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Thank you very much David for those kind words, my parliamentary colleagues, ladies and gentlemen. I particularly welcome this opportunity to address CEDA tonight, to canvass some of the Government's longer term strategic objectives and also as it happens to make an important announcement regarding our defence and strategic dispositions and also to outline broadly the approach that we are going to take in two very important areas requiring long term policy planning, namely water and energy.
But before coming to that let me start with some important points of philosophy to set the context for what the Government has done and continues to do. I think all governments need a clear understanding of the values that are important to Australians. And I think governments must identify national priorities so that they can develop coherent, long-term programmes based on these values. I think Australians want from their governments and believe in relation to themselves four important things. Australians do believe in self-reliance. We largely want to be self-reliant individuals with an equal measure of rights and responsibilities. We believe very much in what we call in our own colloquial way a fair go for all Australians. We do want to ensure a equality of opportunity and equality of treatment for all Australians and whatever our starting point, each one of us deserves an equal chance to succeed and a leg up when we hit troubles. We believe in pulling together as a community. And this willingness to unite and help others is ingrained in the Australian culture. And as a government we have a partnership between the Government and the community through the social coalition at the heart of many of our policy decisions. And fourthly we believe in having a go. Australians do rise to the occasion on the sports field, in the broadrooms, overseas, indeed everywhere. And calculated risk taking, creativity and having the courage of your convictions is very much part of the Australian psyche. We do seek a strong, fair and decent Australia based on these values. And in recent days in responding to the Bali tragedy, we as a nation have seen those great values on display. We have seen the compassion, mateship and unity like I've not seen in my political lifetime. And I have to say it's been one of the most inspiring and warming experiences of my life.
Another strong conviction that I brought to office was that Australians needed and wanted a government prepared to carry out vital reforms. And that suited me and it suited my senior colleagues, I've never seen any point in being in government unless you use the opportunity to change things for the better, where change is needed.
Modern reforming governments face two areas of policy where they must get things right. They must oversee economic management and they must care for the defence and the security of the nation. And on behalf of the Government I can report tonight a substantial and continuing record of progress in our management of both of these areas. Success in economic management and national security underpin the quality of Australian life. And it's worth reflecting on some of the economic data. Our economy continues to perform very well. It has grown at a solid annual rate on average of 3.8 per cent per annum since March of 1996. Total employment under the Coalition Government has grown by one than one million. We have delivered fundamental labour market reform, historically low interest rates, a better tax system and significant personal and business tax reductions. Headline inflation has averaged a low 2.3 per cent since March of 1996. We've cut Commonwealth debt so that at present Commonwealth Government net debt stands at 5 per cent of our Gross Domestic Product against an OECD average of about 45 per cent. This record of economic management underpins our capacity to perform the other core responsibility of government, that's the defence and the security of Australia.
Defence and national security was already a high priority for my Government well before we found ourselves living through a dramatically changing environment. Mounting a strong, focussed and resolute defence of Australia and our national interests is the most critical continuing challenge that we face. Not since the early 1960s have we faced a more complex and uncertain region. Some trends, particularly the emergence of terrorism clearly run deeply counter to our interests. And Australia's national security will therefore require the highest priority and continuous review by the Government. And I'll return to that in a moment.
But before I do that I want to highlight four important points about the business of making policy. Firstly, let me stress that our strategic programme for the years ahead is made up of both whole of government issues that cross many portfolio areas and some of the more strategic issues often covered by a single portfolio. A large part of our strategic policy agenda centres on the more focused policy areas. New agreements with the States on health, disability and housing, the White Paper on Foreign Affairs and Trade, the Dawson Review of the Trade Practices Act and our ongoing tax reform programme. They're all on our current agenda. And only last week we importantly added the negotiation of a Free Trade Agreement with the United States, if achieved of enormous long term value and significance to our economy. And John Uhrig's review of corporate governance of statutory authorities.
The second point about policy making is that we've set out to strengthen the structures and processes of Cabinet so that we can focus more on the things that are very important whilst ensuring that the more second order items are not treated in a peremptory fashion.
Thirdly, I think it's important to recognise that different governments have different styles of government. Our predecessors on office favoured summits, accords with the union movement and summits with peak organisations. We take a different approach, one more open and broadly consultative and drawing on our concept of a social coalition.
Finally, and most importantly, a key requirement of strategic management is flexibility, particularly the ability, and the courage, to move resources to where they are most needed. All of this is, may I say, made harder by the brand of opportunism so much a current feature of the Senate's approach to fiscal measures. Opposition parties in the Senate continue to adopt a cherry-picking approach to many of our policies and downright opposition to those that are needed to improve the long term sustainability of particular programmes. And I think particularly of the Pharmaceutical Benefits Scheme, envied around the world as providing a very valuable safety net for people, essential for modest reform and change in order to maintain its viability against the background of an ageing Australian population.
I now want to turn to areas that Cabinet has agreed are key whole of government strategic policy issues for the years immediately ahead of us. And our focus has been on those complex whole of government issues which engage the attention of a number of ministers and different agencies. We have concluded as a result of a recent assessment that the whole of government priorities for new policy making over the next year and beyond are as follows: national security and defence; balancing work and family life; the demography of Australia; science and innovation; education; sustainable environment; energy; rural and regional affairs; and transport. I have not presented these in any particular order. Clearly, national security is a more fundamental than any of the others, but there is no pecking order, they all have a special importance of their own. The first key whole of government strategic area is obviously national security and defence. And faced with the twin dangers of rising international terrorism and the proliferation of weapons of mass destruction, these are challenging times for countries like Australia that value freedom and tolerance. I know I speak for everyone in saying that this Government and this nation will not be intimidated by terrorist threats. Our support for Australia's Defence Forces has always been strong. And in the 2000 White Paper on Defence we committed to building a more combat-capable Defence Force. And we agreed to additional defence spending of $27 billion over this decade.
As you know Australian soldiers from the Special Air Service Regiment have been deployed continuously in Afghanistan now for almost a year as part of our contribution to the war against terrorism. They have played an important part in defeating the Taliban and severely disrupting the Al-Qaeda presence. Their contribution has been acclaimed by United States political and military leaders. And they make all Australians feel very proud. Tragically, the contribution has not been without cost with one member of the regiment, Sergeant Andrew Russell, killed and another seriously injured in land-mine incidents.
Largely as a result of coalition military efforts, the tasks for Australian special forces in Afghanistan are now much reduced. The focus of military operations is shifting towards support for reconstruction and institution building. These efforts are crucial for the future of Afghanistan but do not require the same level of involvement by our highly trained Special Air Service Regiment. Therefore the Government has decided on the advice of the Chief of Defence Force, General Cosgrove, that this, the third rotation to Afghanistan, will complete Australia's special forces contribution. The SASR Task Group will begin withdrawing from Afghanistan in late November, and most will return to Australia before Christmas, allowing them to celebrate the holiday season with their families. On behalf of all Australians I want to thank them for their professional and highly effective contribution.
The RAAF deployments of tanker aircraft to Kyrgyzstan and fighter aircraft to Diego Garcia have also been successfully completed. The Bali atrocity has only strengthened our resolve to fight and defeat global terrorism. Australia will continue to make a strong military contribution to the international coalition. We still have two frigates deployed with the Multinational Interception Force in the Persian Gulf, and two P-3C maritime surveillance aircraft will join coalition forces in the region from January 2003.
Following the terrorist attacks in the United States, we strengthened Australia's counter-terrorism arrangements at a cost of $1.3 billion over five years. This included enhancements of a second Special Forces Tactical Assault Group and a permanent Incident Response Regiment to improve Defence's ability to respond to chemical, biological, nuclear and other incidents. We introduced a counter-terrorism legislation package, much of which became law in July. The remaining bill, the ASIO Legislation Amendment Bill, will enhance ASIO's ability to gather intelligence about possible terrorist attacks. At the Leaders' Summit held on the 5th April this year, I agreed with Premiers and Chief Ministers to establish the Australian Crime Commission. This will improve information exchange between the various law enforcement agencies on the links between organised crime and terrorist organisations. On the 24th October I signed an inter-governmental agreement with the Premiers and Chief Ministers on counter-terrorism cooperation. In addition, the States will refer powers to the Commonwealth to support federal counter-terrorism offences with national application. After the Bali atrocity, I commissioned a further review of Commonwealth counter-terrorism arrangements, I announced a number of initial and urgent measures to be implemented as a result of that Review. This was but the first part of a continuing process.
The international community, and that of course includes Australia, cannot walk away from the challenge posed at present by Iraq. Some may, and indeed, have questioned this. They ask why is it that there is such a focus on Iraq when other countries, such as North Korea, possess weapons of mass destruction. The crucial difference is that Iraq has form. Iraq has used weapons of mass destruction, not only against a section of her own population but also against Iranian forces during the Iraq-Iran war. Moreover Iraq has been aggressive towards her neighbours, as evidenced by her invasion of Kuwait in 1990 and missile attacks on Saudi Arabia, Israel and Bahrain. Iraq supports Palestinian suicide bombers, who cause such death and destruction in Israel. Iraq also has a long history of giving support to terrorist groups. What is more Iraq has been in continuous breach of resolutions of the United Nations Security Council for more than a decade.
In the current international climate made so stressful by the almost constant terrorist threats, the ultimate nightmare must surely be the possibility of weapons of mass destruction falling into the hands of terrorist groups. That is a powerful additional reason why a country such as Iraq, which has previously been willing to maliciously use weapons of mass destruction, should have those weapons denied to it.The Australian Government has strongly endorsed the recent United Nations Security Council Resolution on Iraq. This resolution reinforces the demand of the international community that Iraq eliminate its weapons of mass destruction. It calls for a comprehensive programme of weapons inspection.
It is now up to Iraq. It can choose to co-operate fully with the weapons inspectors and remove its WMD capabilities. This would deliver a peaceful outcome and offers the best chance to avoid armed conflict. Iraq should fully understand that if it does not meet its clearly understood international obligations, it must face the consequences. All Australians want a peaceful resolution and hope, if at all possible, that no military action will be required. And, as previously stated, if the Australian Government were to decide to commit Australian military forces to action involving Iraq, there would be a full Parliamentary debate on that decision.
The Defence Minister and I have indicated on earlier occasions that Australian military personnel have been attached to the American Military command structure for some time. They and others have had contingency discussions with the United States as a matter of prudent military planning. During these discussions, it has been made clear that any Australian contribution in a new theatre such as Iraq would need to be within our resources and not detract from immediate defence and national security needs. As a broad indicator, it has been noted that our contributions to operations in and around Afghanistan has met that basic test. As the Australian public would expect the Australian Defence Force itself has made appropriate contingency arrangements.
In my pre-election speeches to the National Press Club in August and November of last year, I identified the problem for families, particularly young families, of balancing work and family life as a key policy challenge. The Government in 2000, through the tax package and elsewhere, had already brought in significant changes to support families, particularly with the introduction of the Family Tax Benefits and Child Care Benefits as part of A New Tax System. Our key policy goal in this area is to facilitate choice for families and not mandate particular behaviour. We need to respect the different priorities that individual families have and the different choices that they want to make. I have on other occasions described this issue as a barbeque stopper. I find in the context of social policy no issue as I move around Australia quite excites the lively interests of different generations and not just those with young children in trying to achieve a balance between work and family. We have already done much, the solution to further challenge in this area will not be bound up with one particular policy decision and I've established an inter-departmental Taskforce chaired by my Department to review all of the options that might better facilitate choice for families in balancing their work and family lives. We're also developing a National Agenda for Early Childhood. Research indicates that in appropriate cases very early intervention, young children can make an enormous difference to their prospects later in life.
The dramatic changes in the structure and the composition of our population present many challenges as well as opportunities for our country. The Intergenerational Report, released by Peter Costello with the last Budget, was a very important step in recognising and preparing for population ageing issues. The report revealed that although Australia was relatively well placed compared with other OECD countries we must act to ensure we maintain this advantage. The Government believes that the three pillars which underpin our retirement incomes policy remain relevant in the future. They are a targeted safety net age pension payment, compulsory private savings through the Superannuation Guarantee, and opportunities for individuals to save voluntarily, backed by tax concessions that will exceed $10 billion in the current financial year. In maximising labour force participation, it is important that the skills and experience of older Australians are fully utilised and that the social safety net is focused on those in need, yet does not deter participation and self-reliance. It is worth interpolating here that the participation rate in the age cohort of 55 to 64 in Australia is significantly lower than the participation rate for the same age cohort in comparable OECD countries.
Let me turn to an equally vital area of Government strategic policy interest, and that is science and innovation. Investment in science and innovation is an investment in Australia's economic and social prosperity. New knowledge and new ways of doing science enable us to push the boundary of what is possible with our resources and help build solutions to issues in areas such as health, the environment and industrial development. This is why, at the beginning of last year, we put in place a $3 billion, five year strategy called Backing Australia's Ability, the largest commitment to science and innovation by any Australian government. Shortly I will announce the Government's first set of national research priorities. These will integrate Australia's science and research effort even more closely with the community's economic, social and environmental goals. This is the first time an Australian government has implemented a national, coordinated and strategic approach to setting research priorities. The next step is to take stock of the state of Australian science. And I announce tonight that I've asked the Minister for Education, Science and Training, Dr Nelson, to undertake a major initiative in mapping Australia's science and innovation activities across the public and private sectors.Such a comprehensive picture of Australian science surprisingly for the year 2002 does not exist. Yet it will be fundamental in planning the future strategic direction for science in this country. Dr Nelson will conduct this exercise in cooperation with state and territory governments, industry and the research community and other interested parties.
Education, more broadly, is naturally one of the Government's highest national priorities. No issue could be more important to Australia's future than creating the best learning and development opportunities for people of all ages. Responsibility for education is, as you know, divided between the States and Federal Government and there are many different options for primary, secondary and tertiary education. We expect this conglomerate system to produce people with the right mix of skills, values and trained abilities that Australia needs for the future. Dr Nelson, as you know, has conducted an extensive review of higher education over the second half of this year. This is a very critical sector for Australia, and one that produces the skills, talent and capacity for innovation the country needs to sustain economic growth and build a better society into the future. We are determined to provide an environment in which universities can deliver superb teaching, engage in scholarship and undertake world class research. As reforms are developed, we will be guided by four key principles - diversity, quality, equity and sustainability. We need a higher education system that is diverse in its specialisations and objectives, is characterised by exceptional quality and high standards, that provides all Australians with the opportunity of a higher education experience, and is sustainable not just three or four years on, but for the next 20 to 30 years. I'm very encouraged by the quality of the ideas that are coming forward from Dr Nelson's review, which the Government will consider in detail in the context of the next budget.
Our use of natural resources must be put on a sustainable basis for future generations. After the election I established a Sustainable Environment Committee of Cabinet, which I chair, which brings together the strands of natural resource issues and making sure the costs and benefits of proposals are properly weighed. There are few issues more important to our nation than water reform. In our last term of office, our focus was on the water salinity problem and we have been working hard in that area through the National Action Plan for Salinity and Water Quality. There is still a great deal to be done on the salinity problem, but we are beginning to make progress and we're widening our focus now to also address the broader question of the efficient and sustainable use of Australia's water resources. The Government believes very strongly that clearly defined and nationally recognised property rights for water are fundamental to delivering the best outcome for efficient and sustainable water use. There is still a way to go here. It is, if you will, a twenty first century equivalent of the old rail gauge problem. At present the States and Territories have separate approaches to managing water property rights. What is needed is a national approach that creates consistency across our internal borders. Neither our river systems nor indeed the Great Artesian Basin recognises State borders.
At the December meeting of heads of government, with the Premiers and the Chief Ministers, I will outline the Government's key principles for achieving sustainable water management. This will include the urgent need to accelerate reform to create more certainty over water access rights, better trading regimes, and adjustment assistance for those severely affected by the transition to reduced water access. When competition payments were established in April 1995, it was understood that the monies available, which under the agreement totalled an estimated $5 billion dollars over the 10-year period, it was understand that those monies could be used to aid the process of adjustment. Significant progress has been made across the board, including in water. It is not unreasonable that in future years, given the extent of adjustment required in regional Australia, that competition payments made to the States should be available for financial adjustment required by water reform. It should also be noted in this context that an additional justification in 1995 for the establishment of the competition payments regime was that states of Australia lacked access to a growth tax. The introduction of the Goods and Services Tax in 2000 has of course dramatically altered that picture because the entire proceeds of the GST goes to the states and under the transitional arrangements Queensland is better off this year and successively the other states will become better off over the next few years.
In relation to greenhouse emissions, a strong body of scientific opinion is suggesting that global warming is occurring and it is having a negative effect on the world's environment. That is now taken as a statement of the obvious. And all countries have a responsibility to do what they can to address this challenge. We are therefore committed as a government and as a nation to meeting the greenhouse gas emission target set for Australia at Kyoto. We are doing this through developing and funding domestic programmes to meet the emissions target. Currently we do not believe it is the Australia's national interest to ratify the Kyoto Protocol because under the terms of this arrangement many of our competitors do not face the obligations we would face.If we were under present conditions to ratify Australia would lose investment to these countries and the greenhouse gases would simply change location. Indeed many countries have less stringent environmental standards than Australia. To be truly effective, every country must help to reduce greenhouse gases, but at this point developing countries as well as the United States are strongly resisting any move to place binding targets on them. For example, under the Kyoto Protocol, a company wishing to establish a new aluminium plant in Australia may face a greenhouse-reduction cost penalty that they would not face in countries like China and India. In a competitive global market, this cost burden may be enough to see the plant is built elsewhere, leaving Australia the poorer without any global gain. Our position is that we must tackle our environmental and our energy concerns together in a way that makes sure our policies satisfy both objectives of sustaining the environment and also continuing economic growth.
Competitive, reliable energy has underpinned Australia's growth and economic prosperity. We must ensure that our energy policy continues to support economic growth and development while also contributing to reduce air pollution and greenhouse gases, and while we develop new technology. Australia is entering a very exciting phase in terms of energy policy. We have large amounts of competitive fossil fuel energy sources, a growing natural gas industry that, as the recent LNG deal with China shows, has enormous export prospects. Rapid advances in technology are giving us cleaner vehicles and fuels as well as growing scope for renewable technology. We are developing a strategic plan for Australia's long term energy policy, bringing together and enhancing many areas of policy work already being done. Our policy responses must and will not be constrained by the traditional boundaries of Commonwealth Departments. I've therefore establish and will chair a Ministerial Oversight Committee comprising, in addition to myself, the Deputy Prime Minister, the Treasurer, and the Ministers for Environment and Heritage, and for Industry, Tourism and Resources. A critical task, to be carried out with the support of our own advisers as well as appropriate private sector advice, will be to work on energy market reform now underway, including the findings of the recently released Parer report which aims to aid the building of a truly national and efficient energy market.
We have important and enduring priorities in the area of rural and regional policy. These include a national response to the drought along with ongoing and future programmes for sustainable and stronger regions. The current prognosis for the drought in Australia is extremely grim. We are experiencing an extreme drought of a severity that is likely to occur only once in twenty or twenty five years. This is, of course, a tragedy for all Australia, it will affect our growth, but it is especially heartbreaking for country Australia. The Commonwealth expects that on a conservative assessment that we may need to provide as much as $365 million in Exceptional Circumstance relief payments to farmers this year and next year. Our Farm Management Deposit scheme has proven to be a very effective way for primary producers to manage incomes that fluctuate over good and bad seasons. As at the 30th of June last, 43,000 Australian farmers had deposited over $2 billion dollars in the scheme. This reflects an approximate cost to the Commonwealth of $500 million in foregone tax revenue.
This scheme and the size of the deposits reflects a strengthening of farmers' self-reliance and will contribute not only to helping them through the ravages of the drought but also to building stronger regional and rural communities. Our broader rural and regional policy is another area where a whole of government approach is necessary. Our objectives were outlined last year in the Stronger Regions statement and this brings together some $28 billion of specific regional programmes across many different areas like education, health and transport that the Government has put in place since 1996. Stronger Regions also includes a $100 million prototype regional development programme under which the Commonwealth is working in partnership with local communities to help strengthen regional self-reliance and to ensure that we all share in Australia's economic progress. This programme is being trialed in eight regions around Australia, providing access to what could be described as a toolbox of support measures and a flexible problem solving approach driven by the local community.
Transport policy, another of our key priorities, is an area where policy coherence is critical because more than in any other issue, transport infrastructure is the concern of each of the three levels of government. The States have much of the direct responsibility, but in an area so vital to Australia we can't overlook the necessity of a strong national focus. John Anderson has recently announced the development of a new framework for planning, developing and funding Australia's land transport infrastructure network, which we call AusLink. This strategy is necessary now because movement of freight alone will double between now and the year 2020. Our existing infrastructure is quite inadequate to the task. AusLink will develop an integrated network of land transport links of strategic importance to the nation. The AusLink Green Paper released by the Deputy Prime Minister on November 7th will be the basis for consultation over the next few months and it will be followed by a White Paper in about May of next year. We will then finalise a new land transport inter-governmental agreement with the States and Territories to enable AusLink to be implemented in the middle of 2004.
We are also pursuing major reform of the national rail system by offering the New South Wales Government a package under which the state's mainline track would become integral to the national track. The Commonwealth would contribute to establishing a dedicated freight route through Sydney. This could cut freight rail transit times between Sydney and Melbourne by three hours, and between Sydney and Brisbane by three-and-a-half hours.
Ladies and gentlemen I have taken perhaps a little more of the time of an audience such as this than I normally do because I wanted to deliver a speech of a type and at a time that did a number of things. It properly recorded the achievements that we together have been able to make and deliver the benefits of to the Australian people over the last six and a half years. I wanted to outline the broad strategic framework that the Government has in mind, not only for the next two years of its term in office but hopefully beyond. And also because I believe that the essence of good public policy making is a thoughtful and intelligent dialogue between the Government and the business community and others who are interested in the development of policy. And of the many originations that might claim ownership of that description, CEDA of course has been in the forefront. And I want to thank both CEDA and Westpac for their joint sponsorship of this gathering.
You can't meet and talk anywhere in Australia about the affairs of this nation at the present time without feeling a more sombre mood than has normally been the want of we Australians on earlier occasions. We are a changed nation because not only of what happened on the 11th of September last year in the United States but very particul