It is precisely one year ago today since the day I stood with my colleagues at Yarralumla and took our oaths of office.
The twelve months that have passed since then have been exceptionally challenging for all of us - whether you are in the financial sector, in other industries or in government.
As a new government, we have been exceptionally well served by the quality of Australian public institutions such as the Treasury, the Reserve Bank and our economic and financial regulators.
This has of course also been a challenging time for representative bodies like the Australian Chamber of Commerce and Industry, dealing with both the developments in the economy and the transition to a new government with an ambitious policy program.
The priority of our first year in office has been to take early and decisive action to do everything possible to protect the Australian economy, families and jobs from the full impact of the global financial crisis.
The crisis that began 16 months ago in the mortgage market in the US, because of the excesses of what I have called extreme capitalism, has now spread across the global financial system and the global economy:
* More than 30 financial institutions around the world have collapse or needed to be bailed out.
* Stockmarket capitalisation around the world has lost 50 per cent of its value.
* The OECD is projecting a year of negative growth for developed nations in 2009 - for the first time since 1971.
* Unemployment has risen in practically every country around the world.
* 15 nations have implemented emergency economic and financial rescue packages.
* And 6 out of the seven biggest economies in the world are already running budget deficits - with forecast deficits of 4.6 per cent of GDP in the United States in 2009; 5 per cent of GDP in the UK; and 3.9 per cent of GDP in Japan. The stimulus package announced by the European Commission last week is expected to add around 1.5 percentage points to deficits across Europe.
Today we had the release of the National Accounts for the September quarter showing that real GDP grew by 0.1% in the September quarter to be 1.9% higher through the year.
This is a positive outcome for Australia, especially during this global financial crisis.
To put this in context, every member of the G7 major economies has experienced a negative quarter of growth in the past year.
Four of these seven countries - the US, Japan, Germany and Italy - are in recession.
While most other countries are contracting, our economy continues to grow.
At 1.9% through the year growth Australia has an annual growth rate well above all G7 major economies.
In addition, Australian business investment - a crucial indicator of the economy's future performance - remains strong.
New private business investment rose by 1.8% in the quarter to be 12.5% higher through the year.
We know that the Australian economy isn't out of the woods yet.
The Government has been upfront with the Australian people that this global crisis will affect growth and will affect jobs.
This will be a long drawn out crisis.
Unfortunately there are many indications that the global economy will get worse before it gets better.
Today's figures show we cannot resist the pull of international economic forces, but our economy is better placed than other nations to face this global financial crisis.
We will continue to take whatever action is necessary to support growth and limit the impacts of the global financial crisis and global recession on Australian families and jobs.
All arms of policy are directed towards buffering our nation and its people from the worst the world can throw at us.
We know that Australia will not be immune from the global recession.
There are no easy solutions and no quick fixes, either for global economy or for Australia.
A lesson of the last 16 months is that his will be a long, drawn out crisis.
Economic growth will slow.
Budget revenues will be reduced.
And unemployment will go up.
The Government has provided early and decisive leadership in both our financial markets and our economy.
At the same time, we remain committed to our long term program of economic reform.
The events we have seen this year have only underscored the basis of the entire economic program we took to the election 12 months ago.
As I said throughout last year, Australia cannot rely only on strong commodity prices and the hard work of the mining industry to build our future prosperity.
We need to restore strong productivity growth through a comprehensive productivity reform agenda.
And we need to support innovation, and build the businesses of the future, businesses that can succeed in the highly competitive global marketplace.
In our first twelve months in office we have taken substantial action on the productivity reform agenda across every area of economic policy - in education, infrastructure, business deregulation, COAG reform, taxation, health care, climate change and water, and workplace relations.
And in 2009 we plan to make substantial progress on the productivity agenda, while continuing to deal with the incoming challenges from the global economic downturn.
While the global economy is facing acute difficulties in 2009, we should not ignore the positive developments that have occurred in recent weeks.
The need for a coordinated global response is now widely accepted.
The G20 meeting in New York, and the APEC meeting in Lima, have shaped a growing consensus around the imperative for coordinated and comprehensive action to deal with the impact of the crisis on the real economy, growth and jobs.
Governments around the world are providing stimulus to their economies.
Central banks have also been implementing a rapid easing of monetary policy. Interest rates have been cut:
* by 425 basis points in the US;
* by 275 basis points in the UK;
* by 100 basis points in Europe; and
* late last week, China cut its lending rate by a further 108 basis points after a cumulative 81 basis points of cuts in September and October.
We are therefore seeing coordinated fiscal and monetary policy action across the global economy.
In addition to the global fiscal and monetary policy response, there is also fresh hope that this crisis might focus attention again on the global trade agenda.
APEC leaders agreed in Lima we must bring trade ministers from around the world together in Geneva in December to conclude the Doha Round.
A breakthrough on the Doha Round would be a major boost to confidence in the global economy - and would be particularly positive news for Australia's economic outlook.
The Government is acting decisively on both the immediatee and long-term challenges Australia faces.
Through the past twelve months, the Government has worked closely with Treasury and with our regulators to take strong, decisive action and stay ahead of the curve.
Australia has also been active in international fora such as the East Asia Summit, G20 and APEC in pursuing a coordinated global solution to these global problems - addressing both the immediate challenges, and tackling the longer term challenge of reforming financial markets to avoid the future recurrence of such crises.
Earlier this year, we acted on the challenges of supporting our financial markets through increasing the issuance of Commonwealth bonds.
We acted when short selling was threatening major Australian businesses.
We acted to support the residential mortgage-backed security market when it was largely frozen by the credit crisis.
We adopted a Financial Claims Scheme and secured agreement on a consistent national approach to the regulation of consumer credit, replacing a complex patchwork of inconsistent state laws.
When it became necessary in October, we provided a guarantee for 15 million bank deposit accounts and for the term funding of our banks, building societies and credit unions.
We have also acted decisively on the threat to the Australian economy to protect jobs, protect Australian families and invest in the drivers of economic growth during the global financial crisis.
We were able to act so decisively because we'd built a strong surplus in the May Budget as a buffer for the future.
The first phase of the Government's response to the global financial crisis was the announcement of a $10.4 billion Economic Security Strategy - delivering relief to pensioners, low income families and first home buyers, as well as a significant boost to job training.
It is estimated this will help protect the equivalent of 75,000 jobs.
The second phase of the Government's response was our $6.2 billion commitment to Australia's automotive industry from 2010 onwards.
This is an important industry that directly and indirectly supports 200,000 Australian jobs.
The third phase of the Government's response was our $300 million commitment to local infrastructure programs though the Regional and Local Community Infrastructure.
This will create thousands of jobs throughout Australia.
The fourth phase was the agreement reached at the Council of Australian Governments last weekend when we increased our funding to the states and territories by $15.1 billion to help create up to 133,000 jobs while driving forward our reform agenda.
The fifth phase of our response will be making an early start on ready-to-go nation-building infrastructure projects, after we receive an interim national infrastructure priority list from Infrastructure Australia shortly.
In addition to these measures, the 300 basis point cut in the last four RBA meetings has already delivered $600 a month in relief for someone with a $300,000 mortgage - welcome relief after ten straight interest rate rises in a row under the Coalition.
The Government has made it clear that we will continue to undertake whatever further steps are necessary to support growth and jobs in response to the global financial crisis.
Every responsible government in the world has moved to protect jobs through fiscal stimulus - even though the stimulus packages have an impact on the budget.
Like other responsible governments, the Australian Government won't sit on its hands while jobs are lost and Australians suffers from a crisis we did not create.
Right now we are still forecasting a modest surplus this year, despite a $40 billion hit on the Budget bottom line resulting from the impact of the global crisis.
But we recognise that we are in a very fluid environment.
The reason why the Government built up a large surplus in the last Budget was so that we could prepare for the difficult times that lie ahead.
Those difficult times have now arrived.
If the global financial crisis gets worse and puts the Australian economy more at risk, then the Government will take decisive action in the nation interest (including a temporary deficit) to stimulate the economy build infrastructure, and support jobs, families and Australian businesses.
It is important that we understand Australia's outlook is still better than much of the developed world.
As I've mentioned, recent months have seen sharp falls both in global stock markets and economic growth forecasts.
Global commodity markets have also seen dramatic falls, with many commodities losing more than half their value.
The mining boom is among the strongest and most enduring commodity booms experienced in Australian economic history.
* The Reserve Bank's index of commodity prices almost doubled between mid-2003 and September 2008.
* These soaring commodity prices drove an extraordinary increase in Australia's terms of trade - from 76.9 in 2002-03 to 112.9 in 2007-08, an increase of 47 per cent.
* This year's Budget estimated that the impact of the mining boom on our nation income this year will exceed $100 billion, and a cumulative $260 billion over the five years to the end of 2008-09.
* While commodity prices have fallen sharply, Australia will be reaping benefits from the mining boom for some time to come.
The terms of trade is still expected to rise strongly in 2008-09, with an expected 10.75 per cent increase due to the flow-through of US dollar contract prices for iron ore and coal, which are locked in until the end of March 2009.
As a result, it will be a considerable period of time before the full impact of lower commodity prices is felt across the economy.
The substantial fall in the Australian dollar will cushion the impact of the sharp fall in commodity prices.
In addition, we are likely to see substantial new mining capacity coming on stream in the medium term.
The Australian Bureau of Agricultural and Resource Economics has reported that 22 major minerals and energy projects worth $11 billion were completed in the six months to October.
A further 85 projects worth a projected $67 billion are at an advanced stage.
And while commodity prices have fallen, forecasters do not expect prices to permanently fall back to pre-2003 levels.
We do not anticipate a full unwinding of the income boost delivered to the Australian economy through the mining boom.
Nevertheless, we anticipate a gradual unwinding of the boom, which will have an impact on our national income over the medium term.
This means Australia will be in a very different economic environment to recent years.
We can no longer rely on rising commodity prices to drive continued increases in our national income - and this underscores the need to tackle Australia's long term productivity deficit.
From Opposition and in Government, the Government has always welcomed the mining boom and the enormous boost to economic growth and job creation that it has brought to Australia - especially to Queensland and Western Australia which have grown by around 50 per cent above the national average for the past five years.
It is competitive, productive and in several respects world-leading.
But the economic argument we made throughout the mining boom was that we cannot rely on our mining industry alone to build our future prosperity.
Our argument was that the long-run key to prosperity for all nations is productivity growth.
As US economist Paul Krugman has said, productivity isn't everything - but in the long run, it's almost everything.
Productivity growth has been responsible for more than 80 per cent of the improvement in Australian living standards during the past three decades.
In other words, ultimately it's productivity growth that allows us to grow the profitability of our businesses, increase shareholder value, lift personal incomes, create high-paying jobs and invest in better services for our community.
The great opportunity created by the mining boom has been for Australia to invest the proceeds of the boom in our future, and in building long-term productivity growth.
Unfortunately, when economists and historians sit down in future years to assess the previous Government's economic legacy, they are likely to conclude that the previous Government missed the opportunity to invest the proceeds of the mining boom in the nation's long-term future.
Already the OECD has made this assessment in its 2008 Economic Survey of Australia and I quote:
“Over the past few years, there has also been a sharp rise in spending, the quality of which was not always ensured... growth in government investment has been modest and spending on education or health care, which are likely to have beneficial effects on human capital, has been lacklustre.”
The budget surpluses gave Australia the opportunity to tackle the ever-widening deficits in infrastructure, education and the long-term drivers of productivity growth.
Unfortunately, those investments were not made, and as a result the Government inherited what might be described as a significant deficit in productivity growth.
Australia has seen a long-term decline in productivity growth in recent years, from an average of 3.3 per cent in the productivity cycle of the mid-90s to an average of just 1.1 per cent in the current cycle.
As I said in my Budget Address in Reply speech in May last year, quoting the words of President John F. Kennedy, the time to fix the roof is when the sun is shining.
The challenge we face now is that we've got holes in the roof, but there's also a storm overhead.
Australia needs large infrastructure investments in transport, broadband and water infrastructure.
We need to turn around the situation where other nations were rapidly upscaling their public investment in education, while ours were falling.
We need to put Australia back in the lead of the low carbon energy industries of the future like solar, wind and other renewable and clean coal technologies.
And we need to fix the Federation so that it serves the needs of a modern economy.
The Government is alive to the scale of these challenges, and we recognise that it will be more difficult tackling them now than it may have been in the better economic conditions of recent years.
The global financial crisis presents us with many challenges, but I want to make this clear - the global financial crisis will not result in us dropping off the productivity reform agenda.
These tough conditions only strengthen our conviction and our resolve to prosecute the productivity agenda that we outlined last year before the election.
Because Australia's long-term prosperity depends on it.
Our long term prosperity depends on building a modern economy with advanced infrastructure, a highly skilled workforce, and a modern Federation with a seamless national economy.
And it depends on building an economy that makes a successful transition to the low carbon economy of the future.
That is why we began to invest the proceeds of the boom this year with our first Budget - establishing our three nation-building investment funds, the Building Australia Fund, the Education Investment Fund and the Health and Hospitals Fund.
Last weekend's COAG agreement sealed a new era in Commonwealth/State relations.
We agreed on restructuring the financial relationship between the Commonwealth and the States - simplifying 96 separate and overlapping payments down to five.
We secured agreement from the States and Territories to new levels of accountability in health, education, housing, business deregulation, and closing the indigenous life expectancy gap.
The States will now be accountable for delivering actual outcomes that will affect the day to day lives of Australians and their business - while giving the States the freedom to determine how they deliver those outcomes.
The system of accountabilities is an approach that has never before been implemented across the full range of Commonwealth/State financial relations.
As a result of that agreement we will move towards a seamless national economy with simpler business regulation.
We will have better teaching quality in our schools, we will ease the pressure in hospital emergency wards, and we will reduce the shortage of doctors and nurses.
We are also taking further steps in the reform program for education, nation-building infrastructure, climate change and business deregulation.
We are also moving ahead on the education revolution. Last week we announced our program to recruit top university graduates from areas like commerce, law and science into teaching through a new pathway that ensures the best and brightest are attracted into the profession.
We have secured support through COAG for the National Curriculum Board, with the role of establishing agreed national curriculum in school subjects.
We are also investing in school infrastructure, with hundreds of millions of dollars now being invested in school computers and trades training facilities in schools across the country.
On climate change, we are progressing with the implementation of the Carbon Pollution Reduction Scheme and will release a White Paper outlining the final scheme design soon.
The Government remains committed to commencing the CPRS in 2010 as the primary mechanism for Australia to transition to a low carbon economy.
This week the Parliament is also debating the passage of the Fair Work Bill.
The Bill delivers on our commitment to build a simpler and fairer workplace relations system that gets the balance right.
We appreciate the substantial efforts that ACCI has made through the consultation process on the details of that legislation during recent months.
We know there will always be a wide range of views on industrial relations policy.
But we believe the Fair Work Bill has genuinely struck a balance of fairness - reflected in the modern safety net - and flexibility, which has been built into every part of the system.
The principle at work in this reform is to provide proper protection for the weak, and support for those who can look after themselves to negotiate maximum flexibility.
It is a system designed for the competitive global economy of the 21st century by maximising productivity growth through the full range of employment options:
* Enterprise agreements
* Common law agreements
* Modern awards
Within each of these three options, there is substantial individual flexibility.
Enterprise agreements allow employers and employees to make their own enterprise-level arrangements to maximise productivity in the workplace, as has been done since the early 1990s.
The Bill provides greater flexibility for common law agreements which have previously all been required to comply with all award provisions, no matter how highly paid the employee.
Employees earning above around $100,000 will now be free to agree their own pay and conditions without reference to awards, through common law agreements.
All modern awards and enterprise agreements will include a Flexibility Term identifying the award or agreement provisions that can be varied through an Individual Flexibility Arrangement.
Examples include where employee asks to start work early and leave early to collect children from school, or allowing an employee working a regular shift pattern to average their wages over the cycle.
In addition to the flexibilities inherent in each stream of the workplace relations system, we are retaining tough rules on industrial action and the system of permit and the notice requirements for unions' right to enter workplaces.
The Government strongly believes that Work Choices swung the pendulum too far in one direction.
But rather than swing the pendulum to the other extreme, the Government has worked hard to build a balanced system that reflects the realities of a 21st century economy.
Australia has very tough economic challenges ahead, but the Government is committed to acting decisively as needed, while pressing ahead with our longer term reform agenda.
We will act in the national interest - supporting Australian families through the current difficult times, while implementing the long-term reform that will help us build the businesses of the future and create the jobs of the future.
And our investments in the productivity agenda will also provide a support to economic growth in the immediate future.
The Government is committed to continuing to act in the national interest in response to the global financial crisis - as we have done in financial markets, through our bank guarantees, and in each phase of our response to the global economic downturn.
We will do this in partnership with the business community. Together, we can get through the difficult period ahead - and we can look forward to build a stronger Australian economy.