Can I thank the Western Australian Chamber of Commerce and Industry for the invitation to speak to you today.
It is a pleasure to be here in Perth with so many leaders of WA business - you and your companies have made a major contribution to the success of your state and for the country itself.
In fact, as you come back to Perth each time, there is a palpable sense of excitement, of enterprise and enthusiasm about this part of Australia. You feel it, you sense it.
Just walking bridge to bridge last night after I flew in from Canberra. Once again you run into people who are always up beat, talking about what they are going to be doing next, it's a great sense of the ‘possible' that you have here in WA and I congratulate you for it.
It is very difficult to capture the spirit of a place but insofar as I experience WA, there is something of Queensland about this place.
And I mean that in every positive, Bronco related, Brisbane Lions related way, which is that, we wont talk a lot about that, and that is that you have about you a culture of enterprise and the possible, which you should cherish and nurture.
It is a good thing, and to be encouraged further by whoever occupies the Treasury benches in Government, be it in Canberra, or here in Perth.
A lot has been said and written about the remarkable economic conditions here in the West.
Western Australia has undoubtedly benefited from the extraordinary mining boom of the last 5 years.
But to that I would add, the challenge lies in how do we ensure that this extraordinary boom, and the dividend from it is invested into the state's and nation's long term global competitiveness. And that is very much the mission statement of the Government which I lead.
When I come here I find dynamic entrepreneurs leading innovative businesses - like the CO2 capture technology firm CoolEnergy; a home grown West Australian company that is delivering cutting-edge clean technology solutions to the global energy sector.
In this state I find innovation, creativity and enterprise.
I find workers whose creativity and enterprise have made so much of what happens here, an emblematic example of success in the age of globalisation.
On my first visit here three months ago, after becoming Prime Minister, I made my first major speech as Prime Minister about the future of the Australian economy.
I spoke of our commitment to tackle Australia's inflation challenge through responsible economic management - because inflation is the enemy of the economy and the enemy of working families.
I also spoke of the Government's commitment to build Australia's long term productive capacity through new investments in human capital, in physical capital and a new era of microeconomic reform.
We can't rest on our laurels, we have got to push ahead. We have got to move forward.
Today I'd like to report on some of our preparations for the Government's first Budget - a Budget that will deliver on our commitments and begin to lay the foundations for Australia's long term economic future.
Economic context
I should begin by saying that when we assumed office, we knew that this year's Budget would not be easy.
When we won Government on November 24 last year, we knew there was a lot of hard work to do.
We knew we were inheriting an economy which had sustained high inflation - the highest this country has seen in 16 years.
We knew these mounting inflation pressures had contributed to 10 interest rate rises in a row.
And we knew that we had to put an end to an era of fiscal irresponsibility with public expenditure growing at 6.85 per cent in the four years to 2007/08 - the highest growth rate in more than a decade.
Back in November, we knew that these conditions would present difficulties for the Government's fiscal strategy.
But since then, a series of international and domestic events have made economic management tasks, somewhat more challenging.
The global financial crisis has deepened more swiftly than expected.
The world economy has slowed so rapidly that the IMF was forced to revise down its global growth forecasts - not once but twice - in the early months of this year.
The Australian stock market has lost more than 25 per cent of its value - with the ASX All Ordinaries Index falling from its high of 6,873 points in November to a low of 5,130 points in March. And, even though some value has been recovered, this has heavily impacted already, for example capital gains tax revenue.
Crude oil prices have surged - up more than 34 per cent from $86 a barrel in November to a peak of $119 a barrel in April. These are big changes and they do represent significant changes in the operating environment in which government's now find themselves.
The annual rate of headline inflation has reached 4.2 per cent in the March quarter of 2008. Excluding the impact of the GST, this is the highest recorded inflation rate since inflation targeting was formally introduced in Australia in 1996.
These events - unforseen by most commentators six months ago - have reshaped the global economic landscape. And reshaped so much of the national economic landscape which we must now navigate as the elected governments of Australia.
These events leave no doubt that what Australia needs now is a responsible Budget - based on the fundamental conservative principles of economic management.
Budget principles
In the context of these domestic and international economic challenges, the Budget process has been long, tough and demanding and you would expect that.
We have had to make some difficult decisions on the way through and they won't all be popular.
But within the confines of our fiscal position and the broader domestic and international economic constraints, we have stuck to our principles.
For too long budgets have been an annual political set-piece in which the government of the day delivers a swathe of handouts and quick fixes.
That is no longer good enough, given the challenges we face long term.
If Australia is to compete and succeed in a rapidly changing world we need a long-term approach to fiscal policy.
We need leadership that looks beyond the three-year electoral cycle.
That is why I am determined that this budget won't be another “one year wonder”.
It will be a Budget that sets a platform for long term growth.
It will begin to prepare Australia for the future - for the next 5, 10 and 20 years.
And in this year's Budget, we will build on this platform.
We'll do the same in next year's budget and the one following.
Three isolated budget packages over the electoral cycle actually don't add up to much.
What we want to be able to do is look back over this three year term and know that we delivered the first tranche of a coherent long-term fiscal and economic strategy for the nation, to prepare the nation for the economic challenges of the 21st Century.
And if we are elected again, I can tell you that we will continue to deliver budgets which build on the strong foundation that we will lay down this year.
That foundation is based on four baisc principles.
Our first priority is to build a strong economy through responsible economic management - a strong economy that also delivers for working families.
Second, we are committed to honouring our commitments to help working families under financial pressure.
Third, we will deliver on our commitments to prepare Australia for the great challenges of the future - acting on areas of long-term government neglect: in education, health, infrastructure, climate change and water.
Fourth, we will plan and provide for our nation's long-term defence and security needs in a rapidly changing threat environment.
These are the principles and priorities which have guided us in this Budget process, and they will be reflected in the outcomes on Budget night.
1. Building a strong economy that delivers for working families
Just yesterday, the Reserve Bank noted that there is “considerable uncertainty” about Australia's economic outlook.
In these uncertain economic times our objective is to put the Australian economy on its surest possible economic footing for the long term.
The first priority of building a strong economy is to tackle Australia's inflation problem.
Inflation is not just an abstract figure.
It's just not a number on a page.
It is not just a bureaucratic statistic.
It is a cancer which eats away at the living standards of all Australians.
Inflation hurts the working families struggling to put food on the table for the family.
A litre of milk now costs 11.6 per cent more than it did a year ago.
A loaf of bread is now 9 per cent more expensive than it was last year.
Vegetables cost nearly 10 per cent more than they did last year.
Health costs have risen 4.6 per cent over the past year.
Recently I received a letter from a young mother from Burpengary, a suburb of about 15,000 people 40 kilometres north of Brisbane.
She wrote that she had a job as a sales assistant in a butcher's shop in Brisbane earning $17 an hour.
She had to give up the job because the cost of child care for her three kids and the petrol for her drive to work was so high that she was only $50 a week better off after a whole day's work in the shop.
She wrote: “how is anybody supposed to get ahead when the cost of living is so high. If you buy three litres of milk and a loaf of bread - you have just spent $8.00.”
I get letters every week from every corner of the country telling me about the financial pressures faced by many working families.
I have said before there is no silver bullet to provide instant financial relief to those families currently facing these sort of financial pressures.
But where we can act, it is the Government's responsibility to do so.
That is why I believe we must do everything within our power to fight inflation because inflation is pushing up mortgage rates and pushing up the cost of living.
It is why I believe that inflation must be a key priority of this budget.
Unfortunately not everyone is of this opinion.
Mr Turnbull, for example has suggested that inflation is a “fairy-tale”.
He said last month that inflation is “under control”.
He said that it was at “manageable levels”.
Dr Nelson said yesterday that the inflation challenge is a “charade”.
Well, I am here today to say that's not my view. It is not the Government's view.
Nor is it the view of the International Monetary Fund which reported its World Economic Outlook last month that Australia's “main short-term policy challenge is to keep inflation pressures in check.”
Nor is it the view of working families who face higher prices and higher interest rates.
There may only be three people in Australia who don't believe that inflation is hurting working families through rising prices and rising mortgages.
Dr Nelson
Mr Turnbull, and the Tooth Fairy.
And all three are out of touch on this question.
If we do nothing - if we sit on our hands like the alternative Government is suggesting - then the responsibility for reducing inflation will fall to the Reserve Bank's blunt monetary policy instrument; and that means further hikes in interest rates.
That's not good for anybody.
We now face the scenario of the Liberal Party of today attacking the Federal Labor Government from the left on fiscal policy.
At a time of high inflation the Liberal Party is urging us not to cut government spending, and presumably therefore, to increase government spending.
I regard this as gross economic irresponsibility in our current circumstances.
And I believe it reflects short-term populism.
The Government is committed to reducing inflationary pressures on the economy through this Budget.
That's why we've got to cut government spending.
The Budget will cut irresponsible spending because profligate spending has been one of the main reasons we are in this inflation predicament.
We need responsible fiscal policy to start heading in the right direction.
That's why a budget surplus based on cuts in government spending is necessary to reduce some of the pressure on working families from high interest rates.
In opposition, I committed to conservative economic management through achieving budget surpluses, on average, over the economic cycle.
In government, we will honour that commitment.
We will do so in large part by reducing government spending.
The surplus I set as a target for the Government in Perth, when I was here last, in January of 1.5 per cent of GDP was considerably higher than our predecessors were planning for the upcoming financial year.
We will have to make significant cuts to a number of existing government programs, to achieve that higher surplus and to reprioritise spending to reflect the nation's greatest needs.
I can announce today that this Budget will achieve a one-off 2 per cent efficiency dividend across government.
This efficiency dividend of itself, will yield a further $1.3 billion over the next four years - over and above what the previous government had planned.
Does Mr Turnbull, for example, believe - having said that there is no economic case for budget cuts, that the Government should not impose this $1.3 billion saving?
What does the Liberal Party of today stand for if they have abandoned a commitment to fiscal conservatism?
What does the Liberal Party of today stand for stand for if they no longer believe we should cut government spending?
Or that we should eliminate government waste?
I notice also that the Liberals today have been returning to the question of inflation and the inflation challenge and it's interrelationship with industrial relations.
They released a piece of Treasury advice from the early part of last year on the impact of industrial relations on inflation.
This Treasury advice dealt with the impact of industrial relations settings on the overall inflation rate, together with a range of other factors.
Of course the Treasury advice in question was released before Labor released it's industrial relations policy, before it released it's industrial relations policy implementation plan and before I should add, the Liberals themselves introduced their own Fairness Test as part of the subsequent revision to industrial relations laws.
That Fairness Test, as businesses in this room will perhaps attest themselves, adding considerably to the administrative impost on the business.
I would say overall that when it comes to placing these things into proper context, it is important to put them into their chronological context. It is important also to clearly deduce from this engagement by the Liberal Party in this debate, in this fashion, that they are seeking to argue that the only effective tool for dealing with the inflation challenge, is industrial relations and Workchoices.
Our view is that when it comes to dealing with the challenge of inflation, what we need is a five part strategy, the core of which lies in producing a significant budget surplus, around the target that we announced when we were last here in Perth, and achieving that target through effective savings through an attack on unnecessary Government spending.
2. Delivering on our commitment to help working families under financial pressure
The second commitment of this Budget is to help working families under financial pressure.
Our opponents have told us that working families have “never been better off”.
They say the effect of inflation on family budgets is exaggerated.
We had a Community Cabinet out in Western Sydney only a few weeks ago and we listened very carefully to what people were saying to us out there.
Working families face a daily battle to cope with financial pressure because of the rising costs of living - every day costs such as mortgages, rents, groceries, petrol and childcare.
It is our job as a responsible national government to help where we can.
That is why we are delivering $31 billion of tax relief over the next four years, directed at low to middle income families.
Some economic commentators say we shouldn't be delivering tax cuts to these families. But we promised to do so, and we promised also to increase childcare assistance in the Budget, and we intend to deliver on that.
We will be increasing the childcare tax rebate from 30 to 50 per cent and paying it quarterly - at a cost of $1.6 billion.
These measures won't take away all the financial pressures facing working families.
But they are practical and responsible policies that provide assistance where it is most needed.
Let me tell you what this means in practical terms.
For an Australian family with one parent working full time and one parent working part time (that's three days a week) and a combined gross income of $75,000, this budget will deliver tax cuts worth $27.88 per week or $1,450 each year.
And if that family has one child in long day care for 30 hours a week, the Government's additional Child Care Tax Rebate will deliver an additional benefit of $19.05 per week or $990 per year from 1 July 2008.
In addition to these measures, the Government will also tackle the housing affordability crisis with a $1.4 billion package of practical policies.
In the 2008 Budget we will include a $500 million Housing Affordability Fund to drive housing construction activity.
It will also establish First Home Saver Accounts to help young people get onto the ladder of home ownership. Over the next four years, the Commonwealth will invest around $1 billion in these special accounts to help people save a deposit for a house.
In addition, the 2008 Budget will look after those people in our community who are doing it toughest.
In the upcoming budget the Government will commit $1 billion to fund disability services and increase support for carers.
This $1 billion commitment includes an extra $100 million in capital funding, to build more supported accommodation for people with a disability so that more older carers can have assurance that there are good facilities to look after their loved ones when they're no longer able to do so.
It is our job as a Labor Government and as a responsible national Government to make sure that those who need that practical level of assistance, get it.
3. Delivering on our long-term policy challenges
Our third objective in this Budget is to prepare the nation for the long-term challenges of the future - to secure a long-term future for the nation and for working families.
We are committed to providing long term economic leadership for Australia, in key areas like education, health and infrastructure.
We will face up to Australia's big future challenges like climate change, the ageing population and the rise of India and China.
These were areas of gross policy neglect in the past. But they cannot be neglected any more.
We need to begin implementing long term solutions to address these long term challenges.
The longer we neglect our long term challenges, the harder it will be to deal with them.
This neglect was nowhere more evident than in infrastructure.
Consider the facts because they are particularly apposite for the infrastructure challenges here in the West:
* CEDA reports that as a result of underinvestment, the backlog in infrastructure investment for water, energy and land transport alone is around $25 billion dollars - and that this is costing us around 0.8 per cent of GDP a year in lost production. That's $8 billion a year;
* According to a CEDA report, if we were to address this backlog, it would increased exports by 1.8 per cent, increase business investment by 1.2 per cent, and lower the consumer price index by 3.2 per cent.
* Further, it is estimated that a 1 per cent increase in investment in infrastructure results in a permanent increase in economic output of 0.17 and 0.39 per cent;
* Australia ranks 20th out of 25 OECD countries for our investment in public infrastructure as a proportion of GDP;
* The Bureau of Infrastructure, Transport and Regional Economics estimate that urban congestion - caused by inadequate infrastructure - will cost families and businesses nearly $20 billion by 2020;
* Australia's broadband infrastructure is not up to scratch, with average download speeds lagging at 27th among all developed economies;
* ALGA estimates that inferior broadband infrastructure could cost regions up to $2.6 billion dollars and 30,000 jobs;
The economic consequences of this underinvestment in physical capital are significant.
Consequences for economic growth.
Consequences for productivity growth.
Consequences for jobs.
And consequences for rising inflation and therefore higher interest rates.
The Government is committed to investing in Australia's future and addressing our nation's long-term infrastructure bottlenecks.
We know it is not possible to turn around overnight the long term infrastructure neglect that the nation finds itself with today.
But we are certainly going to try.
We are certainly going to make a start.
It's time to set our eyes on addressing the nation's long term needs in road, rail, ports and other infrastructure.
The funds that we allocate to the nation's infrastructure challenges in next week's Budget will be properly and responsibly allocated through the benefit of the Government's new statutory advisory council, entitled, Infrastructure Australia.
Infrastructure Australia will ensure that Australia's infrastructure needs are comprehensively audited and prioritised.
Australia will produce its first Infrastructure Priority List - which will guide of dollars in private and public sector investment in coming years.
This will help create the pipeline of projects needed to make investment in infrastructure easier.
This advice will be independent - at arms length of government - to make sure that the infrastructure investments are made according to the national interest, not political interests.
This infrastructure funding will be in addition to the Western Australian Infrastructure Fund the Federal Government committed to during the election.
Nowhere is the case for infrastructure investment more clear than here in Western Australia.
More than any other state, WA's economic activity in recent years - primarily through the mining boom - has been the foundation of the nation's economic strength.
The WA Infrastructure Fund will be set up to invest in State infrastructure projects over the next 20 years.
Less than 12 months ago, the nation's peak infrastructure organisation - Infrastructure Partnerships Australia - released its list of infrastructure priorities.
For Western Australia, The IPA's priorities are:
* The Fiona Stanley hospital in Murdoch
* A multi-user sporting arena for big football matches
* Transport links between the Perth CBD and Northbridge
* Dredging the inner harbour at Fremantle's port
* Development of a new port facility at Oakajee in the Geraldton region
* The Goldfields Water project
This is their list. What it indicates is the fact that many here, and many round the nation, are taking an active interest in underlying the importance of Government's coordinating effectively to ensure that in partnership with the private sector, the nation's and the state's long term infrastructure needs are met.
Infrastructure Australia will work in conjunction with the Private Sector and with State Government's to ensure that we get the priorities right and we get the priorities right for WA's long term infrastructure needs.
The WA Infrastructure Fund recognises the contribution Western Australia makes to the national economy. That fund, will ensure that WA gets the infrastructure it will need for the future, ensure that it is playing it's part to ensure that we have got the right infrastructure framework for this state for the future, to secure Australia's long term prosperity.
4. National Security
The fourth major objective this Budget is to strengthen Australia's national security.
Our Government is ever mindful of the national security challenges we face.
The threat from terrorism is real.
Australian citizens have been the victims of terrorist attacks.
Our embassies overseas have been targeted.
Terrorist groups continue to look for ways to attack.
Groups such as Al Qaeda continue to mutate, regroup and present new threats.
In Afghanistan, the Taliban is trying to re-establish its regime.
We have had a terrible reminder in recent days that the Taliban are only too prepared to kill to further their aim.
States like North Korea and Iran continue to pose a threat to stability in the region and around the world by seeking to develop nuclear weapons.
To meet these traditional security threats in a changing world, we need to work even more closely with our key security partners.
In a connected world, we also face a new range of threats to our national security.
Threats like pandemics that spread across national borders quickly; a threat that requires us to build a robust regional capacity to respond.
Threats like natural disasters that also need region-wide cooperation to respond to effectively.
To meet this array of threats we need a comprehensive national security strategy.
We need to back this up with clear statements of our defence strategy, our foreign policy and our approach to domestic security threats.
For too long Australia's approach to national security has been piecemeal.
Defence spending has been wasteful in the past - let's never forget this $1.1 billion Seasprite helicopter fiasco.
We will be improving defence acquisition systems to ensure that resources are used wisely. We will be committing the necessary funds to defence.
We will determine our defence priorities for the long term future through this year's Defence White Paper. This will provide us with the planning platform for the future.
Prior to the election we committed to three per cent real increases in defence expenditure out to 2016, and in the Budget we'll be honouring that commitment over the forward estimates and beyond.
Our aim with the budget is to build the long term national security defences of the nation for the future.
The Government's broader economic strategy
In each of these four big areas, this Budget is about the nation's long-term future.
The new Australian Government is committed to building a modern, competitive Australia capable of meeting the challenges of the 21st century - to secure the nation's future and the future for working families.
If we are to build a modern Australia for the 21st century, we will need to take a long-term approach to the physical and human capital needs that drive productivity growth.
This Budget will establish the platform for building long term productivity growth. We will invest in an education revolution.
We need to invest to make our future infrastructure needs in areas such as roads, rail, ports and broadband to make sure that we are dealing with those challenges long term.
We also need to invest in greater workforce participation by reforming our tax and welfare system. Beyond the Budget, the Government is taking a long-term approach to policymaking.
Australia needs a long term, comprehensive economic strategy to enhance our global competitiveness by arresting the recent slide in our productivity performance.
To do this we must restart the economic reform process that has stalled in recent years.
That is why the Government will match our commitment to new investment in this Budget with a renewed commitment to microeconomic reform through the COAG process.
That's why the Government has advanced a large program of work beyond this Budget for the remainder of this term.
We need to move towards a seamless national economy by cutting the wasteful duplication and red tape facing business.
We need to end the blame game and make the Federation work effectively, in critical areas like infrastructure, education, training and health.
We need to implement our agenda for reform of the Federation, including a plan for business deregulation.
In partnership with state governments we have identified already 27 areas for deregulation and red tape reduction to improve efficiency and reduce the regulatory burden on the economy.
We need to modernise our tax, welfare and superannuation systems to recognise rather than penalise hard work, and to enable Australian families to get by and to get ahead.
We need to act decisively and responsibly on climate change.
And should we be re-elected we face a long term agenda of work responding to the mega-challenges represented by the rise of China, the rise of India as well as promoting stability and development in the South West Pacific, where developments have not been headed in the right direction.
To conclude: I am optimistic about Australia's economic future.
And I am optimistic about WA's future.
Spending a day in the stunning city of Perth reminds me everything that there is to be positive about this great country of ours, Australia.
Australia can and should strive to be the best place in the world to live, work, and raise a family.
If there was one, overwhelming message from the recently conducted 2020 Summit in Canberra it was this: you won't achieve long term success if we don't plan for the long term.
You can't change this country if you're only interested in the short term.
You can't repair the physical infrastructure of this nation if there is a one-year horizon.
You can't build Australia's human capital and skills needs if you're only planning out to the next election.
You can't transform the federal system if you're only interested in the next opinion poll.
That is why we have made a commitment to do things differently starting in this Budget.
We will build a strong economy through responsible economic management - a strong economy that delivers for working families.
We will honour our commitments to help working families under financial pressure.
We will begin to prepare Australia for the great challenges of the future.
We will plan and provide for our nation's long-term defence and security needs.
In this budget and beyond, the Government is committed to making the right decisions now to underpin our long term security and our prosperity.
I thank you for your attention.