Jun 16, 2009

Address to CEDA State of the Nation Conference 2009

ADDRESS TO CEDA STATE OF THE NATION CONFERENCE 2009

Hotel Realm, Canberra

16 June 2009

The Hon Anthony Albanese MP

The Minister for Infrastructure, Transport,

Regional Development and Local Government

Leader of the House

Member for Grayndler

Introduction

Thank you and it’s a delight to be back here at CEDA once again.

We’re here to discuss the state of the nation.

In actual fact I’m sure that you don’t need me to tell you what state it’s in.

The employment, investment and economic growth figures are widely reported and well known to you.

Even more to the point, they’re what you have been experiencing every day since the financial crash of last year.

Particularly if you’re in the heavy engineering or construction industries.

For so many of you in those sectors, it’s meant dealing with the challenge of disrupted financing of projects, the temporary downsizing of businesses, the reconsideration of new capital equipment, or – worst of all – assessing the employment needs of your organisation.

But in the midst of these sorts of stories, another story is also emerging.

It’s a story of consumer spending holding up. Of the housing market remaining strong. Of companies sharing around the burden by shortening hours to keep employees in jobs.

There’s a feeling of survival and relief in the air. Perhaps even quiet confidence.

Obviously, there are many difficult days ahead, but in the short-term at least, the savage downturn that’s hit so many other countries so hard has been averted here in Australia.

The economics commentator Ross Gittins has written, with some relief, that:

“…we’re not out of the woods yet. But, even so, it does seem that our recession may be a lot milder than those in the rest of the developed world.”

I think he’s right.

And today I want to outline why I think that’s happened.

I believe the Government has displayed two important strengths in a time of crisis: political courage and long-term vision.

Political courage

The first strength has been political courage.

As people who read the opinion and business pages of the newspapers, everyone here will understand that public policy is made in a wider arena than simply inside the cabinet room and government departments.

As it should be in a democracy, policy is made in the public arena, where big ideas are fought over and orthodoxies established – orthodoxies that too often limit the scope for decisive changes of policy.

This process involves academics, think tanks, vested interests and policy makers in sometimes highly charged public debates and bureaucratic overhauls.

At its best it involves the active participation of the general public.

The past couple of decades saw the establishment of a new orthodoxy that said, in essence, that public spending was bad and debt had to be avoided, no matter what part of the economic cycle we happened to be in.

Dare I say it: Even productive debt got the chk, chk boom treatment!

Infrastructure spending was seen as simply a cost rather than as an investment.

It’s always tempting to stay within the confines of these orthodoxies. No matter how potentially damaging they may be, they offer intellectual comfort, and an easy alternative to hard thought.

They also offer a convenient excuse for failure. Like the economists who made the stock market collapse of 1929 turn into the Great Depression of the 1930s, orthodoxies allow policy makers to say that they were only following accepted wisdom and to evade responsibility for their actions.

In the face of the financial crisis of 2008, it would have been easy to have taken refuge in this orthodoxy. But it would have meant retrenching and retreating. Backing away. Not taking bold moves. Distrusting public spending. And obsessing about debt. All at precisely the wrong moment in history.

It would have meant the creation of a destructive negative feedback loop in the economy; one that would have turned Ross Gittins’ relatively mild impact into a major one

Instead of following the advice of our critics, the Government acted boldly.

Just nine months on from the Lehman Brothers collapse, the Prime Minister’s leadership of a gutsy expansionary and reform strategy now looks like common sense.

It’s easy to forget that it wasn’t a foregone conclusion by any means last September.

I believe history’s verdict will be that in the face of a huge challenge, the Government showed not just intellectual leadership but high-order political courage and skill.

The initial measures are well known to you. A $10.4 billion Economic Security Strategy in October last year. A $4.7 billion Nation Building package in December. A $42 billion Nation Building and Jobs plan in February.

All with an emphasis on increasing economic activity by boosting consumer demand and getting vital job-creating nation building under way in crucial facilities like rail, road, ports, schools, TAFEs, universities, and broadband.

All backed up by strong measures to keep our financial sector strong and stable.

I know some of the associated consumer stimulus measures provoked some unease. People prefer to see public funds invested in projects of long-term benefit to the nation, not as cash advances to boost consumer demand.

The Government agrees with them.

Stimulating consumer demand should never be an end in itself. But what those interim measures represented was a lifeline to support jobs in the retail sector and stimulate the economy before the larger scale nation-building projects could get underway.

It’s early days, but I believe we have been vindicated by Australia’s relatively strong economic performance to date in the form of small but positive growth and rising consumer confidence.

And by the verdict of senior economists – 21 of whom pointed out recently that, at less than 14 percent of GDP, our net debt is only one-fifth of that of comparable credit worthy countries.

As they state, this fact:

“illustrates that even after the stimulus, we remain within a very healthy margin of safety in our Government’s reputation for economic prudence.”

A sound endorsement – the envy of most advanced economies of 2009.

Reforming vision

The second strength Australia needs to get through the global recession and prosper in the future is long-term reforming vision.

The 21 economists I just mentioned said something else of profound importance.

They posed a challenge – one the Government’s critics must also address. Australians, they wrote, must decide: do they want a balance sheet more suited to ‘genteel decline’ or one that ‘supports investment, dynamism and growth’? Especially at a time when our physical and human capital needs to be modernised and made more environmentally sustainable.

We could pose their challenge another way. As well as having the political courage to avert economic catastrophe in the short term, does our Government have the reforming vision to ensure Australia can prosper in the long term?

My answer is yes.

The Government is determined to make up for the failures of recent history.

Australia has been through eras of boom and bust before. But at least in the past, we’ve made the boom work to our long-term advantage.

The benefits of the 1850s Gold Rush can still be seen in the splendors of Victorian-era Melbourne and cities like Ballarat and Bendigo. The University of Melbourne is a prime example.

The Roaring Twenties left us with the Sydney Harbour Bridge, the Great Ocean Road and great memorials to the First World War – projects started when the economy boomed and completed with public investment after it crashed.

The great era of Post War Reconstruction of course gave us the Snowy Mountains Scheme, the Australian National University and the public infrastructure that enabled us to massively increase our population and create modern Australia.

The boom of the 1980s gave us many things, most notably a massive expansion in education and skills. Brisbane began its rise to the status of a world city.

But the most recent mining boom was a strange aberration. It’s like the dog that didn’t bark.

The fastest rise in wealth in Australia’s history failed to leave its mark. It should have accelerated us into first place in the things that determine the wealth of nations in the 21st Century like:

  •  early childhood education;
  •  year-12 retention levels, university and TAFE graduations;
  •  fast broadband;
  •  efficient metropolitan and inter-state transport;
  •  a better-coordinated public health system;
  •  the creation of cleaner energy sources; and
  •  the regeneration of our soils and rivers.

Yet at the end of the boom, Australia had gone backwards in world rankings in so many of these areas.

And – most ludicrously of all – we even had bottlenecks and inefficiencies in the very thing that had enabled the boom in the first place – mining exports.

In fact, under the Howard Government, public investment in the nation’s infrastructure as a proportion of national income fell by close to 20 per cent.

What we had for the first time in our history was a progress-free boom.

The Gold Rush without the splendour. The Twenties without the Bridge. The Forties without the Snowy. And the Eighties without the massive expansion of education opportunities.

That’s some indictment!

We now have to make up for this lost opportunity. We have to do the things left undone when the times were easy.

And we have to do it by investing on a large scale and investing wisely.

Investing on a large scale

Our second Budget has continued the processes set in train by the previous expansionary packages. At its heart is a nation building agenda which will put people to work building the infrastructure that Australia needs for tomorrow.

We are investing an unprecedented $35 billion in transport infrastructure alone.

This will make real progress in developing the modern urban rail infrastructure that will make it easier to get around our major cities;

…a national road network equal to the needs of the 21st century;

…and more efficient international gateways to support our exporters.

In particular, this year’s Budget provides $8.5 billion in new funding for 15 nationally significant rail, road and port infrastructure projects.

These projects will lift national productivity, tackle urban congestion and build a stronger economy.

They will also support thousands of jobs in these tough economic times.

Investing in a smart way

But this isn’t just a story about money. To maximise the benefits, we need better regulation, governance, planning and pricing. Especially in transport.

Anyone who has ever touched down, on time, at a gleaming new airport, only to sit stationary in a freeway off-ramp for fifteen minutes and be late for an important meeting, all whilst running up a huge taxi bill, will know what transport systems need: coordination.

Efficiency requires seamlessness. And while perfect seamlessness is impossible to achieve, we can at least aim for significant improvements.

We’ve come a long way. Let’s face it, Australia made an art form of creating disjointed transport networks in the 19th Century by constructing a rail network using different railway gauges.

We solved that problem mostly, but today coordination takes different forms – notably infrastructure planning and better safety, environmental and other forms of regulation.

Differences in these areas are the sorts of things that make transport operators, and most importantly users, see red.

We need to eliminate them.

And this is why the current national transport reform measures being led by the Rudd Government are so important.

Crucially, our transport infrastructure investment is going to be guided by advice from Infrastructure Australia, ensuring projects are selected on long-term economic, social and environmental merit, not politics.

But just as importantly, all infrastructure – new and existing – is going to operate more effectively because it will better regulated.

In May, Commonwealth, State and Territory Transport Ministers took an historic step towards a truly national transport system by agreeing to progress reforms towards single national regulators in maritime, heavy vehicle and rail transport.

All vehicles over 4.5 gross tonnes, all commercial vessels operating in Australian waters, and rail safety, should be regulated by single national regulatory bodies.

We have also made progress through pricing mechanisms to increase vehicle safety and reduce carbon pollution.

None of these changes on their own will lead to dramatic improvements, but each will add up. The saving of a minute here. The elimination of a black spot there. The purchase of a safer van or truck. It all adds up.

The big picture benefit is obvious: higher economic productivity through greater transport efficiency.

But the benefits to individuals will be important too: fewer deaths on our roads; greater peace of mind for the families of long-haul truck drivers; safer railway journeys; cheaper goods in our supermarkets and shops; and cleaner air in our cities.

More efficient ports

Every transport network has an end point. For the vast bulk of our products it’s our ports.

We’re an exporting nation and our transport system is reasonably effective at getting our exports to our shore line.

But we need to get better at getting them onto ships and across the seas.

There’s a simple analogy here: believe it or not, last year’s AFL Grand Final. Fast delivery from the back line, through the centre, to Gary Ablett at half-forward, came to nothing for Geelong because they couldn’t get through the bottleneck of their dysfunctional forward line.

Our port system in some respects resembles the Geelong forward line in the Grand Final. We need to make it as good as Brendan Fevola, Jonathan Brown and Buddy Franklin put together.

Two new port developments – at Oakajee and Darwin – will make huge improvements.

And these will be backed up by a new National Ports Strategy – which was one of Infrastructure Australia’s recommendations and of the recent inquiry into coastal shipping.

It will produce better regulation, better governance arrangements, and better planning – through more cooperation between Commonwealth, State and Territory governments and our port bodies.

Conclusion

I’ve talked about the lessons of history this morning, so let me end with another lesson from it.

Every year, millions of people drive over the Sydney Harbour Bridge to get to work, to visit friends or sometimes, as tourists, just for the sake of doing so.

Some may even reflect on the fact that the people who built it not only had foresight in economic nation building for the future, but a sense of the requirement to support jobs when it was most needed.

The bridge which started as a nation-building project and was completed as a means of keeping people in work. Hundreds of similar projects built with the same intentions during that era are scattered across the nation.

I think these reflections give people a sense of national pride. They tell us something about what sort of people we are.

What sort of nation Australia remains today.

As decision makers responsible for planning infrastructure worth billions of dollars, we need to emulate that example.

Those from the sector here today – engineers, planners, financiers, architects, and policy makers need to leave a mark on the nation – in ways that not only employ people in the short-term, but make us more prosperous in the long term.

It’s difficult to capture the grandeur of the big infrastructure projects of the Twenties and Thirties.

As the Federal Infrastructure Minister, I want people 20 years from now to – just occasionally – look at the road their driving on, the rail tunnel they’re traveling through, or the port they’re working at and think – as their grandparents did after the Great Depression: ‘this was built after the Global Financial Crisis to sustain jobs and to give me a better future.’

Thank you.