NATIONAL PRESS CLUB ADDRESS

You don’t get much closer to the centre of Australia than Docker River.

It’s in the Northern Territory, but just seven kilometres from the Western Australian border and close to the border of South Australia.

Docker may be close to the centre of Australia but its residents and the residents of communities like it, are all too rarely at the centre of our political debate.

Jim Chalmers and I travelled to Docker River and other remote communities last month with Warren Snowden, including spending some quality time with the delightful kids at Docker River primary school who help make up the population of 300.

We went there as Shadow Treasurer and Finance Minister because closing the gap isn’t just a test of our national character, it’s a measure of our economic success.

The best way to grow our economy is to ensure that every Australian has the ability to fulfil their potential, wherever they live.

It is in that spirit that I acknowledge the traditional owners of the land in which we meet, the Ngunnawal and Ngambri peoples and pay my respects to elders past, present and emerging.

As well as committing myself and our alternative Labor Government to the task of eradicating indigenous disadvantage in our country, noting that years of good intentions are not enough. 

We need a whole of government and whole of nation effort to lift the living standards of our first Australians in which every senior member of the Government is devoted to the task, under the leadership of the Prime Minister. 

I also want to acknowledge the other members of our alternative government here today, (Jim Chalmers, Kim Carr, Joel Fitzgibbon, Ed Husic, Jason Clare and Kristina Keneally).

All of us, all in our team have spent our time in Opposition developing our thinking about our approach to the challenges of government, and the implementation of the Labor mission in modern times. 

Part of the reason Labor has been so competitive under Bill’s leadership is our unity of purpose, the quality of our team and the extent to which we’ve all been free to shape the contest of ideas.

I do want to particularly mention Jim Chalmers, my partner in economic policy making. 

The relationship between the Treasurer and the Finance Minister is one of the keys to successful economic policy in an Australian Government and Jim and I have a productive and warm working relationship which I look forward to putting to deploying at the heart of a reforming and activist Labor Government.

This is my fifth post budget address to you as Shadow Treasurer.

I’m sure you won’t take offence when I tell you I hope not be here looking out at you when the National Press Club Budget reply is delivered next year. 

In fact, I’ll share with you that I recently learned that I am about to become the second longest serving Shadow Treasurer since the position was created in the 1960s.

Not a record I was particularly hankering for, but in this line of work, you take what you can get.  

But longevity in this particular office has had some advantages.

It’s given me plenty of time to reflect on the challenges and opportunities facing our country and to prepare for the role of Treasurer.

Frankly, my five years as Shadow Treasurer, combined with having been a former Treasurer (albeit all too briefly!), a former Assistant Treasurer, former Minister for Financial Services, member of the Cabinet for five years and member of both the Expenditure Review and National Security Committees of the Cabinet means that I approach the election and hopeful return to Government having learnt quite a lot from my experiences along the way.

And over that five years, I am proud of the fact that Labor has led the economic debate, eschewing the traditional small target strategy of Australian oppositions, being frank about the challenges facing our country and our budget.

We’ve made big calls.

And in politics, it’s the big calls that ultimately matter.

There will always be the day to day.  Who’s up, who’s down.  Who’s made a gaffe? Who’s got the best grab today?  Who is dominating the news cycles or trending on twitter?

But ultimately, all that doesn’t account for very much.

It’s the big calls that count.

And I put to you that not only have we been prepared to make the big calls, but we’ve got them right and the incumbent government has got them wrong.

It was a big decision to call for a Royal Commission into banking and financial services now more than two years ago. 

It was controversial and the conventional wisdom in the financial and political commentariat was that it was not justified and we’d gone too far.

I think the events of recent times have borne out our decision.

Negative gearing was seen as an untouchable entitlement, reformed at the risk of political death.

Family trust reform had been attempted on multiple occasions and failed due to the political resistance.

The Labor Party had frankly been traditionally wary of capital gains tax reform because of the experience of the 1980 and 1998 elections.

And while most Australians probably didn’t know that you can get an income tax refund, even if you didn’t pay any income tax, and can get the tax paid by a company you own shares in repaid to you so that no net tax is paid, removing a concession worth $6 billion was, we knew, bound to cause a backlash.

But we didn’t do these things for fun. 

We didn’t make these decisions lightly or because we thought they might help us win a 24 hour news cycle. Quite the contrary. 

We did these things because we regard them as essential elements of a bold and necessary reform agenda of a Labor Government.

We did them and will implement in office for a higher purpose.

And it is that purpose I want to talk about today.

Bill’s budget reply speech last Thursday night wasn’t the result of 24 hours or 48 hours frenetic work (although the two days between budget and budget reply are inevitably pretty intense for Bill, Jim and I and our teams). 

Bill’s budget reply was the product of five years of thinking built on the foundations of careful policy work, the culmination of getting the big calls right.

Five years of hard decisions which have created the room and capacity for Bill to announce:

[if !supportLists]·         [endif]A greater commitment by Labor to tackle debt and deficit than the Government has embarked on.

[if !supportLists]·         [endif]Better and bigger tax cuts for 10 million low and middle income earners, delivered in the next term, not on the nebulous never never; and

[if !supportLists]·         [endif]Important investments in health and education

And this is the higher purpose of our decisions.

By making the tough decisions, as well as opposing the Government’s corporate tax cuts, we have been setting out to do three things.

Firstly: to deal with debt and deficit in a better and faster way than the incumbent government;

Secondly, to fund policies we regard as important for economic growth, like our Australian Investment Guarantee, investment in human capital in schools, TAFE and university and our “FutureAsia” agenda for example; and

Thirdly, to enable us to sustainably pursue the Labor agenda of improving the fairness of our economy and tackling inequality.

I want to talk about this higher purpose today.

Firstly, returning the budget to surplus and paying down debt.

I have on other occasions outlined why I regard return to budget surplus and the paying down of debt is important.

The $18 billion we will spend next year on debt interest is money that could be better spent on infrastructure, health and education.

And we need more room, more of a buffer for the government to be able to respond to international downturns in the future.

It’s good that we are returning to balance a year early.   In the face of the best global economic circumstances in a decade, with 120 economies accounting for three quarters of world GDP seeing a pickup in growth in 2017 it would be almost impossible not to record a balanced budget in 2019-20. 

And yet, we only get to 0.1% of GDP as a surplus in 2019-20 and only then by a massive bring forward of tobacco excise of $3.3 billion and assuming that the wages growth rut we have been in for years now will suddenly jump back above three per percent.

The Government has the most expensive and growing component of their tax package coming in in 6 years’ time, based on the assumption the good times roll on for another decade. 

A budget that bakes in future tax cuts in 6 years’ time worth tens of billions of dollars, when the revenue may not turn up to fund them.

As good as the world economy is there are plenty of downside risks.

Risk of a trade war remains material.

Global debt is at historic highs, reaching the record peak of US$164 trillion in 2016, equivalent to 225 percent of global GDP. The world is now 12 percent of GDP deeper in debt than the previous peak in 2009.

As the Deputy Governor Guy Debelle said just yesterday, in a warning about debt, “debt levels are always sustainable until they are not”.

And, the GFC should remain a constant reminder that there are plenty of risks that can exist in the financial system undetected by regulators and commentators alike.

As John Hewson said last week “The risks (economic and geo-political) and unpredictability of the global outlook are greater than I can recall over my working life”.

The realisation of any of these downside risks would have serious implications for Australia’s growth outlook and for the budget particularly given our record public debt is accompanied by record household debt.

And, concerningly, our position has been getting worse as other countries have been improving.

Despite the global economy improving, Australia has gone from an over performer to an underperformer.

The most recent IMF data confirms that between 2013 and 2017, Australia’s general government net debt as a percent of GDP has risen by more than 40%.

Germany’s fell by more than 20%.

New Zealand’s declined by 41%.

Canada’s fell 5%. The UK and US’s has remained relatively stable.

You get the picture.

The whiff of a surplus, not reaching at least 1% of GDP until 2026-27 does not adequately protect Australia against the potential rolling seas of international uncertainty.

Australia needs bigger surpluses, sooner than the government is scheduling.

We can’t afford to let the next four years go to waste in the efforts for a healthier, safer budget surplus.

Accordingly, I can confirm that based on the decisions, budget figures and baselines released by the Government last week Labor will go to the next election:

[if !supportLists]·         [endif]Achieving budget balance in the same year as the government;

[if !supportLists]·         [endif]Delivering bigger cumulative budget surpluses over forward estimates as well as substantially bigger surpluses over the ten year medium term; and

[if !supportLists]·         [endif]That the majority of savings raised from our revenue measures over the medium term will go towards budget repair and paying down debt.

Now of course if the Government decides to announce a new secret policy that is fundamentally unfair and is an attack on working people, then we reserve the right to address that.

But as I said, based on the 2018 Budget, we will achieve these critical goals.

Of course, Jim and I will release full and detailed accounts showing the impact of Labor’s policies when announced closer to the election, but we are announcing today that the net result of those policies will be a better budget bottom line in the short term and bigger surpluses in the long term.

In addition, I can also announce that until Labor gets the budget back into a strong surplus position we will be guided by the following fiscal principles in Government:

[if !supportLists]·         [endif]Repairing the Budget in a fair way that doesn’t ask the most vulnerable Australians to carry the heaviest burden

[if !supportLists]·         [endif]More than offsetting new spending with savings and revenue improvements

[if !supportLists]·         [endif]Banking changes in receipts and payments from changes in the economy (parameter variations) to the bottom line if this impact is positive.

Our fiscal strategy will be based on sound principles, taking economic conditions into account.

As the Government introduced a new arbitrary tax-to-GDP cap into their fiscal strategy in this budget, other elements of their fiscal strategy such as their promise to “bank” the uplift in revenue to budget repair were simply ignored.

No doubt as I speak, the Government will be taking to Twitter to attack our commitments.

But they are not in a position to credibly do so.

They have trashed their own fiscal rules, so they are not in a strong position to criticise ours.

They have watered down their fiscal rigour with regular monotony.

The greatest failure of the Government’s official ‘fiscal strategy’ has been the persistent watering down of its 2013 commitment to get to a surplus of at least 1 per cent of GDP by 2023-24.

This was then downgraded to a surplus of at least 1 per cent of GDP “as soon as possible”.

Now, on the Government’s current numbers, they still don’t get there for eight years in 2026-27.

Now, let me make a prediction.

Based on recent form, when faced with good policy announcements from Labor, difficult to criticise on their merits, the Government will resort to personal abuse and simply say “Labor can’t be believed”. 

That’s all they have.

Following our budget reply, the Government claimed our policies were not costed by the Parliamentary Budget Office.  This was a lie.  Of course, they were. 

The Parliamentary Budget Office, a statutory independent office, is available to all political parties to cost policies on an equal basis to costings undertaken by the Treasury and Department of Finance under the Charter of Budget Honesty.

An independent PBO costing should be treated with the same respect as a Treasury costing, as the best estimate of the cost or revenue raised by a policy, determined by experts in their field with access to all the relevant data.

But Labor wants to provide extra rigour.

Accordingly, I today announce that Labor has engaged a panel of expert and eminent Australians to review our costings and assure their efficacy.

The Costings Panel provide a final assessment and verification of our budget bottom line, over the forward estimates and the medium-term. The Panel will also assess the robustness of our costings and the assumptions that underpin them.

Of course the panel members are not being asked to endorse our policies, but rather the rigour and appropriateness of the costing process.

The panel consists of Professor Bob Officer AM, Dr Mike Keating AC and Mr James Mackenzie.

Bob Officer is one Australia’s most respected academics when it comes to finance and accounting.  He is Emeritus Professor at the University of Melbourne and Honorary Professor at the University of Queensland. He was chosen by John Howard and Peter Costello to conduct their Commission of Audit.

Dr Mike Keating is a respected former public servant, serving as a former Secretary of Department of Employment, and former Secretary of the Department of Finance and the Department of Prime Minister and Cabinet.

James Mackenzie is a distinguished businessman, holding formal qualifications in accounting and is a Fellow of the Institute of Chartered Accountants and the Institute of Company Directors.

The particularly observant of you will note that Professor Officer, Dr Keating and Mr Mackenzie also performed this role for the Opposition at the last election.

This additional rigour that we applied is part of the reason why, after the last election, the Parliamentary Budget Office reported that:  ““There were no material differences between these budget impacts and those released by Labor prior to the election.” In other words, are costings were accurate.

It is only the Liberal Party who has suffered the ignominy of having their costings found to be in error (in 2010) and the accounting firm they used to put them together found guilty of professional negligence for the errors.

Whilst the Liberals will no doubt spread their misinformation about the efficacy of Labor’s costings, the “PBO plus” model of rigour that we are taking to our costings means that we are going to extra mile and applying more than the appropriate amount of rigour not only  to our policies but to the fiscal impact of the policies we embrace.

Our policies show we are serious about economic reform, and our rigorous processes show we are serious about budget repair.

As important as budget repair is, it cannot and will not be the be all and end all of Labor’s economic policy.

Our agenda also embraces growth and ensuring that growth is inclusive.

Our twenty six years of uninterrupted economic growth are a substantial achievement for our country but I’m under no illusion that they will continue automatically without government policies.

The Government has a one point plan: a corporate tax cut that will cost at least $80 billon over the next decade, (although the Government very suspiciously won’t reveal the full cost of their corporate tax plan, meaning it is quite possibly more than $80 billion) with no conditions or guarantees about investment, wages, jobs or growth.

This is where Labor has a better, more holistic approach.

Our plan takes the ‘high road’ of productivity growth, through dynamic efficiency gains, better skills and smarter use of technology.

[if !supportLists]·         [endif]encouraging technological investment and innovation, including through our Australian Investment Guarantee;

[if !supportLists]·         [endif]improving the quality of our human capital through important investments in education, skills and health; and

[if !supportLists]·         [endif]better harnessing the economic opportunities in our region through our FutureAsia plan.

Our Investment Guarantee will allow all businesses to immediately write off 20 per cent of all their new investments in tangible and intangible assets in the first year, with the balance depreciated in line with normal depreciation schedules from the first year.

This will improve cash flow making more attractive those marginal projects that otherwise may not get off the ground.

Our Australian Investment Guarantee will drive new investment in plant, machinery and equipment.

But it will also drive investment in “knowledge assets” – supporting new investments in the new economy that embody more innovation and human capital.

From firms expanding the capacity of their factories in outer metropolitan areas, to farmers wanting to buy the most sophisticated trucks and machinery in regional areas to advanced manufacturers wanting to upgrade their computerised technology in Australia’s cities.

Our plan will support them.                                                          

Take, for instance, a food manufacturer operating in regional Australia.

A company that wants to spend $6 million upgrading to new energy efficient freezers to ensure it can store its growing stock of food.

Our plan would help deliver the investment because it will deliver it immediate cash flow of $1.2 million – money that can be used to hire new employees and continue their business development in Asia.

Not only would this company get the instant cash flow benefit, but the new freezer equipment would help reduce the carbon emissions intensity of the production process by 33% and due to the improved energy efficiency would result in savings of up to $500,000 in energy costs per year.

Recent modelling by the University of Victoria shows that compared to a straight cut in the company tax rate, an investment concession – like Labor’s Investment Guarantee – is actually up to “three times more effective as a stimulus to investment”.

The most growth enhancing part of the United States tax package is the “immediate expensing” element.

Drawing on IMF analysis Saul Eslake has pointed out that in relation to the US tax plan “the thing that is providing the boost is not the company tax rates, it is the immediate expensing of investment”.

Our plan is permanent, and won’t be subject to the annual budget cycle like the Government’s instant asset write off. 

The Government’s corporate tax cut does not guarantee any new investment for each budget dollar spent. Ours does.

Their corporate tax cut can go directly to paying for share-buy backs, and dividend increases either here or offshore, not new investment.

And when it comes to supporting economic growth over the next few years, we have a superior plan.

Our bigger, better and fairer personal income tax cuts announced by Bill last week targeted at the hip pockets of low and middle income earners will put more money back in the hands of families and businesses.

Because low and middle income households have a higher propensity to spend, our bigger tax cuts for 10 million working Australians will give a bigger shot in the arm to household consumption than the Government’s tax cuts.

And of course it is not just about tax.

Investment in people lies at the heart of Labor’s growth mission.

And it’s arguably the most important part of the growth equation we have to get right.

If our future workforce does not have the skills to participate and contribute to the nation’s prosperity, it will put us on a path to worsening living standards and inequality.

The challenges are immense. Technological change means that the type of jobs and people’s lifetime experiences in the labour market will change significantly over the coming years.

Consider this: three and a half million Australian jobs will be impacted by automation by 2030.

As Reserve Bank Governor Philip Lowe has consistently pointed out, how we prosper in the future “depends increasingly on investment not in physical capital, but in human capital”.

The first 5-year productivity review undertaken by the Productivity Commission has already made the case for investment in a more adaptive education system and skills.

And it’s a strong reminder of the importance of skills and investment in people to our growth potential.

The Commission was pretty frank in its view about what’s important for growth and productivity “if we had to pick one thing to improve…it must be skills formation”.

With labour underutilisation in Australia high, and at a staggering 30% for Australia’s youth – close to record highs – it highlights the growing challenges to ensure ongoing participation.

And when it comes to skills, we’re going backwards.

Today, there are 140,000 fewer apprentices than there was when we lost office.

And $3 billion has been cut from TAFE and training.

We know that there is an increasing demand for skills in the service sectors – like disability and aged care.

We know that we need to boost the digital capability of the workforce to deal with massive skill shortages now and to position us to deal with technological change.

And we know we need more tradies for the big infrastructure that will drive growth and productivity – and yet the government is taking money out of the very system that will ensure we have that workforce.

On Thursday, we announced that we would scrap the upfront fees for 100,000 TAFE students who pursue studies in the skills Australia needs.

Important as this announcement is, it isn’t a one-off but part of our holistic and comprehensive offering that has been developed by Tanya Plibersek and Doug Cameron which include:

[if !supportLists]·         [endif]Investing $100 million in modernising TAFE facilities around the country

[if !supportLists]·         [endif]Ensuring that one in ten jobs in Commonwealth priority projects are filled by apprentices

[if !supportLists]·         [endif]Providing 10,000 pre-apprentice programs for young people who want to learn a trade

And

[if !supportLists]·         [endif]Providing 20,000 adult apprentices programs for older workers who need to retrain.

Now Simon Birmingham has been disparaging TAFE, with talk of acupuncture and basket-weaving.  Now that’s insulting and elitist of course.  But it also belies a lack of understanding of the importance of TAFE for Australia’s future.

Prioritising vocational education and TAFE in particular is a big call the Labor has right and the Government has wrong.

Ladies and gentlemen.

My colleagues and I don’t know when the next election will be –that’s not something we get to decide.

What we can control is the program we take to the next election, the choice we offer. And that choice is increasingly clear.

The competing economic plans have taken shape.

The Liberals used to make a virtue out of budget repair. 

But now Labor can offer a better budget repair plan because of the tough decisions we’ve already made and announced as well as the discipline we are applying.

Recently the Liberals sought to make a virtue of low tax.

They’ve sacrificed larger surpluses on the altar of an arbitrary tax to GDP cap which is so sacrosanct that Peter Costello had five budgets which breached it and I don’t remember the Liberals arguing that the dead hand of socialism had been resurrected at the behest of that well known taxer John Howard.

And now, Labor can offer better and fairer personal income tax on a believable time-frame, not on the never-never and subject to nebulous international economic changes.

I’ve made some commitments today when it comes to the Budget.

They’re important.

But more importantly, they are backed by policies.  By decisions already taken and announced.

Announced months and some cases years before the election, happily open to scrutiny and debate.

Because we want a mandate, not just to govern, but to reform.

To do big and important things.

To fix the budget to provide a bigger buffer to protect Australians against uncertain international economic times.

To make our tax system more fair.  Not less progressive like the government, but fairer.

To create room for the investments we see as vital in education and in health.  Investing in our people so that they can give their best and their all.

The Government has, as they always do, put together a budget designed to shut down political problems and create wedges and games.

We see a budget and we see our alternative approach as a statement of values and priorities.

Evidently very different to the Government’s.

The battle lines are drawn.

And we relish an election based around our competing economic plans.

And more importantly than that, we’ll relish the opportunity to implement them in a Shorten Labor Government.

We’re ready for an election.

But we’re also ready for Government.

A Government that makes hard choices and big calls.

And gets them right.