Thanks very much, Don, and thank you for that wholehearted acceptance of the principle of compulsory arbitration.
And Julia, where are you? Note it down, we'll get it to the files down at the ACTU headquarters by about nine this evening and everything will be on.
The thing about the job that I have, is that, and I'm sure you've had this experience as well, is that you sometimes find it hard to call people, and I'm sure this won't come as a big shock, but I don't often or always get around to calling people back when I know that I should.
Heather is one of those people whose call you always return. You would not dare not to.
What's sort of frustrating about that fact, though, is that Heather is so busy, often she doesn't return my call.
I'm not smiling, Heather.
But to be fair, it's mainly my fault. If you looked at the number of jobs we've given Heather in recent times, we just keep appointing her to things. She's a member of the Business Advisory Group, she's on Skills Australia, she took part in the 2020 Summit, she's working on the Henry Review of Taxation, a few things on industrial relations as well, I think.
By the way Heather, who's paying for all this? Is it -
Can I say your contribution is exceptionally welcome.
I was going to appoint Heather to some other bodies recently, but she said she really valued that 15 minutes she still had time to check her emails, and I said to her, “Heather, based on recent experience here, it's always very important to check your emails”.
I am delighted to be here tonight at the Australian Industry Group dinner, and to be part of your National Forum.
Heather has mentioned to me that tonight is a special evening, celebrating the addition of the South Australian members, the Engineering Employers Association of South Australia - and we welcome you warmly.
What brings the members of the AiGroup together is a shared commitment to our country's prosperity, to building businesses, expanding industries, generating jobs and laying the foundations for future growth.
That is why the Australian Government enjoys such a strong partnership with the AiGroup, and I want to acknowledge tonight the ongoing contribution the Group makes to the Government's reform agenda.
Through the outstanding leadership of Heather Ridout, the AiGroup has contributed to our reform agenda for national infrastructure, skills development, industrial relations, business deregulation, climate change and taxation, and don't worry, she's not to blame for all the outcomes, but she has been actively engaged with us on all of those.
In corridors of the Ministerial Wing, the carpets are worn down with the constant flow of AiGroup members in and out of ministerial offices, advocating for the interests of Australian businesses - and that is as it should be.
In the past 12 months the AiGroup has played an important role across many complex policy initiatives, including:
* Australia's response to the global recession, which has involved the largest Commonwealth infrastructure program in our nation's history;
* The design of the Carbon Pollution Reduction Scheme;
* The drafting and implementation of the Fair Work Act and the reforms to the Building and Construction Industry Improvement Act;
* The harmonisation of national occupational health and safety laws, where your support will be crucial in encouraging all Australian jurisdictions - all Australian jurisdictions - to implement the model OHS Act and regulations by 2011;
* The revival of our manufacturing industry so that we can still be a country that makes things in the future - a passion of Kim Carr, a passion of mine;
* The strengthening of the national innovation system, including the re-casting of the Research and Development tax incentive;
* The investment allowance for smaller businesses, and
* The additional funding for the Export Market Development Grants program.
Of course sometimes the AiGroup and the Government agree and sometimes we do not, and that is one of the great things about our democracy, but we enjoy a strong, constructive and positive relationship, and one that is to the benefit of our nation and I believe to the benefit of good policy outcomes for us all.
In my remarks tonight I'd like to provide something of a report card on our response to the global economic crisis in the short term and to begin to outline our strategy for sustainable economic reform for the long term. But first I want to touch briefly on the critical policy challenge of the moment - climate change. Because whether we like it or not, this is as fundamental a challenge to our economy for the future as it is also for the environment.
We need concerted action. We need action domestically, internationally, we need action locally, we need action globally, to meet this challenge effectively.
With only a short time to go before Copenhagen, the Australian Government is working hard, through Penny Wong, to ensure that the world takes this window of opportunity in order to act on climate change.
Unfortunately, last Thursday in the Senate, our emissions trading laws were voted down. The result of that decision of the Senate is renewed uncertainty at a time when businesses need to be able to move forward with confidence and certainty for future.
I cannot emphasise strongly enough the importance of the CPRS legislation proceeding, and I acknowledge the AiGroup's support for passing the legislation this year for business certainty.
I know there is concern about the challenges involved in the implementation of the Carbon Pollution Reduction Scheme, but can I say, across the world this is a challenge confronting all developed economies, and none of it is easy. It's all hard because of the fundamental nature of the reform in which we are engaged.
This is a historic economic policy reform that will play a central role in engineering Australia's transition to a lower-carbon economy in the future. It will require change and adjustments in many parts of our economy, but it will also create many opportunities, some of which we have not dreamed of yet, especially for our manufacturing industries that will provide the green products, and also our other industries that will provide the green services of the future - more fuel efficient cars, the water and energy-saving devices and technologies for our homes and for our offices.
I spoke yesterday in Sydney with Larry Smar, who I understand was with you here today, as he explained to me over lunch in Sydney the absolute importance of what we're doing with the national broadband network and its impact in terms of energy saving, energy efficiency and a whole series of initiatives which will contribute fundamentally to our ability to bring greenhouse gas emissions down. One part, I believe, of an exciting set of innovations for the future, and business opportunities coming off the back of the national high-speed broadband network, which again we have not yet fully conceived of.
It is essential that Australia begins this transition to a lower-carbon economy if we are to compete successfully for all the business opportunities that will be generated by the global transition to low-carbon energy sources in the years ahead.
It's time we got on with the implementation of this scheme and with working with Australian business so they can be fully prepared for implementation come 2011, because if we somehow as a nation conclude that this all too hard for us, all too difficult, and that somehow we could remain outside the global network of cap-and-trade systems across the developed economies of the world, let me say this - we'll be denying Australia of a whole new set of economic opportunities for the future.
Secondly, we'll be also inviting the possibility of punitive tariffs being imposed on this economy being imposed on this economy in the future by other economies which join the cap-and-trade system of the future.
Thirdly, we will have done nothing, absolutely nothing, to have contributed to a positive global outcome at Copenhagen - critical for Australia hottest and driest continent, where the impact of climate change is being felt first and hardest.
Therefore, the challenge for us all, whatever our side of politics, is to lift our vision beyond the partisan divide and to seize this opportunity for Australia, not see it simply as a threat, but to see it as an opportunity, and to embark upon this bold new set of reforms for the future.
Previous generations of Australian leaders have confronted challenges of complexity as well. They have, by and large, risen to the occasion. That is our challenge for the future.
Our most pressing challenge right now - - to echo the Forum theme - is negotiating the downturn to emerge stronger than before.
Our most pressing challenge right now is to ensure that our strategy for economic reform continues for the future, and that we can continue to negotiate our strategy for recovery from the global economic recession.
Australia has a remarkably powerful story to tell, right now, in terms of how we have so far withstood all that the world thrown at us through the global financial crisis and the global economic recession.
We have suffered damage, that is true, but compared with most other economies, we've weathered this storm arguably the best of many.
But as we continue through the powerful headwinds of the months ahead, we will also face new challenges, so tonight I'd like to run through two or three things which I think are important to underline as we embark upon the challenges of the second half of this year and into 2010:
* Firstly, our Nation Building for Recovery plan;
* Secondly the impact of what we have achieved so far,
* Third, the uneven, the very uneven road of recovery that lies ahead, where unemployment will continue to rise, where interest rates, as the Reserve Bank Governor has indicated already, and I have in earlier speeches as well, will also rise, and on top of that the fact that we'll also, on the back of commodity price improvements around the world, also see increases in the cost of living. These are the challenges of what I describe as an uneven recovery;
* And the fourth thing I'd like to touch on tonight is, most importantly, how do we lay the foundation stones for long-term, sustainable economic growth in Australia, the building blocks for a long-term productivity revolution of the Australian economy.
You have heard us say before that this global recession is the worst in 75 years. I would simply draw your attention to what is seen on the screen before you.
Many of you in this room, in fact most of you, have an active memory of the recession in 1991, an active memory in some cases of the recession of 1982. With those two earlier recessions, remember well this point: that the growth numbers in 1982 were still, for global growth, 0.9, and for 1991 they were 1.5, positive. However, for 2009, the global growth number is projected to be negative 1.4.
Whatever the experiences were, therefore, of '82 and '91, remember that the global economy continued to grow. This, remarkably, since when economic data has been collected in the post-war period, since '51, is the first time that the global economy is projected to shrink.
Notwithstanding the above, partly because of the measures undertaken by the Australian Government, partly because of where we are in terms of our international trade and our access, still, to export markets in this part of the world, and partly because of the decisions taken by so many of you in this room, our performance against the other OECD economies has been strong. Australia, as of the conclusion of the first quarter this year, is the fastest growing economy in the OECD. This should be something in which we take some pride as a nation.
The measures that we took as a government to underpin this performance are broadly in three categories. The first of them, on the slide before your at the moment, goes to the use of Government guarantees for the banking system. For those of you familiar with your discussions with your banks in October last year, you'll recall how difficult things became.
You'll recall that we had a virtual drying up of global credit flows. You'll recall that people were becoming anxious about the security of their deposits.
That's why in October last year, the Government, meeting in Cabinet in this building here, took two fundamental decisions. One, for the first time in Australia's history, to guarantee everyone's savings deposits, deposits in their building societies and credit union, and second, again the first time in this country's history, to guarantee the inter-bank lending of Australia's banks, both at home and abroad.
The reason that was necessary, if you look at the slide, and look at what was happening in September, October, November of last year, the total raisings by Australian banks, both onshore and offshore ground to zero. What you see in the right hand side of the graph is in fact the emergence of the impact of the guarantees provided by the Australian Government. That shaded in grey, obviously, offshore raisings, which are guaranteed by the Australian Government, that in black domestic raisings guaranteed by the Australian Government.
It is only as we've got closer to the middle of this year, 2009, in May and in June, did we begin to see the rising again of those raisings by some of our banks not using the Australian Government guarantee.
Why do I labour this point? Credit - the artery of the economy. The non-availability of credit, the time span is short between when the tap is turned off and when the real economy begins to fundamentally fall in a heap.
The decisions taken by this Government in this building in October last year were fundamental to ensuring that the lines of credit opened up again by year's end and early 2009, and you begin to see here the slow trajectory towards recovery.
The second part of our response to this global recession has been what we would do in terms of providing stimulus to the Australian economy.
When we sat in the Cabinet room on that room, and the Treasurer's with us tonight, as is the Finance Minister, and the Deputy Prime Minister, and it was a long and hard series of meetings, we asked the Secretary of the Treasury, who's also with us tonight, to explain to us what had happened in previous recessions, and how we could actually make a material difference.
We began with a presentation in terms of something basic and elementary, which is what were the final drivers of total final demand in the Australian economy - household consumption, dwelling construction, private business investment, public final demand, and you'll see their relative statistical significance in the middle column - 54, 6, 17 and 22.
Net exports, of course, adding up at the end, and contributing to the overall equation.
Therefore, this led to a very clear set of conclusions - if you're looking at this, beginning of October last year, what could you do there and then to make a material difference there and then in the weeks following the Lehman's implosion as the global economy was teetering on the edge, to make a material difference in the real economy?
And the answers we came up with were: cash stimulus. Ken's advice to us: go hard, go households, go early.
Secondly, dwelling construction, hence the trebling of the First Home Owners' boost, and thirdly, private business investment, hence the temporary investment allowance which we've employed as well.
Australia's strong economic position is in large part due to strong, decisive Government action to cushion the impact of the recession.
Those were the three measures that we embraced at around about that time in order to provide an injection then into the real economy. Had we waited for the simple delivery of infrastructure, medium-term or longer-term infrastructure, as many economies around the world have done, the flow-through time would indeed have been long, we would have seen a complete collapse in real activity and real employment in the economy in the last quarter last year, the first quarter this year and the second quarter this year, and once you've got employment falling through the floor, as has happened in so many economies around the world, the roll-on consequences for asset prices, and then to the financial system, particularly off the back of real estate, becomes a negative cycle, and in turn compounding the spiralling down of growth.
In our stimulus strategy, we phased it in three stages. What you see before you, of course, is short, medium and long.
The short-term measures are those I've just run through - cash payments to families, and secondly the trebling of the First Home Owners boost and thirdly, the provisions we've made by way of support for the temporary investment allowance, all adding up to some $26.9 billion.
That has made, collectively, the critical difference. Final quarter last year, first quarter this year, and we see, still, with the effect it has in second quarter this year as the numbers have not been produced.
However, the second phase, medium term, which is this large school build, this large public housing build and this large range of energy efficiency measures, as well investment in local government infrastructure, to collectively representing some $34.9 billion. Of course, the flagship for this is the largest school building program that you've seen anywhere in the country, spread across all 10,000 of Australia's schools, primary and secondary, Government and non-government. That is underway now, and the objective again is for it to fold in at the time at which the shorter-term measures, particularly the cash payments, were fading out. That is the phase which we are currently in, and have been in since around about June.
And then the third phase, of course, is long term, and there you would have seen that outlined in great detail in the Treasurer's budget speech, in terms of our investment in long-term transport projects, the National Broadband Network, as well as a range of other education research projects, clean energy, health and hospitals infrastructure.
Three stages to the overall stimulus strategy, critical, fundamentally critical, to provide a rolling series of stimulus into the economy in order to cushion us in the real economy from the full impact of what was happening abroad.
Some have questioned the real impact in terms of cash payments. I simply draw that to you attention as a fundamental difference between what happened here and other economies, such as in Europe, Canada, Japan, the US and New Zealand, in terms of the retail sector.
1.5 million Australians work in retail. That's 15% of our workforce. It's a lot of Australians. Ensuring that we could generate growth numbers like that at a time when around the rest of the world it was falling through the floor, was of critical importance.
Of course, loans to first home buyers based on the First Home Owners boost had a similar effect in terms of what we saw in the overall number of loans, and again the housing data, while still down, has been better than in most other comparable economies.
Business investment, remarkably, has remained just positive - one of the contributing factors in this data has been in fact the temporary investment allowance. As you know, 30 percent announced at the end of last year, and then from the middle of this year up to 50 percent for small businesses through until year's end, again with the idea of providing businesses with encouragement to bring forward their capital investments, and most critically, to continue to contribute to positive growth.
These short-term measures have worked to support the economy until our infrastructure investment has come online. As the chart shows, without the cash stimulus, growth would have been -0.2 in the March quarter, pushing Australia into a technical recession.
The simple fact is that without the Australian Government's early and decisive action, through targeted stimulus, Australia would already be in recession.
Treasury's advice is clear: Without the cash stimulus to low income earners, Australia would have experienced a second consecutive negative quarter in March - pushing Australian into technical recession.
Therefore, we thought this was the wrong way to go.
We did not accept the advice of our political opponents. We thought this was the right way to go in terms of ensuring we could at least cushion Australia from the impact of the global economic recession.
A technical recession would have had a further negative impact on economic confidence, both business and for consumers. Therefore, we believed the right thing to do was to support growth, to support employment, and to avoid a crushing blow to confidence. That's why we believe we've embarked upon the right strategy.
Just as no stimulus would have plunged Australia into recession earlier this year, reducing the stimulus now would pull the rug out from under thousands of small- and medium- sized Australian businesses dependent on stimulus-related work to keep their heads above water. We are not out of the woods yet.
It's important to emphasise that 70 per cent of our total stimulus investment is in medium- and long-term infrastructure.
As I said before, the Education Revolution, energy efficiency and social housing, the longer-term infrastructure investments as well - the uniting theme with so many of these infrastructure investments is also to have a weather-eye on our strategy to build long-term productivity growth.
Mention was made before of the deficit, historically, in infrastructure investment in Australia. For the first time, the Commonwealth's now taking a lead in national infrastructure planning through the good work and the strong leadership of the Minister for Infrastructure, Anthony Albanese, but we have just begun this process.
The consequence of all these measures has flowed through to confidence.
The consumer confidence numbers have rallied, as you can see on the screen, just as have the business confidence figures rallied as well, and therefore they have returned almost - almost - to pre-crisis levels.
As you know, what we do objectively in the economy by way of policy and programs and investment is critical. What the economy itself concludes subjectively, both as consumers and as business leaders, is equally critical. What the Australian community, I believe, concluded, having seen the strategy that we're putting in place, was that in fact this strategy was of substance and formed a basis upon which they could have confidence in making business and consumer decisions for the future.
That has been as important as have been the real decisions in the real economy by business leaders such as yourself.
Without the stimulus, unemployment would be higher. Without stimulus, Treasury estimates that unemployment would have reached some 10 per cent. As you know, we are tracking somewhat under that, and we believe this is a direct consequence of the stimulus investments that we have made.
Treasury's advice to us was that in the two years of this year and next year, had we not invested in this stimulus, there would be something in excess of 200,000 Australians each of those two years who would be further out of work.
Australia's unemployment rate is lower than the other major advanced economies, only second lowest compared against Japan. Again, the impact of our measures on the labour market have been significant.
One final measure in which we've engaged in is this - I mentioned before our activity to stabilise financial markets, I've mentioned our investment in stimulus, short, medium and long - but the other thing we've sought to invest in, of course, is the work undertaken by the Deputy Prime Minister in her responsibility for education and training, assisted by the Employment Minister, Mark Arbib, and that is a jobs and
training compact supporting those who have lost their jobs.
A Compact with Young Australians, a $277 million investment, where young Australians must be earning or learning, a Compact with Retrenched Workers, some $438 million, providing immediate employment assistance, reduced waiting times for income support, as well as what we've negotiated with major banks - a capacity to postpone mortgage payments for 12 months - and a Compact with Local Communities. Across Australia, we know from the historical data where in fact we have seen the highest spikes of unemployment in the past, and that's where we have deployed this local jobs fund through the assistance of local priority employment coordinators to take the edge off the highest levels of unemployment in the most unemployment affected regions.
That, therefore, is our strategy, but as a consequence of implementing it, what we're able to say to the world at large is that Australia has lower debt than the major advanced economies in the world - that's us on the bottom left. Australia has lower deficits than the major advanced economies, and you can see, again, us on the bottom left. Those are, of course, percentages of deficit as a percentage of GDP.
The overall impact of these measures, then, before I go on to productivity growth, is as follows - that what we have been able to do through these measures, supported by the decisions in business, and often hard decisions to retain employees when it's been most difficult, has been to bring about a situation where in Australia as of now, we have the fastest growing economy in the OECD, the second-lowest unemployment of the major advanced economies, the lowest debt, the lowest deficit of the major advanced economies, and we have done so, so far, with this economy being the only one of the major advanced economies not to have gone into technical recession.
That is what we have been dealing with up until now. How do you build for the building blocks of future? As our president said before, the big challenge for the future lies in building productivity growth. Those are the figures to which he referred just before - sliding productivity growth since we began reflecting these data series from the early ‘90s. This has to be turned around, just as we need to embrace a global challenge about how we in fact close the global growth gap in the future, without simply assuming that we're going to have a return to business as usual in the years ahead.
US household wealth is estimated to have fallen by $12 trillion over the past two years due to falls in housing and stock markets, and as household wealth has fallen, consumers have naturally responded by increasing their savings rates.
US savings rates are already on the rise - reaching as high as 9 per cent this year after falling below zero in 2007.
The slowdown in consumer demand alone could leave a $500 billion a year hole in the US economy - a growth gap of some 4 per cent of GDP. To fill the growth gap we must build the foundations for future growth and put the global economy on a more stable footing.
For us simply to assume here in Australia that the formula which has generated growth in the past, led by US consumption fuelled from US debt, which has been underpinned by global capital transfers out of North-East Asia and Middle East, is not a sustainable proposition for the future.
One of the deliberations we will have on the table at the Pittsburgh summit of the G20 next month will be how do we being to craft a different global growth strategy which is sustainable for the future, and one which necessarily embraces the reconciliation of the financial imbalances between the United States and North-East Asia for the rest of the decade ahead.
That is for the world, but also for Australia it means how do we actually carve more out of global growth which may be more sluggish than it's been for decades past, for which there is only one answer - and that is a productivity growth agenda.
That's why we are embracing and targeting these five key areas:
* Regulatory and competition reform through the COAG process;
* Infrastructure investment, brought about through the leadership of the Building Australia Fund and Infrastructure Australia;
* Investment in innovation, in particular through the national high-speed broadband network;
* Skills investment, which have been championed by the Deputy Prime Minister in the Education Revolution; and
* Tax reform, as we await the deliberations of the Henry Commission of review into the Australian taxation system.
To conclude on what the private economy is up to, and I mention this to you as a word of encouragement about what is going on out there in the resources sector at the moment. Today, the Australian Government, together with the Government of Western Australia, made an important decision, and that decision was to jointly accept any long-term liability resulting from the storing of CO2 in geological formations part of the Gorgon project in WA. This is an extraordinarily large project - $50 billion.
Let me put that into context. The stimulus strategy I've just run through from the Government, spread over a number of years, cumulatively represents some 6.1 percent or thereabouts of GDP. This one resource project in Western Australia is worth $50 billion, or about 5 percent of GDP. This is critical for Australia's future.
That is why ourselves and the Liberal Government in Western Australia have worked hard to conjointly take on this responsibility. The project has not been formally concluded yet. Some remaining approvals remain to be delivered, but it is one in which we should, as a country, take confidence, assuming we can get over the final regulatory hurdles, generating some 6,000 jobs alone in the construction phase.'
To conclude, what we've done so far is embrace upon, embark upon, this strategy of nation building for recovery. We've done so by investing in stimulus, by supporting financial stability through the bank guarantees we've provided, and through our strategy for jobs and training intervention as well. The results, as I've run through before, for Australia, I think, are a good story for us to tell, but we're not out of the woods yet, and the road ahead will be long and tough, but what must unite our efforts as AiG and as the Australian Government going forward, is how do we embark now upon a building decade for productivity growth for the future.
Ladies and gentlemen, that's where AiG comes in. The work we've done so far is but the beginning. We have to not just recover from this global economic recession, we have to put in place the foundation stones, the building blocks for long-term, sustainable economic growth. That's our report card so far. The real report card is whether we can engender that productivity growth for the future, and that will only come if we the Government remain in close and strong partnership with you, the leaders of Australian business.
I thank you for your time.