AFR Business Summit Address

Thank you very much,
it’s a great pleasure to be here. Can I acknowledge the traditional owners,
their elders past and present and emerging. Can I also acknowledge any
ex-servicemen or women who are with us today and those who are serving still.
Could I acknowledge also Simon Birmingham, the Trade Minister who’s here with
us this morning, and Simon is here fresh back from signing the Free Trade
Agreement up in Indonesia yesterday. It’s wonderful that you’re able to join us
this morning, Simon, and of course Peter Costello, a predecessor of my own
Treasury portfolio. Ten surpluses, we’re looking forward to adding to that
tally in a months’ time when Josh hands down his first budget, which will be a
surplus and that’ll be the first time that’s happened in 12 years. It’s a long
way back when the country takes a different course and we’ll be able to say
that we’ve righted that course when we set up at the budget this year. I also
want to acknowledge the support of BHP for this AFR Business Summit.

This year’s Summit
has, rightly, put trust at the centre of discussions. Trust is the currency of
a strong and prosperous economy. We all have a stake in ensuring high public
trust in our economic institutions and it’s no secret that big business, in
particular, finds itself under unprecedented scrutiny. The need to restore
trust with customers, employees, the suppliers, the wider community is
preoccupying boardrooms all across Australia.

As former Canadian
Prime Minister Stephen Harper has written, high trust societies are richer,
they’re happier, not least because trust enables efficient trade and commerce
by allowing markets to function better and I think Stephen hit that right on
the head when he said that. On the other hand, low levels of trust generate
pressure for more laws to regulate business activities and practices. Trust is
also the currency of politics, our public discourse and our policy
decision-making. The public, rightly, want to assess your record. They want to
assess your plans. They want to know what you believe. They want to know about
what you seek to do in the future and your basis is or your claims to what you
want to achieve. And with the election approaching, Australians are beginning
to focus on the choice that is in front of them. They are beginning to focus on
the records, the beliefs and the plans of the alternatives and what the means,
importantly, for the economy that they will live in for the next decade.

I just want to pause
on this point. The next election, just like in 2007, will have a profound
impact on the economy that Australians and families and small family businesses
all around the country, it will impact on the economy they will live in. The
economy is not a theory, it’s something that affects every day of your life.
And just one term of a Labor Government can change the economic course and the
economy each and every Australian will live in.

So, I welcome this
scrutiny. I think it’s time for that scrutiny. Our Government, of course, has
been under that scrutiny, as it should. We are the Government. But equally, as
you go into an election, it’s important that the alternative plans are put
under the same scrutiny and an understanding of what the impacts are for the
decade ahead. Labor can do a lot of damage. They only need one term – only one
term to really stuff it up. We had two terms we’ve had to fix over the last six
years and will have a profound effect on the next decade. So, I welcome this
scrutiny because the Coalition does have a strong record – a clear set of
beliefs and I welcome it because the Coalition has a strong record, clear
beliefs and a comprehensive plan to keep our economy strong, to keep
Australians safe, and to continue to bring Australians together. Scrutiny will
be important more than ever this year because the stakes are higher than ever,
as they always are in every election. The contrast between the economic plan of
the Coalition and Labor, as I said, is greater than it has been, I think, in 40
years – in a generation and more.

In the past, there
was at least some degree of convergence on our economic direction as a country.
There was broad recognition about the modernisation of Australia’s economy
resting on some key pillars – balanced budgets, competitive tax rates, low
inflation, competition reform, enterprise bargaining, trade, opening it up,
playing to our economic strengths including, can I stress, our traditional
sectors in agriculture, in resources, in forestry, in mining. Things that we
don’t shy away from as a Government, that we understand their critical
importance to the future of our economy. We don’t think it’s a good thing when
any of these sectors face markets with strong headwinds. We don’t think that’s
wonderful like the Labor Party does. The dividend for Australian households
from this economic modernisation has been substantial over the last 30 years.
Between 1960 and 1991, the Australian economy had six recessions. Since 1991,
Australia has enjoyed 27 years of uninterrupted economic growth – this is an
extraordinary achievement. It is arguably our most significant national
achievement. Half the Australians voting at this election – half, more than
half – will never have experienced a recession during their working life. They
would never have had to face 18 per cent interest rates as they look for a
mortgage, as they started a young family. They would have never had been in a
job market where there was a recession and looking for a job or trying to keep
their job or looking for their wages. It would have never happened. More than
half. So, it’s important that we understand the economy is real and it has real
implications for every single Australian and if you make the wrong calls, then
that will punish Australians – every household, every business, each and every
Australian.

Our real GDP has grown
faster than any other advanced economy over that period. Real GDP per capita
has risen around 60 per cent since the early 1990s. This compares with an
average rise of 44 per cent in the US, Japan, Germany, Canada and the UK. We’ve
seen strong income growth across the income distribution sector. In the context
of globalisation and rapid technological change, this has been a singular
achievement of what I have called ‘the modern Australian compact’. A compact
where the tax-transfer system reduces income inequality in Australia by more
than 40 per cent, according to the official statistics of the Australian Bureau
of Statistics. A compact where the top 10 per cent of taxpayers pay almost half
of personal income tax and where the bottom 10 per cent of households by income
has achieved the highest income growth of any group since the Global Financial
Crisis. These are facts about our economy. This is the truth about what is
happening in our economy. Not the myths, not the fairy tales, not the
sentimental stories, but the hard facts of what is happening in our economy. A
compact where, according to Peter Whiteford from the Australian National
University, social security benefits are targeted to the poor more than in any
other high-income country today.

We have a good
system, we do have a fair system and the facts back that up. Over the past five
and a half years and in the wake of a massive fall in mining investment, our
Government has worked to sustain economic growth and secure a more diversified
economy. Let’s not forget that mining investment boom moved $80 billion out of
the Australian economy. To fall off the edge of the mining investment boom was
a far more devastating factor impacting our Australian economy than the GFC.
And over that period of time, as it impacted incomes significantly, we have
been able to ensure the economy has continued to grow and, importantly, we have
maintained our AAA credit rating throughout that entire period at a time that
it has been under greatest threat.

Speaking of trust, we
pledged to create one million jobs five and a half years ago. And we met that
target before time, and we exceeded it. More than 1.2 million jobs have been
created since 2013 in September. Those jobs were created by businesses – by
growing a stronger economy, businesses were able to grow and employ people. In
2013 under Labor, unemployment was at 5.7 per cent and going that way, north.
Today, it is 5 per cent, what some call the natural rate, and Australia’s jobs
growth is now faster than in all G7 countries. Our employment to population
ratio for those aged 15 to 64, the working age population, is at a record 74.2
per cent. This is the best result since records began more than 40 years ago.
More people of working age are in work than in any other time in our history
and as you can see in the chart, it’s been a long way back.

The female
participation rate is at a record high. So too is the participation rate for
Australians aged over 65. Welfare dependency is at the lowest level for three
decades. More people in work, less people on welfare – that’s what Coalition
economic policy delivers. Armed with this record, we have now set ourselves the
goal of creating another 1.25 million jobs over the next five years – that’s my
jobs pledge to the Australian people. And as you’ve just heard from the record,
that is a claim, a pledge that we can make with some credibility. At the same
time, we have fixed the budget mess we inherited in 2013 and turned the corner
on debt and maintained our AAA credit rating. When we came to office, the
budget had a deficit of $47 billion, or a 3 per cent share of the size of our
economy.

In 2019-20, the
Budget will finally return to surplus. It hasn’t been an easy path, it has been
a long road back to both fiscally consolidate while at the same time growing
the economy when there had been [inaudible] of mining investment in the
country. These are the three things that had to be very carefully managed. Our
discipline, fiscally, will ensure these surpluses exceed 1 per cent of GDP over
the medium term. Real spending growth under our Government is at the lowest
level for half a century – more than 50 years of any Government. The hard work
of getting the budget back into surplus though is only the start – we need to
restore the balance sheet to where it was prior to the GFC so that we’re well
placed to handle whatever the global economy throws at us in the future.

The buffers that were
created by the Howard-Costello Government, not just the fiscal ones but the
regulatory ones around our banking and financial system, were the critical
factors that ensured that we were able to move through the GFC at the time. And
we need to get back into that space. The Government is committed to eliminating
net debt over the next decade and it will take that long and it will be quite a
challenge to achieve. This should now be the focus of our government’s fiscal
management and it will be, paying down the debts of the past in order to grow
the economy of tomorrow. That is our intergenerational pledge – securing our
future by keeping a lid on taxes and restraining expenditure to support
confidence right across the economy and, in particular, amongst business.

Obviously, the
finishing line of zero net debt is in the distance, but we need to stay the
course. In the same way, we will steadfastly work toward getting ourselves back
in the balance. We will work steadfastly to achieve this goal also. So, this is
not a time to experiment with economic management. We has seen these
experiments before under Labor. They don’t end well for anybody. Our proven
track record on the economy is one that we’ve worked hard to achieve over the
last five and a half years. It honours the legacy of that which we’ve inherited
from the Howard-Costello Government. And we’ve maintained it, and we need to
maintain this course. Why? Because, as we know, in recent months, the global
economy has slowed, the risks have risen, at least compared with those we’ve
faced in last 18 months or so.

Both the IMF and
World Bank have lowered their global growth forecasts since our mid-year
update. The World Bank warns of darkening skies given global financing
conditions have tightened, industrial production has moderated and the threat
of protectionism remains high. There are a few own goals out there in the
global economy. It warns that a simultaneous sharp slowdown in both the United
States and China could have severe consequences for the global outlook and
these are very obvious points. Meanwhile, domestically, we have seen dwelling
prices fall in our major capitals, a correction, with prices down 10.4 per cent
in Sydney and 9.1 per cent in Melbourne. The Reserve Bank Governor has been
able to put these into context. We have been able to achieve, I think, a soft
lending to date in the housing market. It was very over-heated, particularly in
the Sydney and Melbourne markets, we know that and the measures and factors
that have been in play have ensured that softening. Had it been a hard landing,
the implications for our economy we all understand would have been quite dire.

This only underlines
why we can’t take Australia’s unbroken run of economic growth for granted.
Why we must do more to make our economy even stronger. Why we have taken
the hard work of rebuilding the Budget position. Prudent fiscal management has
allowed us to turn the Budget around while also I should stress investing
record levels in defence, in health, in aged care, in education, all essential
services that Australians rely on. Our investments in all of these essential
services – 2,000 affordable medicines on the PBS without increasing taxes. The
investments that I’ll announce today on domestic violence, important,
bi-partisan commitments. The only difference is, I’ll be announcing them
without increased taxes.

Education funding at
record levels, bulk billing for Medicare at record levels without increasing
taxes. I believe the way you control expenditure is actually controlling how
much you tax. We should only take from the Australian public, from their
efforts, as much as we absolutely need to deliver those essential services that
Australians rely on. We shouldn’t have to take more in the event that you can’t
manage all your other expenditure, which is what we see the Labor Party do. Why
are they going to tax you more? Because they can’t manage the budget, so we’ll
just tax them to cover up for all the other wasted expenditure.

That’s why we’re not
raising taxes because we’ve kept a tension on the cord across all other levels
of spending. This has allowed us to unlock the largest infrastructure pipeline
in terms of our economic management and what we’ve invested in. Our $75 billion
infrastructure plan is delivering much needed growth and nation-building
capacity to all parts of Australia. In many ways, it’s been filling the gap
left by the retreat in mining investment. That means less congested roads in
our urban areas, so families can spend more time with each other, rather than
get stuck in traffic. The new Western Sydney International, I’m pleased to say
the Nancy-Bird Walton Airport which we announced yesterday, is breaking a
deadlock that has eluded governments for generations, decades upon decades upon
decades.

Our $5 billion investment
in Tulla Rail in Melbourne will transform and reshape that city. A new Inland
rail network for Eastern Australia will enhance the national freight network –
creating jobs, reducing supply chain costs and connecting cities and regional
Australia to markets faster, safer and more efficiently. Snowy 2.0, MarinusLink
and Tasmania’s Battery of the Nation will not only create jobs where we need
them but it will firm Australia’s record investment in renewable energy for the
future so there won’t be dumping and shedding of renewable energy from the grid
and will put downward pressure on electricity prices.

A big part of keeping
Australians together is opening up new opportunities in regional Australia –
through this better infrastructure, digital connectivity and the like.
Our Government is determined that Australia grows together, not apart,
and the key to that is the strength of our economy. All these investments are
being fully funded as I said without an increase in taxes. The Coalition has
embedded Australia into the major economic engines of our region through
transformational trade agreements with Japan, Korea, China, and 10 other
nations of the Trans-Pacific Partnership and we now include Indonesia where
Simon has just returned from inking that agreement.

Since the Coalition
was elected, the coverage of our free trade agreements has increased from 26
per cent of our total two-way trade to 70 per cent. 26 per cent to 70 per cent
– that is a massive opening up of our trade opportunities for small and family
businesses in particular around Australia. New export deals have given
Australian exporters duty-free or preferential access to an extra 1.8 billion
customers in the world’s fastest and largest growing markets. This is the most
effective hedge an open trading economy like Australia can adopt against the
new protectionist sentiment prevailing around the world. And that I think is
where Australia has a story, often going against the grain and ensuring that
we’re opening up our opportunities where others might be seeking to close them
off.

But there is more to
do. As I said, an uncertain global economic outlook means Australia’s economic
fortunes will depend even more on the quality of our economic management. We
will continue to be an ambitious, pro-growth government, supporting
individuals, families and businesses looking to get ahead and prosper. We’re
all for that. We don’t think you have to pull some people down to raise other
people up. That’s not our view. We believe a stronger economy can raise everybody
up and I think that’s one of the key differences between our Government and the
Labor Party and what they’re offering for the next election.

We will stay the
course with policies that achieve this and we will ensure that those policies,
our plan for a stronger economy, is in place. Strong budgets so Governments
live within their means. Lower taxes, open trade, backing small businesses,
promoting cooperative workplaces based on the rule of law, sensible climate
policy alongside reliable, affordable energy supply. Investing in
infrastructure, investing in the skills that are necessary, backing all of our
industries to be world-class – not just the shiny, bright new ones – they’re
fantastic, love them, they’re great, love them, fantastic, Blockchain, high
tech, all of them are doing so well – but so is resources, so is agriculture,
so is forestry and the jobs that they produce all around the country. It’s an
incredibly important part of our economic future.

What we also won’t do
is we won’t tax this economy beyond what it can bare. I put in place as
Treasurer a tax cap – 23.9 per cent of the economy. This is important. That
says that we believe if you go above that, you hold you economy back. It’s a
sheet anchor. It holds every Australian back. I urge you to look for a number
when the budget comes out and when the Labor Party puts their figures forward.
What will be in the share of taxes of the economy under Labor? I can tell you
what is was for the last election – it was 25.7 per cent. That meant around $50
billion a year in more tax on the Australian economy – every year, another $50
billion. And whether you’re paying that tax or not, you’re paying because of
the impact it has on slowing the economy, the impact it has on slowing wage
growth in a country. They have a plan to put $200 billion of extra taxes on
Australians and I really don’t think they understand the impact of that on the
economy. All the individual measures. It doesn’t understand the power and
virtue of aspiration in our society. For our hardest aspiration is some other
country, not Australia. That’s what Labor’s Deputy Leader has said as much –
that’s what Tanya Plibersek has said.

Labor under Bill
Shorten sneers at those who want to get ahead and only promises them a higher
tax burden. If you work additional overtime to get ahead, Mr Shorten wants more
from you, he wants higher taxes from you. If you buy an investment property to
secure your family’s economic future, which so many small and family business
owners do, which so many people who live in regional parts of the country do –
you know there’s more people who negatively gear investments and have
investment properties in the electorate of Capricornia based on Rockhampton
than there is in my own electorate of Cook in Sydney’s Sutherland Shire and St
George. More people in Rockhampton than in Cronulla. Labor doesn’t get that.
They don’t understand the aspiration that would lead someone to make that
decision and that sacrifice to invest in their future.

If you buy some
shares for your retirement, again, Mr Shorten will have his hand in your pocket
through higher capital gains taxes. If you try to build a nest egg to pass on
to your kids, again, he’ll have his hand in your pocket. Mr Shorten even wants
to ensure that our legislated tax cuts – $144 billion worth over the life of
our tax plan will be cut in half. Stripped away. He will reverse the tax cuts
that we have legislated from last year’s budget – reverse stages two and three
of that plan that will stop over $70 billion worth of tax cuts. Australians
being able to keep their own money.

There are many other
things that I could tell you about, but I know Phil Coorey’s interested in
asking me a few questions. But let me finish on two points. I’ve already made
the point about trade and the fact that the Labor Party is baulking again on
this Indonesian Trade Agreement I think tells you that when it comes to the
economy, their instincts just aren’t there. It’s why the China Free Trade
Agreement was never completed under the Labor Party. They never took it
forward. They were never able to break through. It’s why we are able to make
progress on all of those agreements including the Indonesian one today, there’s
a simple reason for that. They’re not in control. They will answer to their
masters in the union at the end of the day. That’s why we are looking at an
economy under Labor which will see [inaudible] run their businesses, through to
moving back to industry-wide bargaining which takes us back to the dark ages of
workplace relations in this country.

As I move around the
country and I walk in and out of small and family businesses and I ask myself
why are they doing so well? It’s because they have such a wonderful
relationship between their staff and the managers and owners. There’s a commonality
of purpose that exists in these organisations. They’re all working to the same
end. I don’t want to set Australians against each other. I don’t want to set
workers against bosses. I don’t want to set one group of Australians who have
had success in life against those who are aspiring to success in life. I don’t
want to set enterprise in this country against anything. What I want to do is
ensure that the economy, the economy that Australians live in, that they depend
on, that their family’s services will rely on, whether it’s Medicare or
hospitals or schools, I want to ensure, and will ensure, that it is the
strongest it can possibly be in the circumstances that we are faced with.

So, it will be the
most important election in decades. It certainly will. And there is a big
choice to make and it’ll impact the next 10 years of your life. Whether you’re
a business, whether you’re raising a family, whether you’re in retirement or
entering into retirement, whether you’re a young person coming out of university,
I was one of those who entered the economy under Labor in the 1990s that went
into recession. I am one of those who does know what it’s like to live in an
economy that is in recession and I did so as a young person coming out of
university and others of my generation who knew what that was like. Why parents
struggled with interest rates that today’s generation can only imagine. We
can’t go back to that. We must go forward and we have the plan to take
Australia there.

Thank you very much.

E&OE…