Thanks very much Grant for those words of very warm welcome and known in Queensland as irony. First of all can I acknowledge all of you who are captains of industry here with whom we have had a long and productive relationship over a long period of time. I notice many of the representatives of the banking industry are here this evening for example, with whom I have just spent the better part of the last hour discussing what I believe is fundamental to every business in this room, and that is the future cost of capital in this country.
We have just been through a global financial crisis. The global financial crisis required extraordinary interventions by Government in order to underpin the continued stability of our financial system and the businesses which depend on it. That required a range of measures. It required us uniquely as a Government to intervene in the economy, for the first time to provide a sovereign guarantee for every single Australian's bank deposit to underpin confidence in the system.
Secondly, for the banks here represented, to also provide a guarantee for their wholesale funding requirements of global credit markets (inaudible.) And thirdly on top of that, given the damage to the real economy, to then intervene to prevent an entire collapse of private demand in the economy in order to prevent the economy from tail-spinning into recession, which occurred in 32 of the other 33 OECD economies. These were extraordinary interventions by Government.
The result and the report card I think, as those of you in this room have acknowledged, has been reasonable. We've emerged as one of the only OECD economies not to go into recession. We have kept growth positive. We have the second lowest unemployment rate of all the major advanced economies and the lowest debt and the lowest deficit. In terms of a report card of basic economic credibility I don't think that's too bad; there is always room for improvement, but it is however measured against the performances of other economies confronted with similar challenges.
The key one which for us has been fundamental is actually keeping people in jobs. Mention has just been made of the mining industry, let me talk to you about the employment performance of the mining industry in the last twelve months. The mining industry contracted its employment load by about 19 per cent last year in the face of what was occurring in the general economy, or more like 15 to 16 per cent. But if it was replicated more broadly across the economy, the total unemployment level in this country would have been something in the order of 15 to 20 per cent. Mining represents employment directly of about 100,000 Australians, 15,000 of them actually lost their jobs last year.
What we did was step into the breach and make sure that private demand kept up and through public investment that overall employment kept up. For those of your companies which depend therefore on the vibrancy of the private economy and the overall performance of our economy in difficult global circumstances, this I think has been a reasonable achievement.
There's a second part though which arises from that, it's a consequence. What Governments are required to do globally in part cause extreme increases in the levels of sovereign debt around the world. Such that we now have a global debate about the sustainability of levels of sovereign debt in Europe and elsewhere. We all know the story of Greece, which is not one relevant to the immediate financial crisis, but what Greece has unfolded is a level of nervousness in markets and bond markets in particular about the sustainability of public debt levels around the world.
That of course brings us back to what will be an important set of discussions which I'll be attending on Australia's behalf this weekend in Toronto, the G20. The G20 will be deliberating on a series of financial reforms which will go down to the cost of capital for each business represented in this room. The proposals which have been forward by Europeans and others, who've had a much less happy experience of the global recession that we have, are intense, they are regulatory and they are prescriptive and of the type and order of magnitude that unless we stand firmly in the Australian national economic interest, will have a profound impact on the cost of capital in this country over time. We intend to discharge our responsibilities in the national economic interest.
Our country has emerged well from this crisis, through good regulators, through a good regulatory system and also through a Government which worked very closely with the regulators at a time of crisis. Therefore looking forward my first responsibility in this country and that of the Government is not just to maintain the stability of the financial system, but in order also to protect it from excessive global regulatory intervention which will drive the cost of capital up. And that in turn would impede global economic activity.
There are four specific items of the Toronto agenda which will flow through to the G20 agenda in Korea at the end of the year. Each of these goes directly to the cost of capital. As various economies around the world, most particularly in Europe and North America seek to insure themselves against future systemic risk against future crisis, the problem is, for economies like ours, and financial systems like ours which have emerged so well, it is that were those burdens to be applied on us, then the impact in fact would be simply of a type which would cause the cost of loans both for business and other purposes to go through the roof, if left unattended to.
So our first responsibility in the last year and a half was actually to keep this economy going, to keep our financial system afloat and to deal with the consequences of those actions through what has happened in the rising levels of global sovereign debt and the consequential actions now by regulators across the world and G20 leaders, not all of them, who seek to regulate private capital in a manner which could have unintended consequences elsewhere.
So that's our first responsibility, maintain macroeconomic stability, maintain integrity in the financial system.
A second responsibility we have beyond all of that is to ensure that we are building in this economy long term productivity growth. Saving the economy from recession is one thing, building for future growth is another thing. That is very much the agenda upon which we were elected, and that agenda is about how do you build sustainable productivity growth for the future of the Australian economy. What are the levers available to us?
When it comes to productivity the equation is actually pretty basic. How do you make labour more productive by instilling in it greater skills, greater education, greater training? How do you also make sure that the infrastructure available to labour is there so that the labour input into a given productive enterprise is used and deployed maximally in the greatest efficiency? And the infrastructure deficit of this country is known and known well.
The third thing you can do is get out of the hair of business to greatest extent possible by removing the regulatory burden. What we have done against all those three measures in the two and a half years that we've been in Government I believe has been substantial.
On the first measure, education, skills and training, the Deputy Prime Minister is here. We've increased our investment in schools alone by 50 per cent in our first couple of years in office. This is a substantial increase because what we do through early childhood education, what we do through schools, what we do through education, training, universities, TAFE and the rest is of fundamental importance in the quality of the labour force which emerges for you to use later on. And there's a great danger that we were simply falling behind. This has been a big quantitative investment.
The qualitative reforms have also been significant. Again the Deputy Prime Minister has been engaged in what I could describe as visible and occasionally audible fisticuffs with various teachers unions around the country to make sure that we in fact had consistent, mandatory national testing of students across the country and mandatory transparent public reporting of the performance of schools. Unless you get that right, dealing just with the basics of literacy and numeracy, quite apart from the other ranges of skills which are needed for the future, we're always going to be held back in terms of our productivity. This is a big reform. It's been undergone, often below the radar, occasionally above the radar.
Then on infrastructure. You've seen the calculations of infrastructure deficit in this country, they are huge. For the first time the Australian Government has appointed a Minister for Infrastructure. For the first time we've established a outfit call Infrastructure Australia, for the first time a rational analysis of the current infrastructure deficit across all of its elements: road, rail, ports and the rest, has been undertaken. For the first time we have a national priority list of infrastructure projects which need to be attended to. This is pretty fundamental to making sure that we have maximum productivity in the future, and the biggest and best piece of infrastructure that we are about to deliver will come through the National Broadband Network.
I see David Thodey here this evening from Telstra. We've been in an arm wrestle with Telstra for how long? A long time and he looks much happier than he did this time last week. But can I say this has been a good negotiation, the product of what actually good negotiations can produce if there is good will all round. And this has actually produced that, and it's produced a real result, good for the Telstra shareholders but good for the country and good for the economy.
We're going to have a National Broadband Network, it's going to be an open access network. We've finally after 20 years resolved the question of structural separation from wholesale networks to retail providers. This is a fundamental microeconomic reform, and Stephen Conroy is here with us this evening, he should be personally congratulated for his efforts. It's been a strong, hard effort put in by him and supported by our friends in Telstra in bringing about the conclusion which we saw announced on Sunday.
I cannot think of an Australia of the 21st century absent a state of the art broadband network. When we were elected in 2007, we had the third most expensive broadband of the OECD, the third most expensive. We also had a speed of the network which was about 35 times slower than that which was available to the fastest broadband providers in the OECD. That was the baseline that we inherited in 2007.
We set to work, we announced a plan, we said we were going to have a National Broadband Network, we said we'd invest up to $43 billion, we actually believe this is the infrastructure of the 21st century, just as railways, roads and the rest, telegraph, were in the 19th century and in the 20th century.
This is an important investment for the future, from which each of the businesses represented in this room will benefit enormously, in ways which the economy at large hasn't by and large thought through yet. New ways of doing business, new ways in which you can actually sell products across the tyranny of distance which has so far haunted so much of our small business community, or those which are geographically isolated from major markets both here and abroad. This is a fantastic innovation. Also for the way in which Government does business in delivering basic and efficient services and saving public finance, for example in simply the ability to transfer electronically and at speed, patient controlled electronic health records.
This is a turbo-charging piece of infrastructure which this Government has brought about and is important because unless we have infrastructure at global standards, unless we have skills at global standards, we will not have productivity growth at global standards.
Which brings me to my third point, on what we've been doing the last two and a half years. I often scratch my head about what our predecessors did for their twelve years in office on the question of regulatory reform, I really do. When we came to office we embarked upon a program which largely the BCA have been supporting, which is to identify those areas of regulatory disharmony across the Federation, six states, two territories and everything from occupational health and safety down to product specifications and job classifications and occupation classifications. And we said 'this is nuts, this is crazy, how do we fix it'. And we set up, and I see Craig Emerson is up the back here, he's been a driving force in this together with the Finance Minister Lindsay Tanner, in making sure that we made this happen. 27 hair-pulling-out working groups of the Council of Australia Governments, pushing each one of these reforms through. How many have we landed so far Craig, out of the 27? One third will be landed by 1 July this year.
If you know anything of the complexity of these negotiations, let me tell you they are enough to cause grown men and women to cry, but we have prevailed, we have been persistent and occasionally we've used intelligently, effectively, affectionately and diplomatically, the fiscal leverage of the Commonwealth.
The important is delivering the outcome, and I look as something as basic as occupational health and safety, about which so many of your businesses have complained for years and years and years, and this Government has actually delivered that, minus the WA Government.
Regulatory reform is something we've been on about because our objective and our mission statement of Government is very clear, a seamless national economy, a seamless national economy with covering off the infrastructure deficit, creating infrastructure of the 21st century, as well as producing the best skilled, best trained and best educated workforce in the world. That's our mission statement for productivity growth.
Let me go on to a third point, which is what else do you do given the current structure of our economy to maximise its global competitiveness. One of those things you do is look at the impact of a two speed economy. You look at the impact of high levels of an Australian dollar and their impact on the export competitiveness of so many companies which are not in the resources sector.
One of those impacts we've already seen, and that is the impact for example of the international tourism market in Australia in the last 12 months. If you go to far north Queensland in Cairns, the unemployment rate in Cairns at the moment is 12.4 per cent. You go to any State Government in the country and ask for their tourism data, the international tourism numbers are down to billy-o. That's what's happening.
Ask those in the universities how their international student markets are going, it's not just the Indian students problem in Melbourne, because that's been largely geographically contained. What's actually happening is the dollar is punishing those providers hugely, and what is a substantial export earner for Australia, the international tourism market and the international student market has been punished by the dollar.
There are some in this room who still represent the art of manufacturing. I actually believe in manufacturing, we've actually come through with an auto industry virtually intact, not a bad achievement when you actually think what's happened elsewhere in the world through the crisis which has recently concluded. But you know something, our great, fantastic world beating manufacturers are also being punished by a high Australian dollar. It is affecting the aggregate competitiveness of the Australian economy.
So you ask therefore what therefore is the rationale of the tax reform. The company tax rate at present exists in the upper third of the OECD. Our challenge is to bring it down at least to the middle and to optimally take it lower. The Government's target is to bring it to 25, but you know something, money doesn't grow on trees, you've actually got to fund the company tax cut from somewhere. So how do you do that if you want your Australian firms outside the resources sector to remain globally competitive. You've got to fund it from somewhere.
We could fund it by jacking up a whole lot of taxes on consumers, on individual PAYE earners, you could do it that way. Or you could also look at those companies which benefit most from resources with are ultimately owned by the Australian people who from time to time, in the global commodity cycle, will enjoy great levels of profitability as a result of the resources which they sell to the rest of the world.
I fully get it and understand it having known the mining industry for the last 20 years coming from Queensland, how much risk and enterprise is involved in setting up a mine, and how much risk and enterprise (inaudible) lies in actually taking up a project such as that in offshore north west Australia in making it work. These are big things, I've been up there, I've seen how much capital is involved, how much risk is involved, it is large. But I'm also mindful of the fact that when you've got a global commodity boom, driven by the demand from economies like China, that it's time also to look at what the proceeds of that boom could do for broader tax reform in the Australian economy.
So what's our core proposal? One: that the resources sector onshore should have a profit based tax regime just as the offshore sector has had since Craig Emerson and others worked on the PRRT more than 20 years ago. Secondly, we've argued that a profit based regime is better than a production based regime because it goes up and down much more closely with fluctuations in the global commodities cycle, we think that's actually rational, in fact that was the submission to us also of the Mining Council of Australia.
Third, we've also said that as far as the proceeds of this are concerned, we would use it not to go into the budget bottom line at all, but we would use it to fund the company tax reform which your organisation has been calling out for, for a long period of time. We've said we'd bring company tax down to 28, our ambition lies to bring it down to 25. We've said also we'd bring about tax breaks for small business because those 2.4 million small businesses we believe should be given every encouragement to become the big business of the future.
The other thing we've said is that by virtue of those adjustments to company tax rates and tax breaks for small business, we'd make it more possible, aided by enterprise bargaining, to bring about the increase in the superannuation guarantee from 9 per cent to 12 per cent over time, progressively across the decade ahead.
Not only is that good for working families, who also need to have a decent nest egg to retire, decent superannuation adequacy, all 7.5 million of them, it boosts our national savings.
I'm always mindful of the great reform that Paul Keating brought in the 90s with compulsory superannuation in this country. The rest of the world stands in awe at the quantity of superannuation savings we have in this country, north of $1 trillion. What we do through these reforms is add something in the vicinity of at least another $100 billion to that, of taking the rate from 9 to 12.
I also note from our friends in the corporate community, that when credit markets froze during the course of 2008-09, the existence of onshore savings off the back of super were fundamental in a number of domestic capital raisings which occurred to the tune of some $70, $85, or even $95 billion. Creating a bigger buffer of national savings for the future in my argument is actually a very good thing to do. Lower company tax, tax breaks for small business and creating a greater pool of national savings. I regard that as pretty fundamental tax reform.
The argument which has just been put forward by others, that somehow the Government's approach to tax reform is incomplete, I believe is inconsistent with what we said when we commissioned the Henry review in the first place. What we said when we commissioned the Henry review was that we would have a possible blueprint from long term debate, discussion and a foundation for long term, comprehensive tax reform.
When the Treasurer released the Henry review on the 2nd May, he indicated the following: there was a range of proposals and recommendations in Henry which we would not contemplate in a month of Sundays. There was another range, from memory Wayne, 60 or 70 or maybe 70 or 80 which are on the table for future discussion in a future term of this Government - and then there was a range that we would actually act on in the immediate term. That's our approach. We actually think it's systematic, because there had been no systematic review of the totality of the tax system for at least 25 years or more.
That's the approach that we said we'd take, that's the approach we did take, and we've made clear the basis for the reform which we are now taking forth.
Now on the question of consultation which has just been raised concerning tax, and concerning the RSPT. As the Treasurer said on the day, on the 2nd of May, what we're up for is this. We want a tax on profits, we want for that tax to be 40 per cent, that's what applies currently in the PRRT, we wanted a tax which also applies to existing projects. We've also said that that tax should generate revenue to fund the type of policy reforms I've just mentioned.
We've also said that on the question of detail, implementation and generous transition arrangements, we would consult and negotiate with industry. With many, many companies in this country, we are doing precisely that and have been doing it for the last month or so. Many resulting in quite good conclusions.
A number of companies have chosen not to embrace that, for reasons best know to them. That of course is their right, it's a free country, so when it comes to us being prepared to consult and negotiate within the framework I've just referred to, I believe it's a very open invitation. You can have a door open for a while, it does however require a decision for others to walk through that door as well.
Tax reform we think is really important. Our proposal on an RSPT is there and the areas where we are prepared to negotiate against the framework of 2 May is there for all to see. As I said, through Martin, through Wayne and through others, those negotiations and consultations continue.
So that in a nutshell is our rationale for tax reform. That in a nutshell is the way in which we are seeking to undertake consultations with those in the corporate community and the mining community, who wish to undertake them. And that process is underway.
On the question of the public sound and light show, that of course is a matter for various parties to attend to. I will not seek to apportion publically, responsibility for that.
My interest as Prime Minister of the country is to get a good outcome for the nation. I have spent a fair bit of time over the years with the resources industry, I've spent a lot of time with the corporate community. I used to work with these guys KPMG, though they will now probably publically disown me given the reports they released in recent days. It's ok, hang in there (inaudible) It's a joke, alright?
And therefore the best outcome for the country is if we can negotiate our way through this, and find a good landing point. That's what we're up for. We're actually a Government that believes in that. But if there is some misty eyed view that if you went through a process of six months consultation before putting out the sort of framework I just referred to before, that our largest mining companies would whack their hand up and say yes, I really want to pay more tax, then I don't necessarily hold that view.
We're open to questions of negotiation, consultation on design. That's detail. On transition, on generous transition arrangements, that's what we mean, that's what we've said, that's what we're doing with many companies across the country.
A last word on the G20. Can I just say to all of you that we the Government still have some concerns about how the global economy is unfolding. We all follow the public debate, the public newspapers, but we're also examining what's happening in terms of threats on the supply of credit internationally and where that goes to in the future. We are in uncertain times. It's very important that I end this presentation to you on the question that I began with, which is it is fundamental for us all to maintain the stability of our financial system.
Absent the flow of credit and the availability of credit, then frankly, our economy is in deep trouble. Therefore we as a Government maintain a very clear weather eye on what will be necessary for the future in ensuring the continued stability of our system which underpins everything which we do.
Toronto will be engaged in that, a lot of it behind the scenes as we look carefully at bond market reactions to the recent developments in sovereign debt. There's a lot of jitteriness out there on the question of sovereign debt and we're going to have to work our way through that soberly, calmly, in a considered fashion as we did through the first phase of this global financial crisis, which I still hope was the last phase of this global financial crisis.
I thank you.