCare over the next decade and beyond – unprecedented in our nation's history. The structural savings we've put in place will improve the budget bottom line by over $300 billion by the end of the decade. Long term measures like protecting the corporate tax base from erosion and loopholes, improving the sustainability of family payments, and better targeting of health expenses and R&D incentives. These savings not only help fund the investments we need, but they improve our medium-term fiscal sustainability. Charting a clear and credible path to surplus and reducing our already low debt levels over time are essential elements of improving fiscal sustainability, consistent with our fiscal strategy. The longer term savings in my sixth Budget will continue to improve our structural budget position – helping to undo the damage of the unsustainable measures introduced before we came to office. Our structural savings have also made room for our investments in schools and the creation of DisabilityCare. These are policies that help boost productivity and participation, which contribute to fiscal sustainability over the long term.
Of course, fiscal policy is not an end in itself – a strong budget means having the capacity to support the economy and invest for the future. And that's exactly what this Budget is about. In fact, it's the thread that runs through each of my six Budgets. It's something we've only had the economic strength to do because we've got the big calls right over the last five years. In this Budget, we've continued our historic investment in productive infrastructure, including critical investments right here in Queensland. Investments like $715 million to help fund the Cross River Rail project right here in Brisbane, identified by Infrastructure Australia as a 'priority' project of national significance. This project will almost double the capacity of Brisbane's suburban rail network, allowing it to carry over 17,000 extra passengers during the morning peak hours. Our contribution will be matched dollar-for-dollar by the Queensland Government, with further long term funding to be provided to support 'availability payments', in order to attract funding from the private sector. Together with our $4.1 billion, 10 year investment to upgrade the Bruce Highway, this will take our investment in Queensland's transport infrastructure to a record $16.6 billion. And it takes our total investment in road, rail and ports across the nation to $60 billion since we came to office.
I'm really proud of the Budget I handed down on Tuesday night because it gets the balance right between supporting jobs and growth, investing for the future, and improving fiscal sustainability. What this Budget demonstrates is that you don't have to slash and burn to keep your budget strong over time – something three global agencies confirmed on Tuesday night by reaffirming our gold-plated AAA rating. We've seen all too starkly the devastating consequences of choosing the path of mindless austerity – not just in Europe, but sadly right here in Queensland. Campbell Newman's slash and burn policy is as economically reckless as it is socially heartless. Only Mr Newman would think that sacking 14,000 Queenslanders could be a good thing for our state's economy, not to mention the profound human costs from axing frontline health and education services. As a proud Queenslander, I want to see our great state maintain its place as a major engine room of our national economy, but Mr Newman's savage cuts will only hurt Queensland's economy.
And what we saw in Canberra last night from Mr Abbott in his budget reply speech was a sneak peak of the slash and burn approach we could expect from an Abbott Government. Mr Abbott left a lot of questions unanswered. But what we know for sure is that it's working Australians who'll pay the price of an Abbott Government. Last night, Mr Abbott also created a $26 billion hole in his budget. And he gave a sneak peak of the kind of cuts he is going to inflict to fill this gaping hole. He will cut to the bone assistance going to working families – with $1,230 bring ripped from the pockets of the average family trying to raise two kids. He will cut to the bone funding to our schools – with half a million dollars being ripped from each school on average. He'll also hit every single Australian with a superannuation account – that's each and every person with a job. The industry's peak body – the Financial Services Council – said this morning that Mr Abbott's "short-term decision to defer 12 per cent superannuation will reduce retirement savings by $46 billion over the next 10 years." These changes will leave a 30 year old on an average wage $19,000 worse off on retirement. And he has a secret plan to jack up the GST – ripping more money from those that most need it. He will use is Commission of Cuts to cut to the bone when it comes to health and education service the Australia people depend on. These savage cuts would take an axe to our economy – putting Australian growth and jobs at risk.
This is the choice that faces the nation. We can yield to the atmosphere of panic whipped up by the fiscal fearmongers and drive our economy into the ground by cutting too hard, too deep, too early. Or we can chart a responsible pathway to surplus, while we continue making the investments that will help boost productivity, participation and economic growth for the long term. I'm proud of everything we've done over the last five years – and now in this Budget – to make our economy and our budget stronger. I'm proud that we've stayed the course on supporting jobs and growth. And I'm proud that we've done all of this in some of the most unprecedented economic circumstances in our history.
Thank you, and I look forward to taking your questions.