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Transcript 17466

Reform is not easy, but it works. Speech to the Queensland Media Club

Photo of Gillard, Julia

Gillard, Julia

Period of Service: 24/06/2010 to 27/06/2013

More information about Gillard, Julia on The National Archive website.

Release Date: 12/10/2010

Release Type: Education

Transcript ID: 17466


It's always good to be in Brisbane - the perfect place to discuss my plan for a strong economy - and always good to be here at the Queensland Media Club.

You know you're back in Queensland when the "southern media" means the Courier-Mail.

Queensland's the perfect place to say this: I want all Australians to benefit from a strong economy, no matter where they live.

Friends, the day I came to Brisbane to launch Labor's election campaign, I came with two tasks: first, to outline my Government's policy plan to Australians as voters; and secondly, to outline my values as a person to Australians as people.

That's why I started that day by talking about the things I learned from my parents in my family home; the things I still believe in; the things that drive me on.

As I said on that day:

The importance of hard work - fulfilling the obligation you owe to yourself and to others to earn your keep and do your best.

A fair go through a great quality education, which with rigour and discipline enables a child to develop the character and skills they will need for a successful life.

The need to respect and value other people, an obligation that extends from simple courtesy and respect to supporting each other in good times and in bad.

So yes, I'm back here in Brisbane today to tell you about what my Government is doing to keep the economy strong through our policies and plans, and I'm also here to tell you why my government is doing it:

Because we are a Labor Government; a reforming Labor Government, in the great tradition of previous Labor Governments.

Because we believe in hard work, a fair go through education, and respect.

Because we know that we can't deliver on any of those values without a strong economy and because we know that we can't deliver on a strong economy without economic reform: significant fiscal consolidation; leveraging new investment in human capital; restructuring markets untouched by earlier waves of reform; right through to economic reforms in areas as diverse as carbon, water, and skills.

So where does our economy stand today?

The facts of our economy are good news for working Australians.

Australia beat the global recession.

Growth is over 3 per cent, business investment is surging, almost 600,000 jobs created since Labor came to office, with 350 000 jobs last year alone, and all with our Budget coming back to surplus by 2013, one of the strongest budget positions in the world.

Australia has emerged from the global financial crisis as the world's strongest advanced economy.

That was no accident. It was a partnership between a productive people and a progressive Government.

I was pressed about just this point when I met other world leaders last week - government heads from Japan and Korea, Germany and France all eager to hear how we did it.

I told them we did two things right.

One, when the crisis hit, we made good decisions. We made a timely, targeted investment in jobs.

We did this in tandem with effective monetary policy and we learned from recessions of the past. We invested in skills in the downturn, so we could capitalise on the recovery.

Two, when the crisis hit, we had the benefit of 25 years of good decisions behind us. 25 years of hard won economic reforms, most particularly the reforms of Hawke and Keating, reforms which internationalised our economy, drove competition in domestic markets and delivered surplus budgets - like the opening up of Australia's markets for goods and services, a reform that was continued by the Howard Government.

Reforms which mean that our open economy's ability to resist global shocks has become the envy of the world.

I want to dwell on this point about learning from past recessions and investing in skills, because it illustrates much about how a Labor Government should work.

Take the early 1990s recession. Apprenticeship starts collapsed. They fell by one third in just two years. What's worse, they took 13 years to recover to pre-recession levels, leading to skills shortages during the recovery and long-term joblessness even during periods of sustained growth.

As Education Minister, I was not going to allow that to happen again, so in 2008 and 2009, the Government invested in skills as the downturn hit Australia and cost jobs, and yes, like in the early 1990s we had a drop in training starts as the down-turn bit - falling nearly one fifth in 2008-2009. This time though, it has taken just two years to bounce back, and today, commencements in trade apprenticeships and traineeships are not just back to where they stood before the global financial crisis - they are the highest ever recorded.

The result is that unlike in previous downturns, we have not lost a generation of skilled Australians, so through the hard work of all Australians, the Government's good decisions of 2008 and 2009, and the legacy of a generation of reform we did beat the global recession.

The global economy is recovering, and Australia has played its part, but we still face domestic and global challenges. As the International Monetary Fund's release of additional chapters of the Global Financial Stability Report highlighted last week, conditions in the global financial system have the potential to jump from benign to crisis mode very rapidly.

That's why we must keep pushing for global financial reform, with our strong financial system an important example to the world.

We are fortunate that the resource-hungry emerging economies of Asia are growing strongly, that we have the right resources, and we are in the right region, but this good fortune brings challenges of its own.

If the emerging Asian economies continue to grow, while Europe and the US stagnate, then the gap between global demand for our mining and energy compared to our manufactured goods and our services will continue to widen, and while consumers and capital-intensive industries reap real benefits from a strong dollar, the upward pressure on our currency makes life even harder for exporters of services and manufactured and farm goods.

Commodity exporters have served our country tremendously well, raising the living standards of every Australian, but an economy that becomes too dependent on any one sector takes too big a risk.

Even while demand for commodities remains strong, we face the risk of a "patchwork economy" - an economy where some parts of the country boom while others go backwards, where some regions cry out for skilled labour while in others, Australians live aimless lives without skills, work or hope.

And if demand for commodities moderates over time, then we will only remain strong if we have ensured that our economic growth is broadly based: growth across all sectors - in services, manufacturing and agriculture, not just mining and resources; growth across the whole country - not just in a few states, and not just in a few cities or regions; growth through our whole society - so everyone who is doing the work shares in the gains; and growth sustained over time - without putting upward pressure on inflation and interest rates.

In the global financial crisis, we steered our economy away from the ditch.

Now in the recovery, we have to lift the speed limit of the economy again, so we will grow for the future with more hard work of Australians, more good decisions by the Government - but that's not enough. I know we must build a new legacy of reform for the future.

Governments don't do economic reform because it feels good. We do it because it works.

When you get economic reform right, you fuel the drivers of sustainable long term economic growth. Reform lifts participation, and greater participation will ease the constraints on growth from the increasing number of Australians who no longer work.

Reform also lifts productivity, and this is the heart of the matter. During the 1990s, productivity growth reached 2.1 per cent following the reforms of the Hawke-Keating Governments, but under the Howard Government, productivity growth fell to just 1.4 per cent in the 2000s.

Reform slowed. Productivity growth slowed.

Treasury analysis finds that if we can get productivity growth up to what it was in the 1990s - up to where it stood following the Hawke-Keating period - our economy could grow an extra 15 per cent by 2050.

That would add an extra $568 billion to Australia's economy in that year. This would be the equivalent of raising the average living standard of each Australian by $16,000 a year.

Reform is not easy - but it works, and for reform to be real, I know every Government decision matters and every dollar counts.

A rigorous, disciplined drive for reform has to inform all our economic decision-making.

This is a key point: one or two big ticket reforms is not enough. In Government, we must walk the reform road every day, and minority Government is no excuse.

Some of our reform policies you won't have read much about, like putting road user charges on heavy vehicles, and establishing national transport regulation to harmonise laws across state borders so the trucking industry pays its fair share of road construction and maintenance costs incurred by governments.

Some policies have delivered big controversies, like the enormous step of structurally separating Telstra as part of delivering a national broadband network. Australia's telecommunications sector represents real unfinished business in our economic reform agenda.

Successive Governments left Australia with a privatised vertically integrated monopoly; inadequate competition; consumers paying higher prices.

The Government's legislation and National Broadband Network will achieve the structural separation of retail and wholesale arms in the telecommunications sector - driving competition and a better deal for consumers.

In Government, we've been delivering, but we know there is more to do.

First, we must deliver fiscal consolidation. This has always been the first step in economic reform. That was true in the 1980s, it was true in the 1990s. It's especially important for us now.

Just as we made a targeted and timely investment in jobs during the downturn, so we must make targeted and timely savings during the recovery. Just as our strong budget position in 2008 allowed us to navigate a difficult global challenge, so we must strengthen our budget position now to deal with the next global challenge to arise.

We come to the consolidation task well placed. Australia's debt is lower than any major advanced economy - our net debt will peak at 6 per cent of GDP in 2011-12 - equivalent to someone who earns $100,000 a year taking out a $6,000 loan.

This compares to the net debt of the G7 economies - which will reach 90 per cent of GDP in 2015.

As a Government, we are up to the task. We have already taken savings decisions worth $84 billion since coming to office - but there is no room for complacency. That is why the Government is undergoing the most significant fiscal consolidation in at least 50 years.

Between 2009-10 and 2012-13, the budget balance will tighten by four and a half per cent of GDP. That's a shift in the Budget bottom line of almost $60 billion.

This is an extraordinary fiscal turnaround in a 3-year period - without slashing and burning services; with record investments in health and education; and it will deliver a Budget surplus by 2013.

Beyond fiscal consolidation, I am ambitious for reform. Reform is always tough, but it's particularly tough in a tight fiscal environment.

When Governments make big decisions to restructure sectors of the economy, inevitably winner and losers emerge. Some governments have the freedom to throw cash at those who lose from reform. It's clear mine won't be one of them.

Frankly, budget scarcity is a good discipline on Government. I want the Government to look at each decision from every angle: to hold them up to the light; to examine every possibility and every question; to make every dollar go as far as it can.

Budget scarcity is also a good discipline on policy advocates as well. It forces everyone - business, unions, welfare and commentators - to recognise the real trade-offs which sustain economic growth.

The Government has a job to do on the supply side of the economy and we'll walk the reform road every day:

- cutting the company tax rate to make our businesses more competitive; better sharing the benefits of our commodity boom; superannuation reform to lift national savings and support domestic investment;- investing in roads, rail and ports, and the National Broadband Network to build productivity and economic capacity; and- investing in skills in the sectors that need them most.

That's why we have a $200 million Critical Skills Investment Fund. Co-funded by industry, it will plan for and meet Australia's emerging skills needs in expanding sectors like resources, construction, renewable energy and infrastructure and it will minimise the effects on other industries that lose labour to these growing sectors.We'll work to meet the needs of the highest-growth sectors. As well, through a broad and balanced investment, we'll work to ensure that skilled workers are there across the economy and across the country.

With the additional Foundation Skills Package, the Government will invest a record $490 million to improve adult language, literacy and numeracy and access to pre-vocational training programs over 2010-13.A Quality Skills Incentive fund for TAFE and other registered training organisations will deliver $130 million directly to providers in return for better quality of teaching and learning, improve outcomes such as completions and greater participation by Australians less likely to engage in training.

We've created incentives for individuals so they'll stay in training, so there are solutions for the next several years.

A new Trade Apprentices Income Bonus will provide apprentices with $1,700 in additional tax free support to encourage higher completion rates, bringing total support to $5,500 tax free over the life of an apprenticeship.

A new national trade apprenticeship mentoring program to arrest attrition rates will begin next year, with an investment of $20 million.

And National Trade Cadetships will make sure students at every school who want to pursue a career in the trades have a clearly defined pathway, equal in quality, value and rigour to more traditional academic pursuits.

And I want to take the market-based tools that have made our financial and industrial capital so much more productive and apply them to our human capital: competition between producers; choice and information for consumers; and incentive structures which drive efficiency and innovation.

My ambitions for reform range more widely than those areas considered part of the traditional economic agenda, so my Government is also driving reform of Australia's family support system. Replacing obstacles with opportunity, and rewarding positive behavioural change, is a familiar family payments reform to improve participation of adults in the workforce.

Our drive goes further, leveraging family payments to invest in the children in the system as well, building their human capital - so parents of four year olds receiving income support will have to take their kids to undertake a Healthy Kids Check or else miss out on financial assistance and parents of children aged 16 to 18 receiving Family Tax Benefit Part A will get increased support if their children finish Year 12 or the vocational equivalent.

I also want to take the market-based tools that have made our domestic product markets and many private service sectors so much more efficient, and apply them to our health and education sectors, so my Government is driving structural reform of Australia's health and education markets.

These social services are large economic sectors in their own right. Efficient resource allocation in such large sectors of our economy has been too long neglected as an agenda for reform.

More than 10 per cent of Australia's workforce is in the health care sector. This makes health care Australia's biggest employment sector.

Our structural reforms will drive efficiency across the hospital system. Instead of states receiving block grants, hospitals will be funded for each activity they undertake. This will be based on the fair and efficient price for each service, set by an umpire with a level of independence akin to the Reserve Bank.

Pricing hospital services will also help identify under-performing hospitals. That means under-performance can be remedied and the best practices of better-performing hospitals shared.

Our structural reforms will drive quality and efficiency across the education system as well:

- providing parents with rich, comparative information about the performance of the schools that their children do or may attend;- paying the top 10 per cent of teachers 10 per cent more - and providing financial rewards to the nation's most improved schools;- introducing a national curriculum;- uncapping university places so government funding follows student demand;- national regulators focussed on quality.

And reform doesn't end there. I could talk more about our reforms in pricing carbon, or water allocations. It's an ambitious agenda for the Government I lead.

Friends, economic reform is good for our economy and it's good for our society. It makes our economy stronger - and it shares opportunity with more people. It's not easy. But it works.

Using market tools to improve social outcomes; doing the hard work of designing new markets for social services, looking at the needs they serve, and then methodically working to create the conditions in which markets serve the public interest - through vigorous competition, transparent information, a focus on quality, the freedom to make choices and a responsiveness to the needs of service users.

That's the future of Australian reform.

The Labor Government I lead puts reform at the centre of all our economic decisions, and I also believe the way we approach reform will be a case study for the best way to govern - methodical; making steady progress on our plans, day by day, week by week; working hard for all Australians, wherever they live; modernising; preparing Australia for the long-term with modern market-based solutions; carefully weighing the hard decisions, at the right time, for the right reasons; driven by our values - hard work, a fair go through education, respect, and always keeping our economy strong.

Transcript 17466