I’m delighted to be here today to talk about re-energising Australia’s economic policy reform.
The massive growth of the Asia-Pacific middle class, which is expected to reach 3.2 billion people in 2030, offers enormous opportunities for Australia.
But we must not let the enormous opportunities before us allow us to be complacent about the challenges we also face.
Over 22 years of continued economic growth have delivered Australians one of the highest standards of living in the world.
But the reforms of the past that drove that growth have delivered nearly all they can.
Without further reform Australia will struggle to sustain the standard of living to which we’ve become accustomed.
And after the last six years of Labor – which saw microeconomic policy focused on redistributing the pie rather than growing it – our Government is faced with an increased urgency for reform.
We are moving to a new phase in the mining boom characterised by lower prices and lower investment, and we can no longer rely on rising terms of trade as a source of income growth.
The key to growth-focused reform is to drive productivity, whilst tapering the growth rate of business input costs so as to maximise our competitive advantages.
This recipe for a better standard of living tomorrow is not like the ingredients of Coca-Cola.
There is no secret about what needs to be done.
The only real challenge is harnessing the political will to do what is necessary.
Over the last weekend, I attended the 11th meeting of the Asian and European Finance Ministers in Milan.
Asian and European countries alike face similar challenges for reform - the barriers to stronger economic growth faced by mature economies globally are broadly consistent:
- high debt to GDP ratios constraining opportunities for fiscal stimulus;
- already highly accommodative monetary policy with little scope for additional easing;
- ageing populations;
- increasing energy costs coupled, typically, with real increasing business input costs; and
- low levels of productivity growth.
These barriers exist against a backdrop of community expectations that government will continue to provide entitlements and services that surpass any historical benchmark.
In the context of these challenges, the Meeting was reminded of a quote from the former Prime Minister of Luxembourg, Jean-Claude Juncker, who said:
“We all know what to do, we just don’t know how to get re-elected after we’ve done it.”
I note Mr Juncker is no longer the Prime Minister.
And, so, ultimately, economic reform is a matter of political will.
And our team – from the Prime Minister and the Treasurer, to all of the Liberal and National Members of this Parliament – we have the resolve to make the tough decisions now to protect the Australian standard of living in the long term.
As Australians, we must be cynical of the snake oil political salesmen who claim that unpopular spending reforms can be safely abandoned in favour of the status quo.
And we should embrace those honest enough to speak to the challenges that must be overcome; those willing to risk disquiet, in order to implement reform.
As a people, if we are genuinely going to provide a better tomorrow for our children, we must respect that the real measure of equity is intergenerational.
An argument for equity that results in mortgaging the next generation of Australians to pay for today’s standard of living simply cannot be rationally made.
In short, we cannot keep spending money we don’t have.
Not only are we spending more than we are earning – we are also paying $1 billion every month just to pay the interest on Labor’s debt legacy.
$1 billion a month means there are thousands and thousands of working Australians whose entire tax contribution goes to paying this interest bill.
I believe those taxpayers deserve better.
And I ask the Australian Labor Party – how can you justify a continued defence of spend, spend, spend economics?
If Chris Bowen thinks now is not the time to make the tough Budget calls – when is?
If Chris Bowen wants to keep kicking the can down the road, because he believes a debt trajectory heading to $667 billion is acceptable, where does the train stop between where we are now and where Greece is now?
The challenge for reform is as real as it is urgent and, already, we have started the work to get our nation’s finances back on track.
The re-energising of economic policy reform has commenced.
Our first Budget was an important step in reforming the size and role of government.
Fiscal consolidation was balanced with economic growth and, importantly, the focus of government spending was shifted to a greater investment in productive infrastructure.
Indeed, our Government has committed to a record level of investment in Australia’s infrastructure.
This investment represents decisive action to drive economic growth, create jobs and increase the productive capacity of our economy.
$11.6 billion was shifted from elsewhere in the Budget to infrastructure, bringing the Government’s total investment in infrastructure to $50 billion through to 2019-20.
Our infrastructure-focused Budget also includes $5 billion for the Asset Recycling Initiative – an important economic reform I believe to be akin to the National Competition Policy of the 1990s.
The Asset Recycling Fund will provide financial incentives to the States and Territories to sell assets and reinvest the proceeds into productivity-enhancing infrastructure.
All up, the Commonwealth Government’s investment will generate $125 billion in additional infrastructure, which, once completed, will add around one percentage point to Australia’s GDP.
The Government’s record investment in infrastructure comes at the same time as the ratio of payments to GDP will drop by one per cent over the forward estimates.
Fiscal consolidation is the prerequisite for a sustainable Budget that sees us live within our means, but also, it is a precursor for us to deliver lower taxes that will improve our competitiveness and the standard of living we enjoy.
Clearly, if you want lower taxes you can’t have tax reform without first having spending reform.
The Government will soon be commencing a comprehensive Tax White Paper that provides a longer-term considered approach to tax reform.
The Tax White Paper process will examine how our tax system should support future economic growth and improving living standards.
This will include examining the competitiveness of the tax system.
Because we cannot observe the almost complete breakdown of barriers to the flow of global capital and labour and falsely comfort ourselves that we do not need to undertake reform.
Reform must be a constant.
Our Government has re-energised economic policy reform in this country.
The task is underway – we are getting government spending under control, we are investing in productive infrastructure and we are working to improve the competitiveness of our tax system.
We are asking all Australians to contribute to the task of economic reform, to come on the journey with us; to capture the opportunities; and tackle the challenges before us.
The industry policy of the Australian Labor Party is clear: they want to increase the tax and regulation burden on our industries where we do have a competitive advantage and subsidise those where we don’t.
In contrast, the Government will soon be releasing the details of our National Industry Investment and Competitiveness Agenda.
This Agenda is being developed by the Prime Minister, the Treasurer, Trade and Investment Minister Andrew Robb and Industry Minister Ian Macfarlane.
The Agenda will examine reform options focused on lowering the cost of business, building better economic infrastructure and skilling our workforce.
I know some of the proposals considered have included employee share schemes, and improvements to our intellectual property system and competition policy.
The corporate welfare cheque book is gone because the Labor way of trying to create jobs with government subsidies is simply lazy government.
The Coalition will take the hard road of reform because we know the ultimate dividend of this reform will be a higher standard of living for all Australians in the future.