PRIME MINISTER:
Thank you very much Kate and thank you all very much for such a warm welcome. To Peter Hood, President of the Australian Chamber, Kerry Weatherill, Deputy President and Tim Reed, Chief Executive of MYOB, ladies and gentlemen.
There has never been a more exciting time to be at the Australian Chamber tonight, and that’s because, well some of you are visitors, but let me tell you there has never been a more exciting time to be Australian.
You know after the last decade, over the last decade we’ve enjoyed the benefits of the mining boom, for the last decade our growth in national income, was as a result of that big lift in the terms of trade.
Of course it was productivity that delivered national income growth in the 90s.
The mining boom was almost entirely the result of dramatic growth in China. Its share of global steel production for example, increased from 15 to 45 per cent between 2000 and 2010. We were pulled through the global financial crisis not by our Australian domestic stimulus, which was overdone, but by the massive stimulus in China.
Now today Australia can no longer rely on rapid growth in commodity prices to fuel future income growth for us, and keep the budget in surplus over the cycle. The challenge for government is to ensure that the Australia of tomorrow offers even greater opportunities than today.
If our national goal is to remain a world leading economy with high quality, high wage jobs, employment opportunities for all of our children and grandchildren, and a generous safety net we must pursue innovation and focus on reinvigorating growth and productivity.
To secure this future, we need to make the right policy calls now - the right calls on the budget - to ensure fiscal sustainability, to ensure that we have the capacity to respond to future shocks.
The right calls on ensuring government delivers services as efficiently as possible, so that it can afford to pay for the services that taxpayers demand.
The right calls on tax reform, to create incentives for growth, reward for effort and sensible risk-taking.
The right calls on fostering competition and making our markets work better - providing opportunities, for those who are willing to go for them.
The right calls on trade, so Australian businesses can take advantage of the massive opportunities we have right here on our doorstep with Asia.
And the right calls on innovation, so that we can support and encourage the creation, diffusion and commercialisation of great ideas.
All Australian governments need to work together to get their own houses in order. To make sure that we deliver the social safety net and services in the most efficient way possible, and to make sure we fund those services by raising taxes in a way that minimises distortions, providing real incentives for people to work, save and invest.
Now that’s why we are approaching the upcoming Mid-Year Economic and Fiscal Outlook, MYEFO, in a thoroughly business-like fashion.
The budget has been in deficit since 2008. So some might say well let’s just go ahead and reduce the deficit by raising taxes. But just raising taxes without looking at spending is not the way to manage the nation’s finances and balance the budget. Increasing taxes will not create an enterprising, dynamic 21st century economy.
The challenge that we face is that expenditure as a percentage of GDP remains at a very high level. Now that doesn’t mean we should go out and slash and burn, cutting individual spending programs irrespective of their benefits to the community. We need to make sure that the Government gets the best value for the taxpayer’s dollar - that we spend and invest taxpayer money wisely.
For example, we’ve committed to looking at how competition principles can apply to health and other human services in the Government’s response to the Harper Review.
Now those changes aren’t about directly improving the Budget bottom line. They’re about improving growth and the quality of life, providing consumers with better information, choices and more responsive services.
The fundamental objective of the government is to grow the economy. If we can grow the economy and we will, I’m using the royal we here, I mean you, this is your enterprise which will grow the economy. What we can do is provide some incentives and get obstacles out of the way to enable you to do it. But, as the economy grows, faster than expenditure over time that deficit will shrink and be replaced by a surplus. That’s the key. Growth and jobs are my pre-occupation, they are the government’s pre-occupation.
Now as our population ages and Australians continue to demand better quality services, we have to work with the states and territories to get those important reforms right.
We need a whole of government, all governments in this. This is a big national effort to lift productivity once again.
Commodities are not going to do it for us in the next decade so where do we go? We have to go to productivity.
I’m meeting with my colleagues at the Council of Australian Governments in a few weeks’ time. The critical and leading item on that agenda is a new dialogue on economic reform.
As I have said many times, all economic reform options remain on the table. We need imaginative reform at both the Commonwealth and state levels.
Meaningful reform to address health and education funding will require a full and genuine buy-in from the states on both the structural and revenue raising issues.
So I’m looking forward to a constructive conversation at COAG about what we can do together to lift the productive and innovative capacity of the Australian economy.
We are also looking at a reform of the Australian taxation system, through the White Paper process, which aims to support innovation and growth.
Now tax reform is not an end in itself. We’re not seeking to get an economic prize here. Our tax system must be a catalyst for higher economic growth and should be the servant of our economy and its people and their businesses, not the other way around.
That means that our tax system – and any future reform of it – must reflect our common values.
Australia is an egalitarian, fair society. So any changes to the tax system must be seen to be fair overall. But we are also a nation of hard workers, innovators and doers.
So it is absolutely vital that any changes to our tax system reward enterprise effort and success.
So we’re looking at how our tax system can be improved, so that we back Australians when they work, save and invest.
We’re examining personal tax particularly carefully.
As the average wage earner moves into the second highest tax bracket, there is a very real risk that current tax settings will unduly discourage participation, effort and innovation.
We’re also looking at company tax.
Australia is located in the most competitive region in the world.
In a world of highly mobile international capital, it’s important for us to continue to have the right company tax settings to attract investment and maximise growth and jobs.
Now we need your help in our tax reform agenda.
Discussions like the one you’re having tonight are vital to the process.
We are not playing you may have noticed if you’ve followed Question Time, the rule in, rule out game.
Tax reform is a complicated exercise and I assure you that we will work with the whole community to make sure that we get the balance right.
The problem with the approach, with all due respect to our opponents in the parliament, the problem with their approach, and this is the mistake Wayne Swan made with the Henry tax paper some years ago, is that if you rule this out and that out, essentially salami slice the issue before you’ve had a good review of it, you end up with no options at all.
We’ve got to be able to look at the whole spectrum of options and ideas. You see it seems to me that effective economic reform, and this particularly applies to tax, is built on at least two pillars. One of them is, and the most important is, that the public see that the government believes that the changes are designed to deliver stronger growth, better jobs, more opportunity, higher investment. It’s got to be seen to be pro-growth; otherwise what’s the point of making a change.
But you know good intentions are one thing, we’ve got to make sure we make the right decision. You the public have got to see you’ve made the right decision and so the second pillar of legitimacy if you like for major reform is that you have gone through a proper process and considered everything.
If you cut one option after another off, rule this out, rule that out, rule something else out even things that are, fantastical is probably a too strong a word, you know what I mean, even proposals that are highly improbable that anyone would have got if you start ruling stuff out then people will say well hang on, we didn’t really look at this thoughtfully, you didn’t look at this with an open mind you didn’t consider all the options.
So it’s critical that we’re seen to be working to drive jobs and growth and that we’re doing so with an open mind and in a thoroughly consultative fashion. I hope that explains the approach that we’re taking to this process.
So I want to now just turn to the response to the Financial System Inquiry and the Harper Review specifically which we were just talking about at our table.
Governments also have a role to play in putting the policy settings in place so that businesses and households can make the best decisions about working, saving and investing. That’s what it’s all about.
My Government is undertaking a significant reform agenda to make sure that the markets are working as efficiently as possible.
The Government response to the Murray Financial System Inquiry will build a more resilient and flexible financial system in Australia.
Our reforms set up a blueprint for the financial system to ensure that we can remain confident in its strength, and so that financial institutions can continue to respond effectively to ongoing innovation in this vital sector.
For example, the Government will be consulting on legislation to support crowd sourced debt financing.
You know crowd sourced equity financing is very close to realisation, what about crowd sourced debt financing? We will also develop legislation to reduce disclosure requirements for issuers of simple corporate bonds.
Our response to the Harper Review will encourage competition across a whole range of existing and potential markets.
As the Treasurer, Scott Morrison, announced yesterday, the government’s proposed reforms promise the opportunity for smarter, more appropriate regulation to encourage the evolution of markets in a way that promotes growth, markets which will work in the long-term interests of consumers, foster diversity, choice and responsiveness, and encourage innovation and entrepreneurship. Again we were talking earlier about the challenge of planning laws, why is that housing is less affordable in Sydney than any other city, well I can tell you.
One reason is that, if anyone involved in development here would well understand, one reason is it is so much harder and takes so much longer to get a DA.
I mean the truth is that all of this regulation is holding back economic growth, it’s making housing less affordable and it’s something we need to have a very serious engagement with the states about.
Let me turn now to trade. I have spoken tonight about the new and exciting landscape of opportunity.
But in which specific sectors will new opportunities arise? What developments will drive our future economic growth? Where will the jobs come from?
Now many are likely to be found right on our doorstep.
Forty years ago China barely participated in the global economy. Over the last decade I should say, China’s share of world output has nearly tripled and on some measures it’s now the world's single largest national economy.
Now I’m sure most of you are under 40, there are a handful of us over 40 and in our lifetimes, China has gone from barely registering on the global economy to being the single largest nation economy. We have never lived, we, human beings in all of the history on human development, have never lived in a time of faster or more rapid economic growth than we live in today.
The opportunities have never been as great, the pace of disruption has never been as rapid, the challenges have never been as confounding for many businesses. That is why freedom is the answer.
That is why you need free markets at home and free trade abroad because you’ve got to have the ability to move because you don’t know what the next opportunity is, you don’t know where the next challenge is coming from.
You have to be, we talk about innovation, I talk about innovation a lot, everybody has to be innovative, if you’re not, it’s like somebody trying to stay on a bicycle when they’ve stopped peddling.
Consider this, China’s online commerce market is larger in dollar terms than that of the United States and obviously has a long way to go.
For the first time in more than 300 years, half of the world’s middle class are living in Asia.
The Trans Pacific Partnership, the China Australia Free Trade Agreement, the Japan and Korea Free Trade Agreements provide unprecedented access for enterprising Australians to the world’s largest, most dynamic economies.
Those agreements are also an important first step along the road to further tax reform.
After all, tariffs are just taxes on goods and services that are produced overseas.
Under the China Australia Free Trade Agreement, we’ve committed to eliminating our remaining tariffs on imports from China.
That will mean reduced input costs for our small and medium sized businesses and lower prices for many, if not most, consumer goods.
China is also lowering its tariffs on our exports.
Increased openness and expanded trade with the rest of the world promise to enhance the forces of competition and provide a vital and timely boost to our productivity growth.
History has shown us that free trade is one of the great generators of economic opportunity.
The next wave of demand from China will be for consumer goods and services where our comparative advantage, relative to other countries, may not be as strong as it is in mining.
But there is a huge opportunity for innovative Australian firms and entrepreneurs to capture a share of this dynamic market.
The enthusiasm I have seen, including for example in Tasmania, it is a state that has had hard times from time to time in maintaining strong economic growth. Tasmania’s unemployment is lower than the Australian average and so much of that growth in jobs there is driven by exports and so much of that is driven by the validation of the good housekeeping seal of approval that comes from the China Australia Free Trade Agreement, which is effective even before it has technically come into force.
Now all of this makes the potential gains from further microeconomic reform that I talked about earlier, all the greater.
In just two weeks’ time, the government will deliver an Innovation Statement, which is the first down-payment to help create a dynamic, enterprising, 21st century economy.
The recent increase in venture capital fund raisings in Australia is a very encouraging sign.
But we need to improve collaboration across sectors and how we increase the appetite for capital investment risk at the early stages.
Australia produces world-class research - but we are peculiarly challenged at converting that research output into commercial output.
Our level of collaboration between primary research institutions and business is on one measure the second worst in the OECD. Now, we can change that, we can absolutely bring about change.
Our theoretical and applied researchers in the private sector and in our universities must continue the painstaking work that pushes back the research frontier.
Developing those raw inputs of innovation – the basic and applied research that leads to new knowledge, new ideas and better ways of doing things – are vital ingredients in the productivity growth recipe.
But for new ideas, knowledge and innovation to ultimately add economic value, our universities must become more commercially agile.
And our businesses must be sufficiently responsive to exploit and consolidate the competitive advantages that can flow from innovation.
Our product designers, market researchers, advertisers, business strategists and owners – small, medium and large – need to be ready to make the necessary investments. To employ the right people to do the job, to develop the sales pitch and execute the deal, and to match the visions of our entrepreneurs with consumer demand at home and abroad.
Everything my Government is doing has the objective of creating a 21st century economy to provide greater opportunities for all Australians who are willing to seize them.
What I have outlined tonight is a broad agenda for securing our future prosperity: By approaching the budget in a business-like fashion, by engaging with the states on further reform, by improving our tax system, by undertaking further microeconomic reform across a range of sectors, by reducing trade barriers and by encouraging further innovation.
Our businesses and entrepreneurs, all of you, are the Australians who have that unique vision; who become inspired by a new idea when your competitors simply cannot see it, or just don’t get it.
You are the Australians who back yourselves and seize new opportunities - when your competitive rivals fail to act.
You are the Australians who take a risk and back yourselves - when others shy away.
And you are the Australians who, when you falter, pick yourselves up, dust yourselves off and have another go - when others would simply give up and go home.
Now in this room tonight we have many of our leading entrepreneurs, you are the key to driving the innovative enterprises that will deliver growth and jobs into the future.
You embody the very best of the Australian spirit - that entrepreneurial ethos, that business ethos which has been responsible for so much of our economic prosperity and which will drive much of it in the future.
To secure that future, we need to work together and so I seek of you, of groups like the Australian Chamber, and you have been an enormous help to government. You have been an enormous help to our policy development process.
Kate Carnell, all of your team, thank you so much. I want to thank you for your thoughtful contributions, your very progressive contributions to the process of policy development.
You know that we are seeking to ensure that we remain and become even more a high wage, generous social welfare net, a first world innovative 21st century economy. That is the goal.
Everything I do, everything we do, everything our team does is to drive high growth and more and better jobs.
Thank you so much for your support. Thank you for your enthusiasm. Thank you for your excitement.
Thank you, above all, for your confidence in Australia.