The Economy

I was raised in a council house by a single mother on an invalid pension. So much of what Mum did added up to one thing: her hope that my life would turn out better than hers. What I saw in her was what I would eventually learn was universal.

The aspiration to lift others as we lift ourselves. To make life better for our families and our communities. To create a future you look forward to, by improving the present. And to do everything we can to make sure our children have opportunities and choices greater than what we had.

This is a desire that doesn’t distinguish between religion or ethnicity, postcode or bank balance.

For some it is the dream of raising the first generation in their family who goes on from school to higher education. For some it is the dream of making enough money to become their family’s first generation to pass on something to the next.

This is also the great possibility that Australia represents to so many migrant families. To them, Australia is the promise of a better life. It is a promise with a powerful allure.

It is a promise that drove my Mum. It is a promise I hope she saw realised in me. And it is a promise I hold for my own son.

Labor is imbued with that spirit. One of our defining values is social mobility.
Our movement was born at a time when your destiny was anchored to your social class. Labor’s historic mission has been to sever that anchor chain.

When I think about the path of my life, I recall that enduring promise of Labor: No one held back and no one left behind.

What turns that aspiration into a reality is a strong economy. An economy that works for people, not the other way around. An economy that has enjoyed 28 consecutive years of growth thanks to the happy accident of our natural endowments, and the anything-but-accidental actions of the Hawke-Keating Labor Government.

And despite the Coalition’s declarations that recession was inevitable, the actions of two great Queenslanders - Kevin Rudd and Wayne Swan - ensured that our economy kept moving forward. An economy that is the beginning of possibility, the foundation on which everything else stands. An economy that delivers rising wages and living standards.

But, beneath the dead hand of a Government in its seventh year, the foundations are beginning to crack.

Our economic growth is at its lowest since the global financial crisis, with both the International Monetary Fund and Reserve Bank revising down our growth prospects. Our standard of living is flat-lining. Wages are stagnant. Our unemployment rate is higher than the US, Britain, New Zealand and Germany. Our national debt has doubled. The annual interest bill on that debt alone stands at more than $16 billion. For that kind of money, you could build Sunshine Coast University Hospital eight times over.

Official interest rates are at their lowest in history, with the Reserve Bank even contemplating unconventional monetary policy such as quantitative easing.
Productivity is sliding backwards. The accumulation of these economic indicators should be jolting us out of complacency.

We can all take pride in our 28 consecutive years of growth. But we know that past success never guarantees the future.

We should be planning how to address the coming economic challenges.

But anyone hoping to hear about plans from this Government of leaners is set for disappointment. As far as this Government is concerned, the job is already done. Election won, mission complete.

There is nothing left to do but a never-ending victory lap. But as history has shown, whether in sport or commerce, this approach is never sustainable.

Australia cannot afford to rest on its laurels. Labor gets this, even if the Government does not.

Today I will lay out the economic challenges that Labor will confront, and our priorities. A plan based upon creating wealth as well as ensuring it is distributed fairly.
Higher productivity, higher growth, higher wages, fairer outcomes.

That will be Labor’s economic agenda.

Structural Changes

We face a significant challenge from the structural changes taking place in the global economy.

It has been over a decade since the collapse of Lehmann Brothers and the onset of the global financial crisis. Yet, the impact of the GFC continues to reverberate around the world.

As Thomas Piketty outlined in Capital in the Twenty-First Century, anyone with assets has done well, but inequality has worsened. While the wealth of the bottom fifth of households hasn’t risen from the average of $35,000 since 2003/4, the wealth of the top fifth has risen from $1.9 million to $3.2 million.

A driver of inequality has been the historically low levels of the cost of money.
For some countries, such as Germany, a large share of the bonds issued are now at negative rates.

What was described as the Japan problem - low interest rates and low growth - is now much broader across advanced countries.

And with debt now effectively free, Central Banks are handcuffed. They are out of ammunition on interest rates yet the Government has relied upon them.

But this is not just an academic exercise. It is reshaping returns in the global economy - particularly for labour and capital. Australia is not immune from these changes.

Low interest rates assist borrowers rather than savers. It is precisely their mission - to bring investment forward.

But this has consequences for asset prices and especially for inequality as the value of assets, for those fortunate enough to hold them, increases.

It also means that when savings are plentiful, and the opportunities of growth less so, firms restructure their balance sheets rather than engage in new investments. And this has implications for wage growth as labour productivity stalls.

Put simply, those with assets have seen their wealth increase, while workers who rely upon their wages have struggled.

The bottom line is that after a decade of low interest rates and low growth, the case for monetary policy as being sufficient is at an end.

Monetary policy is a blunt instrument. It is not designed to do all the heavy lifting on growth and especially not over a decade.

As the Reserve Bank Governor has repeatedly pointed out - we need a wave of reform on our supply side.

Prosperity

It is entirely appropriate that I’m making this address here in Queensland, a state invaluable to our national prosperity.

Queensland has both the largest area and the highest proportion of agricultural land in the country, and some 30,000 businesses engaged in agriculture.

It has developed a $23 billion tourism industry and 430,000 small businesses. Queensland is a great trading state with a mindset for getting ahead, including as the world’s largest exporter of metallurgical coal and the development of the emerging rare earths industries.

Look right across the spectrum - resources and mining; primary industries such as beef; tourism; services; international students - and what you see is an open, outward-looking state.

Queensland is exporting electric vehicle charging stations to Europe, energy management systems to Asia, mining services globally, as well as enhancing farming and agriculture with the use of biology, genetics and drones.

Queensland universities and research institutes are working with commercial tourism operators to take advantage of a growing worldwide interest in unique, sustainable environmental experiences.

In short, Queensland - like the nation - has the potential for a great future.

And I am optimistic about Australia - as long as we get the settings right.

I see a future that builds on our potential as a clean energy superpower.

A future that realises our capacity to deliver the cleanest, most ethical food products to the world.

A future based on our reserves of rare earths, the resources that will fuel this century the way that coal and iron ore fuelled the last.

And a future that leverages our expertise, quality and skills to provide the future services in tourism, education, infrastructure, urban management and human care.

These are the opportunities that lie before us. But they are at risk of not being realised. At risk from a Government that alternates between coasting in neutral, or pulling us backward in what can be most charitably described as acts of passive regression.

They have no plan. No plan for jobs, no plan for growth, no plan for higher wages.

A failure to plan is a plan to fail.

Australians are ambitious for their families, their communities and the nation. It is what characterises our go-ahead spirit.

Taking what has been handed down to us and improving on it.

That’s why we have one of the highest living standards in the world - our desire to leave the next generation and the nation in a better state than we inherited.

Position, position, position

Our task is made that bit easier by the gift geography has given us. At no time in our history has our location in the Indo-Asia Pacific been such an asset. The tyranny of distance is giving way to the privilege of proximity.

We sit at the apex of a region whose population is set to reach 3.7 billion within a decade - all within a flying time of 10 hours and a convenience of a shared timezone.

The region is seeing the fastest growth in human history. Within that region are countries such as Indonesia and Vietnam, home to the world’s fastest rates of economic growth and most rapidly burgeoning middle classes.

We are also connected to India - the world’s largest democracy - via its language and institutions, its Australian-based diaspora, and, indeed, cricket.

And of course there is China, which, as it enters its next phase of development, is increasingly demanding the sorts of services and consumer experiences that prosperous middle classes desire.

Productivity project

If we are to make the most of our natural endowments and geographical position, Australia has to engage in a productivity renewal project.

Productivity is the key to economic growth, international competitiveness and, ultimately, rising living standards underpinned in large part by long-term, sustainable wage growth. Which is why Australia’s recent performance in productivity should be an urgent call to action.

But instead, we have a complacent Government that far from using its power to help drive prosperity and the social mobility it fuels, is instead asleep at the wheel.

When Labor left office in 2013, annual productivity growth averaged 2.2 per cent. Under the Coalition this rate has halved. In the last two quarters it has actually gone backwards.

We are in a productivity recession.

With productivity missing in action, that old anchor chain of class and destiny threatens to make a comeback.

Wages will remain flat and living standards will deteriorate.

For parents trying to put a bit of money away for the annual beach holiday this Christmas, it is getting too hard after paying electricity and childcare bills.

This is a point the Reserve Bank and the business community continue to make.

Our taxation system has shifted towards taxing labour more heavily than capital, reinforcing the concentration of wealth and growing inequality.

Not only is this unsustainable, it is contrary to our national spirit.

I want to lift our productivity horizon - and do that in partnership with business, unions and civil society. But I want the productivity debate to be much more than a one-dimensional focus on industrial relations and work practices.

The fact is workers have not benefited from the modest boost in productivity, because we have an industrial relations system where enterprise bargaining is not delivering real wage improvements.

We have a Government obsessed with attacking the fundamental right of trade unions to exist through measures such as the Ensuring Integrity Bill, which will exacerbate the problem, not solve it.

Instead I want to focus our productivity debate on managing the next wave of challenges. Challenges such as increasing wages. Challenges such as population settlement and the management of our cities and regions so that the balance between our working and family life is restored. Challenges such as climate change, energy and environmental sustainability. Challenges such as support for an ageing population and a health system facing long-term chronic conditions.
Challenges such as tackling entrenched, intergenerational poverty - particularly for those 320,000 jobless households with dependent children aged under 15.

Infrastructure

The priorities of our productivity renewal project will be to lift investment in infrastructure, lift business investment and invest in our people.

Public infrastructure creates short term stimulus and jobs, while boosting productivity in the long term.

Our immediate priorities are clear.

One: The confusion and inaction over energy policy must end, replaced with a clear mechanism and plan that will deliver the certainty necessary to drive investment in this sector.

A shift to a clean energy economy will achieve a triple bottom line - more jobs, lower prices, lower emissions.

Climate change is real and it requires leadership.

The early arrival and intensity of the current bushfire crisis should be a wake-up call for anyone who still questions the science.

We can achieve real outcomes while benefiting jobs and the economy.

Two: To support our future prosperity and productivity Australia needs a high speed broadband network built on more 21st century fibre.

Labor went to the previous election with a responsible and credible plan to address near-term concerns with the NBN.

Come 2022, the country will need a long-term plan.

Three: We need to plan now for Australia’s future transport needs.

It’s no good announcing an urban congestion fund over 18 months ago and literally the only expenditure has been $17 million on advertising in the lead up to the election.

We need vision such as High Speed Rail, which would bring regional communities closer to our capital cities, and boost the case for regional business investment and decentralisation.

This would be a natural continuation of Labor’s strong record in infrastructure.
Indeed, when I was Infrastructure Minister we doubled investment in roads right across our nation.

Better roads that cut travelling times and improved safety.

We invested more in urban public transport than all previous governments from Federation through to 2007 combined.

Including the Redcliffe Rail Link first promised in 1895, and Gold Coast Light Rail.
And we would have funded Cross River Rail, but the Abbott Government ripped that money out.

The provision of infrastructure must be a first order public policy priority.

The Government has this week responded to Labor’s campaign by bringing forward some infrastructure investment - but most of it is still after the next election.

We need is to increase investment now.

There is also a crucial role for the private sector.

Indeed, we will partner with the private sector, including our $2.9 trillion superannuation industry - the legacy of a Labor Government that never sat on its hands - and encourage their investment in infrastructure and technology.

That’s why the legislated guarantee to lift super to 12 per cent is not only in the interests of those in the workforce, it is also in our national interest.

Over the past two decades, the average age of Australia’s capital stock has remained unchanged, and in some industries such as agriculture, manufacturing and accommodation, it has actually aged.

We are not seeing the level of business investment needed to lift productivity. And this is when interest rates are at historic lows.

Faced with the challenge of weak business confidence, the best the Treasurer can do is hector business leaders. That does not constitute a plan.

I want to see business confidence restored and investment renewed.

I want to see a tax system that gives businesses incentives to invest in themselves - both in better technology and equipment, and in their workers.

In that spirit, I again urge the Government to introduce an upgraded investment guarantee as part of a measured economic stimulus package. Bringing forward infrastructure investment, combined with increased business investment, would create jobs in the short term and lift productivity.

Investing in our people

In addition to investing in infrastructure and business physical capital, the key to lifting productivity is investing in people. Crucially, investing in people must involve addressing the skills shortages that are a major handbrake on productivity growth.

We must repair our ailing VET system to tackle the steep decline in the number of Australians working towards apprenticeships.

We need to make sure workers have transferable skills, so they can move more easily between jobs. They also need to be able to upgrade and expand those skills as industries change. Having those skills will give them the confidence to face the future and the change it will bring.

We must foster an education, skills and training system that is fit for purpose.

This is a priority that is so pressing that in Perth last month I announced Labor’s plans for a new legislated body, Jobs and Skills Australia. It will be a genuine partnership across all sectors - business leaders; governments; unions; education providers; and those with expertise in particular regions.

Micro-economic reform

Labor’s productivity renewal project will restart the process of micro-economic reform and the forensic analysis of how economic activity is regulated and where changes have to be made.

I have long been a champion of micro-economic reform.

It was the approach I took as Infrastructure Minister when I reduced the number of transport regulators from 23 down to three. Prior to this, separate maritime licences were required across state boundaries.

The same rail signals meant different things depending on where you were. And there were different widths and lengths of heavy vehicles permitted, and even different numbers of cattle allowed on vehicles.

This removed absurd red tape and will return a $30 billion efficiency dividend to the economy over 20 years.

As the Productivity Commission has confirmed, today’s prosperity is due in large part to the micro-economic reform program undertaken by Hawke and Keating.
From liberalising financial markets, removing tariffs and reducing protection, through to competition policy, the micro-economic reform program of Hawke and Keating was unprecedented.

What they gave Australia was the national leadership that is an essential ingredient in improving our productivity performance in a globalised, competitive world.

Through the sheer power of their actions, they reminded us all that there is a natural and central role for the state.

But we have now reached the limits of the Hawke-Keating reforms. And new challenges require new impetus.

Fiscal Management

This reform agenda must also be complemented by sound fiscal policy.

I want our economic framework to have a soft heart and a hard head.

As the child of a single mother on the invalid pension, I appreciate the value of a dollar and the importance of managing money. And having grown up in council housing, I also know all too well the value and the big difference government assistance can make to the lives of struggling families. Prudence and mutual obligation are values I learned growing up and they are values that I will take to fiscal policy.
Like the Hawke-Keating Government, which turned around the budget by 4.8 percentage points of GDP - the equivalent of $90 billion in today’s money - I will ensure that our investment tackles the real challenges we face.

Unlike the Coalition, which continues to float nonsense such as taxpayer subsidies for a new coal-fired power station that it knows full well will not happen, treating the public like mugs.

And unlike the Coalition, which as the Parliamentary Budget Office has demonstrated, is intent on funding its fiscal consolidation through bracket creep to the tune of 0.5% of GDP.

Labor’s fiscal approach will instead be aligned to our economic priorities, which will first and foremost be to lift our nation’s productivity.

Just as Hawke and Keating used fiscal policy to respond to the terms of trade crisis in the mid-1980s, Rudd and Swan used fiscal policy to quarantine the nation from the shock of the global financial crisis.

I agree with the Secretary of Treasury, who recently told Senate Estimates that medium-term fiscal frameworks play an important role in contributing to a stable and predictable environment supportive of growth.

And I agree with Deloitte Access Economics, when it says that fiscal policy should be assessed in the context of its impact on society’s objectives of prosperity and fairness, including intergenerational equity.

Our fiscal priorities will be integrated with our long-term objectives to increase our productivity and, in turn, our living standards and social mobility.

Conclusion

Right now, Australia is full of opportunity. And with the Asian century, we are uniquely poised to maximise our possibilities.

But if we fail to get these settings right, the failure will not just be ours. It will be felt by generations to come.

But we can get this right.

Yes, Labor has learned the lessons from our recent mistakes. But importantly, Labor hasn’t forgotten the lessons of our historic, nation-changing successes either.

Guided by our record and our enduring values, we look ahead with confidence to the challenges and the opportunities of the economy of the future. Because we are the party that has consistently risen to them.

I want to lead a fiscally responsible Labor Government that invests with an eye firmly fixed on productivity.

A Labor Government that supports wealth creation as well as its fair distribution.

A Labor Government that supports micro-economic reform.

We will never be content to just drift in the tide of good fortune, but we will do what Labor does best - give Australians a strong and resilient economy from which all else flows.

Australians are pragmatic, but they are not timid.

They will grant a Government a licence to embark on programs of progress and change - provided that Government gets the economy right first.
The economy is the starting point.

At the beginning of this speech, I talked about how the circumstances of your birth needn’t dictate the path of your whole life.

That is the social mobility that is at the heart of Labor’s mission.

Social mobility is born of opportunity.

Opportunity needs a strong economy.

A strong economy needs growth in productivity.

And growth in productivity needs intelligent budgets and a progressive tax system that incentivises investment in capital and people.

That is economic responsibility.

That is how Labor will keep Australians from the old anchor of class and pre-determined destiny.

Now is no time to lower our aspirations - it’s time to raise them.