Thanks for having me back. I won't repeat today all the sombre numbers, the challenging circumstances, which I spelled out last night.
You well know that over the last six months the global economy abruptly fell into the worst slump since the Great Depression.
You well know that this global slump is not over.
You well know that after 17 years of prosperity Australia collided with this global downturn last year, and we are not yet through it.
Already the number of our fellow Australians looking for a job has increased by more than 175,000, and – despite the most recent employment statistics – I fear the ranks of the unemployed will continue to increase for some time to come.
You now know that within less than a year the Commonwealth Budget has deteriorated from an expected surplus to a considerable expected deficit.
You know now that the extent of Commonwealth revenue loss is likely to be so big and so persistent that the Budget will be in deficit for about six years, and Commonwealth debt will therefore continue to increase.
Those are the plain facts I laid out last night, and I make no attempt to mitigate or gloss or sugar coat them. They are difficult circumstances for all of us.
There are, however, three key messages I want to convey today: One, that we will recover from this crisis; two, that our early action has prevented it being worse; and three, that we will in fact emerge stronger when the crisis is over because of the nation building for recovery we're engaged in.
So let me take you through those in order.
As I said, while things are now very grim, we will certainly get through. We will certainly recover.
We will certainly regain the jobs we lose. We will certainly begin to grow strongly again. We will certainly be more prosperous again.
Before we come through more Australians will have lost their jobs. More will have found it harder to pay their mortgage.
More small businesses will have gone under. Many older employees will have to postpone retirement. It will be years before Australians are as well off as they were two years ago.
This Government has no higher priority than minimising unemployment and helping the jobless with training and income support. It has no higher priority than helping families hold on to their homes.
There will be sorrow and hardship, but we will come through.
We will get through not as winners and losers, but as Australians sharing our hardship. That is our commitment to Australians.
The second message I want to convey is that I have no doubt whatsoever things would be a lot worse if we had not promptly responded to the fierce intensification of the global crisis in September last year.
I can say now what I could not say then.
Had we not guaranteed Australian bank borrowing, our banks would have been unable to raise enough funds to lend to businesses and families.
Had we not allocated billions of dollars for urgent cash payments to households, consumer spending would have fallen off a cliff.
Had we not increased the First Home Owners Grant, housing lending would be weaker and approvals for new home construction would not have turned up in the way they now have.
So far only two-fifths of our economic stimulus program has been expended, but enough has already happened to affirm that those decisions in October last year and February this year – big and bold as they were, hotly contested by our political opponents as they were – were the right decisions at the right time.
Of all the many big decisions we have made in the last 18 months, they were the ones of which I am most proud.
We were not hesitant. We were not meagre. We acted promptly, decisively, and in a big enough way to make a difference.
We protected Australia as best we could against the brutality of the global recession.
The third message I want to convey today is that because of the measures we announced last night, because of the programs we have put in place over the last six months, because of our commitments, we will not only come through but we will come through as a stronger, more resilient, more productive, more environmentally sustainable and fairer country than we were two years ago.
We will come through in a way which allows us to affirm our place as one of the world's most successful societies, and most successful economies.
The Budget Context
One of the good things about this opportunity to speak with you the day after Budget, is I get to give you some of the context.
Now, it's a truism of public life that no one gets to choose the circumstances in which they govern.
In many ways it would have been nice to have fallen into office at the start of a long boom in which the hard preparatory work had been done by others, and to have had the benefit of rapidly increasing revenues pushed higher by a bullish world economy.
As we now know, history has devised a tougher challenge for me and my colleagues.
The reality is this country is facing two deficits: one we inherited from the previous government – the appalling deficit of skills and infrastructure.
The second has been forced upon us by the global recession. Addressing the second problem really depends on us fixing the first.
A year ago I brought down my first Budget.
It was a Budget designed to arrest the growth of Commonwealth spending, which the previous government increased without increasing the economy's capacities.
It was designed to build a buffer against the international turmoil that has since been unleashed.
It made a start on the big things we needed to achieve as a Government and as a nation: an Education Revolution; the low pollution economy; relief for working families.
It forecast a sizeable surplus. It forecast output would increase by 2¾ per cent.
It was a tough Budget, but not so tough it risked a sharper slowdown in growth than we thought necessary to keep the economy from expanding too quickly.
As I said here last year, we sought to get the balance right, and we sought to buffer ourselves against global uncertainty.
I think I was more blunt than I meant to be when I said while we were tough we weren't stupid – we weren't crazy enough to drive our economy into the wall by cutting too hard.
For four or five months after I spoke here the Australian economy evolved pretty much as we had expected. Growth slowed over the first three quarters of last year. The increase in inflation was arrested.
From the middle of September last year, however, it began to become increasingly apparent that global economic circumstances were rapidly deteriorating.
Then the slump hit.
Ladies and gentlemen, I want to take a moment to give you a sense of the behind-the-scenes action that unfolded in the days and weeks after Lehman Brothers collapsed.
Historians have written about the tension-filled atmosphere that engulfed the Scullin Government in the days after the Wall Street collapse of 1929.
That Government was swamped by events it could neither understand nor control.
Sitting around that Cabinet table in October and by teleconference from DC, we were determined that history would not repeat itself. We were determined to respond with immediacy, purpose and effect.
As you will recollect, back then, what had been threatening dark clouds on the international horizon had just broken into sheets of rain.
All the economic indicators had turned south.
In the United States, consumer confidence fell by 37 per cent and auto-sales collapsed in October. International credit markets virtually froze and global stock markets lost more than 30 per cent of their value.
The Reserve Bank had just cut interest rates by 100 basis points. And the Australian dollar was falling.
We knew these two things. One, growth would be hit in Australia, and hit hard. Two, the economy would need support from policy to cushion the plunge in private demand.
We needed to respond quickly.
But – knowing that policy operates with lags – could the policy support come quickly enough?
Here's the reality that lay before us as Ministers, and the policy advice from our officials:
Monetary policy – that is falling interest rates – would provide most of its support for the economy from about the second half of 2009.
A falling dollar would do likewise, by supporting exports.
Infrastructure spending – even relatively well-scoped projects – would also probably take six months or more to get boots on the ground.
So growth would have good support certainly in the second half of 2009. But that left eight long months in between.
Eight months in which – if we did nothing – confidence would plunge, jobs would be lost, and businesses would go to the wall.
And the question we had to face was how we bridged those eight months?
And if the crisis were to last longer – and it turns out it did – how to support growth over a longer timeframe?
We also knew that fiscal policy – that is, additional demand through government spending – was the only bridge across those eight long months, and it had to be made to work as much as possible throughout those months.
So we hit on two strategies. The best way to describe them is that we had to build a bridge across those eight months, starting on both the near and far shores at once.
First, we asked officials to accelerate our scoping work on infrastructure to see what projects could happen most quickly – to bring forward activity from later in 2009 to the first half. Building from the far shore, if you like.
And second, find a strategy to fill in the intervening months – filling the space between December 2008 – building from the near shore.
If this strategy worked, as the cash payments subsided, workers would already be out there around the country, building the new projects. The two halves of the bridge would meet in the middle.
In the December space, the only stimulus it was possible to get out fast enough was actually to write cheques and mail them to the people who were most likely to spend them.
And then get those people out into the shops as quickly as we could.
Hence the now famous advice to "go early, go hard, and go households".
It's why our first stimulus package in October aimed to put cash bonuses in the hands of the most cash-constrained people in the country.
Then we brought forward infrastructure spending in the December package, and also put in place the following measures targeted towards April 2009 onwards: The February Nation Building and Jobs Plan investments in insulation and school capital works, because we knew the planning time was minimal, and stimulus could get out quickly; and the second round of stimulus payments in that same plan.
And we also had other measures to cover the field: the First Home Owners Boost and the business investment allowances, for example.
And this has worked. As we stand here today, stimulus payments are going out and workers are out there in our schools and homes.
Something like 35,000 building sites will spring up. I'll tell you about one of them in a minute.
So, while you'll hear plenty of specific criticisms of individual measures, these of course miss the point.
What they fail to mention is the alternative.
Our critics could certainly decide they weren't going to try and cover the field – to bridge those eight months of, let's be blunt, a potentially deep valley for our economy.
But they also needed to be honest about the consequences of not acting.
Because the fact is, retail sales did hold up – relative to the months before December and especially relative to other countries – and house prices, consumer confidence and other indicators all arrested their slide.
Yes, our spending proposals had their critics. And in an ideal world they would not have been necessary.
But they are working.
And that's not conjecture anymore.
Now, of course, we must deal with the future.
The Budget papers released last night are pretty blunt about the economic realities that must be faced.
Growth a whole 2¾ percentage points lower this financial year than forecast at MYEFO; and an additional 300,000 people are expected to be unemployed by June 2010.
And crucially, a worse budget position, because once growth collapses, falling tax receipts make surpluses and balances more difficult to obtain.
The Budget and the Recovery
No modern Australian government has had to prepare a Budget under such testing economic times.
The biggest global recession since the Great Depression has hit our economy and government tax revenues hard.
A temporary budget deficit was simply inescapable, increased government borrowing likewise.
But I'm determined this will not be an excuse to abandon either the vision we have for Australia, or the program for which the Rudd Government was elected, or the goal of getting our Budget back into surplus.
Even in the hardest times, we remain true to the vision we were elected to pursue: advancing the Education Revolution, advancing the cause of working families, tackling social inclusion, tackling climate change.
As last night's Budget demonstrated, we want to pursue these goals in a way that sets our economy up for a strong recovery as fast as possible.
Massive road and rail projects, extensive port improvements and a lightning-fast broadband network will support the economy and protect jobs now, whilst also laying the foundations for the future recovery.
$22 billion of shovel-work and technological development that will get Australians working again or keep them in the jobs they love now.
Something I'm particularly proud of is the Budget's new higher education initiatives.
Despite the difficult economic times, the Government has not backed away from our Education Revolution or the vision outlined in the Bradley review of higher education.
The Budget takes up those challenges by uncapping the number of university places, providing incentives for universities to seek out talented kids from disadvantaged families, increasing funding for research and its commercialisation, innovation and more money for capital projects.
All up, it's a total investment of $5.3 billion, which will lay the basis for systemic change in the higher education sector and greater opportunities for more of our people.
Health care and hospitals will also be modernised and improved, with over $20 billion in extra funding, $3.2 billion to improve cancer care, develop new medical research infrastructure and modernise key public hospital facilities across Australia.
These projects and others announced last night will reach out across the whole nation; touching every community in a tangible way; providing their people with jobs and better health care, their businesses with more efficient transport and communications, their young people with diplomas and degrees, and their workers with new skills in cleaner industries that have a guaranteed future.
It will leave a permanent legacy of achievement that the current generation will be able to look back on with pride.
In past periods of adversity – like the Great Depression and the post-war reconstruction era – Australians carved roads through cliff faces [the Great Ocean Road], spanned harbours with magnificent bridges [Sydney], erected solemn war memorials to the fallen [the Shrine of Remembrance in Melbourne] and established universities like the ANU, all of which continue to serve and inspire us today.
Supporting Those Most in Need
In these hard times we intend to keep faith with older and vulnerable Australians too.
That's why the Budget delivers on the Government's commitment to provide additional support to pensioners and carers.
These are the very people that helped make Australia what it is today. They deserve our support. They'll always get that from me and from any Government Kevin leads.
As Australians age, we need to ensure the pension system that supports us is more financially sustainable well into the future.
That's what's behind our decision to increase the pension age progressively from 65 to 67 and the other tough reforms I announced.
Existing pensioners will have their current payments protected, and future pensioners will have the reassurance that the system they contributed to for so long is now more secure.
Paid Parental Leave
And in these hard times, we mustn't neglect important social reforms, especially those with significant economic benefits.
I believe it's time parents – especially mothers – enjoyed not just legal but real equality in the workforce.
So I'm incredibly proud to be the Treasurer who – even in the face of an economic downturn – was finally able to introduce a $731 million national Paid Parental Leave Scheme.
Australian women have waited too long for this support. It should have been done in the easy times. Now it will be done in tough times because we made the hard calls to find room for it, and for a fair go for pensioners.
Deficit Exit Strategy
Last night's Budget is not just about the hard times.
It's a Budget about the future.
And if we're going to continue to build a stronger, fairer and more sustainable country into the future, we're going to need strong finances in the years to come.
That's why we have a strategy to return the Budget to surplus.
As I said a moment ago, the global recession has wiped-off $210 billion in government revenues, including $55 billion in 2010-11.
It is falling revenues that have dragged the Budget into a temporary deficit.
Total transfer payments to support the rising number of unemployed will also increase automatically.
These 'automatic stabilisers' have forced us to increase our borrowings and provide stimulus to the economy when it needs it the most.
Trying to prevent the Budget going into deficit at this point in time would be irresponsible. It would require substantial increases in taxes or more dramatic cuts to government spending.
This would add to the pain already caused by the global recession.
More jobs would be lost, more businesses would close.
I wouldn't contemplate that for a moment. Until the last few weeks I would have thought everyone in Australia would be on the same page.
In this context, the level of government borrowing is both responsible and sustainable. Australian government net debt levels will remain small by international standards.
This Government does not take the Budget going into deficit lightly.
We have a clear plan to return the Budget to surplus over the medium-term as the economy recovers.
We will restrain real spending growth to 2 per cent a year as the economy recovers.
Tax revenues will also recover as company profits and employment recover, but the Government will not let taxes go above the 2007-08 levels on average.
Last night, I announced a number of savings measures that will help us achieve the deficit exit strategy.
These include improvements to the integrity of the tax system. We have also made savings in the areas of health and family payments.
These are not popular decisions. But they are the right decisions.
They place key areas of government spending on a more sustainable footing, while still providing support to those who really need it.
And while still engaging in the most ambitious program of nation building Australia's seen.
Opposition Response
Let me spend a minute or so on the Opposition's response to the Budget.
It's straight out of the voodoo economics text book.
Did anyone else notice that the first half of Mr Hockey's press release last night criticised us for not cutting hard enough? While the second half of it criticised us for cutting too hard and not spending enough!
Joe might have some good qualities – but economics and consistency are not among them.
The Liberals need to understand you can't just put your hand up for the good stuff without doing the hard yards to pay for it.
They need to understand that voting against the saves we announced, to pay for the pension, is the same as voting against the pension rise itself.
We've done a quick analysis of the saves Mr Hockey attacked in the press release he put out last night, and when you add in his blocking of Alcopops, it adds up to about $8 billion over the forward estimates.
That's about $8 billion more in deficits, more in debt, and it's a very bad start if they want to show any shred of economic credibility.
All they've done is criticise spending, then criticise the Government's savings, then say we should have spent more in some areas, and then that we should have lower deficits! Ridiculous.
What Mr Turnbull needs to do tomorrow night is provide a comprehensive list of the saves he'd make to get us out of deficit quicker.
If he doesn't – we know it is just the same old opportunism and negativity for the sake of politics – and the national interest won't get a look in.
Conclusion
The Budget and the strategy that underpins it will play a huge role in what will become Australia's economic recovery.
But governments and their Budgets can't do everything.
Yes, in hard times, the tough decisions are delegated to us – and we accept that responsibility.
But ultimately the investments, the hard work and the risks necessary to produce greater prosperity will have to be taken by people.
Everyday people, not economists or politicians.
Australians will need to show our national qualities of steadfastness and resilience and their usual willingness to seek out new opportunities.
Many Australians are already doing just that: re-skilling, re-investing and employing more people.
A couple of Saturdays ago, for instance, at a housing site in Nundah in my electorate I met Craig Langstone, a small businessman who has been installing insulation in private and public housing for the last 12 years.
As a result of our stimulus measures, Craig has gained the confidence to back his initiative and employ 12 more people.
He's not only building a better future for himself and the 12 extra people who now have a job, he's playing a part in creating a more sustainable environment for his children and grandchildren.
Leaving an important legacy for future generations.
I find in politics it is best to personalise things – to think of economics as human ups and downs rather than the ups and downs of a graph.
And thinking of Craig Langstone makes me think about what we can do together if we try – the jobs we can create and the jobs we can save.
That's what we can do by addressing the global recession with a positive attitude.
Not using it as an excuse to retreat and retrench but as an opportunity to achieve changes that were put off for too long when the going was easier.
People like Craig are showing the way.
I think this Budget will too.
Because it is a Budget for a nation tested in the fire of economic adversity.
It is a Budget that will help us come through that fire strengthened and galvanised for new challenges.
And it's a Nation Building Budget for Recovery.
Thank you.