Source: Australian Parliamentary Secretary to the Minister for Industry
Thanks for the very kind introduction, to all of you who have joined us today, and to the organisers and sponsors.
With a special mention for Griffith University, in its 50th birthday year, and because Griffith educated 3 of the government’s 4 Queensland frontbenchers.
One of them is Anika Wells, the newest member of our cabinet, here today – along with Steven Miles.
We all acknowledge the Jagera people and the Turrbal too, from across the Maiwar.
I also wanted to make a point of thanking the SES, first responders, energy workers, everyone who has been there for our communities in recent days, in difficult conditions.
And the working journalists here for the way you’ve conveyed the necessary information about ex‑Tropical Cyclone Alfred.
It’s helped people prepare, endure and respond to all the heavy weather that accompanied it.
From last week in southeast Queensland or northern New South Wales, to last month up north, we’ve been tested again.
And once more that test has revealed that unique, equal and enviable Australian combination of compassion and irreverence, pragmatism and perspective.
As a Queenslander, I saw these qualities on display in my own community last week.
And alongside the Prime Minister, visiting the barracks and meeting volunteers in Brisbane, and at the disaster management headquarters in Logan and on the Gold Coast.
Cyclone Alfred
How we fund recovery and rebuild communities is the first key influence on the Budget we’ll hand down a week from today.
The human impacts matter most to us here, but the economic cost will be very significant too.
At one stage, around 5 million Australians were in harm’s way.
That put almost 2 million homes at risk.
Days of heavy winds and soaking rain saw major flooding and substantial damage.
At its worst, more than 450,000 Australians were cut off from power, the most ever in this part of the country at once.
We are still getting a handle on the economic fallout, but it will be substantial.
The Budget will book Treasury’s best, initial estimates:
An immediate hit to GDP of up to $1.2 billion.
This could wipe one‑quarter of a percentage point off quarterly growth.
With businesses temporarily shuttered, the economy shed about 12 million work hours.
It could also lead to upward pressure on inflation.
From building costs to damaged crops raising prices for staples like fruit and vegetables.
As of yesterday, 63,600 insurance claims had been lodged, with early modelling suggesting losses covered by the Cyclone Reinsurance Pool are around $1.7 billion.
We don’t yet know the precise cost to our Budget, but again it will be significant.
We’ve already co‑sponsored with the states $30 million worth of support for immediate recovery costs –
Repairing roads and infrastructure and cleaning up parks and community centres.
And millions of dollars of support are already flowing to people in the form of hardship payments and allowances, with more expected.
This Budget will reflect some of those immediate costs and we’ll make sensible provisions for more to come.
I expect that these costs and these new provisions will be in the order of at least $1.2 billion, a substantial amount of money and that means a big new pressure on the Budget.
At the mid‑year update, we’d already booked $11.6 billion for disaster support nationally over the forward estimates.
With all of this extra funding we expect that to rise to at least $13.5 billion when accounting for our provisioning, social security costs and other disaster related support.
This will ensure we are there for people and communities, like they’ve been there for each other in the worst‑hit areas.
A new world of uncertainty
If the first major influence on the Budget has been meteorological, the second has been global.
This is a new world of uncertainty.
The global economy is volatile and unpredictable.
There’s a new US administration disrupting trade, a slowdown in China, war in eastern Europe and a fragile ceasefire in the Middle East, division and dissatisfaction around the world.
We’ve seen extreme market volatility in the US and elsewhere, as a consequence.
The S&P fell 10 per cent since mid‑February, pulling other markets down with it.
Even in the most benign scenario, global growth over the next 3 years is expected to be its weakest since the 1990s.
Overnight, the OECD downgraded its growth expectations for next year and the year after.
Treasury forecasts in the Budget will have Chinese and American growth slowing to around 4.5 and 2 per cent next year, respectively.
The forecasts for the US are the same as the mid‑year update but the downside risks are weighing more heavily now.
Unemployment is rising overseas from higher interest rates, and in the UK inflation is going up again.
This is the global backdrop for the Budget.
But amidst all this churn and change, we’ve been careful to make a distinction between the cyclical and the structural.
By that I mean the fluctuations that we need to manage in the short‑term versus the big transformations in the global economy that require a longer‑term response.
One of those transformations is the shift from globalisation to fragmentation we identified in our Intergenerational Report.
It’s clear the rules that underpinned global economic engagement for more than 40 years are being rewritten.
The whole world has changed.
We’ve seen that change accelerate since inauguration day.
Developments since then have not been surprising but they have been seismic.
As a trading nation, Australia has a lot at stake.
The decision not to exempt Australia from American tariffs on steel and aluminium was disappointing, unnecessary, senseless and wrong – as the PM rightly pointed out.
We are not uniquely disadvantaged by these tariffs, but we deserve better as a long‑term partner and ally.
Our producers make sought‑after, high‑quality aluminium and steel and they will diversify, but they shouldn’t have to.
Tariffs and escalating trade tensions are a form of economic self‑harm.
They are self‑defeating, and self‑sabotaging.
More trade restrictions mean less growth and more inflation.
The Productivity Commission made that point today as well.
And the impacts of what we’re seeing will not be confined to one industry, or one community, or one quarter.
These were 2 of the core conclusions of the OECD’s outlook report overnight.
Trade barriers are a key reason why its economists expect slower growth.
And they think inflation will linger for longer across the globe.
The risk of recession in the world’s largest economy is rising too.
All this has consequences for us.
Treasury modelled the impact of tariffs on our economy.
They did this before the US election, and again after the inauguration.
Treasury estimates the direct hit to GDP from steel and aluminium tariffs would be less than 0.02 per cent by 2030.
So the direct overall impacts on Australia should be manageable.
But when you add in the indirect effects, the hit to GDP could be more like 0.1 per cent by 2030.
In fact, over a range of scenarios, Treasury found the indirect GDP impacts of a trade war could be up to 4 times larger than the direct effects of tariffs on our economy.
In a world of retaliation and escalation, the impacts of tariffs are amplified, they linger for longer, resulting in a bigger reduction in GDP and a bigger increase in prices.
Our response to this will not be a race to the bottom on tariffs.
We’ll go for more resilience, not more retaliation.
Because more and higher tariffs would harm, not help, our workers, businesses, industries and economy.
Progress together
Against this uncertain backdrop, the progress we’ve made together in our economy is even more exceptional, and more important.
The encouraging performance of our economy is the third major influence on the Budget.
Despite everything coming at us from off the east coast and from right around the world –
And after 3 difficult years –
The Australian economy has turned a corner.
We saw that in the most recent National Accounts which showed growth in our economy rebounded solidly –
And with bigger contributions from households and new business investment.
This means the private sector is making a more substantial, more promising contribution to GDP growth.
At the same time, real wages and living standards are growing again, supported by our tax cuts and the interest rate cut, and sentiment has been zig‑zagging up overall, as a consequence.
These are all early and encouraging signs that momentum is building.
We know people are still doing it tough and that’s why cost of living continues to be our major focus.
But consider what we’ve achieved together.
Inflation a third of its peak, and now in the lower half of the band.
The lowest average unemployment rate for any government in 50 years.
Stronger employment growth than any major advanced economy.
Four in every 5 of the 1.1 million jobs created this term, in the private sector.
More jobs created in the market sector than any first‑term government on record.
Record labour force participation.
The strongest rate of real wage growth since 2020 – and now 5 consecutive quarters of annual real wage growth.
The gender pay gap at record lows.
Unemployment around 4 per cent and inflation below 3 per cent at the same time, for the first time in half a century.
The highest level of business investment in over a decade, in the last financial year.
25,000 new businesses created each month this term, the highest average on record.
Thirty share market record highs since the election –
25 per cent growth in household wealth via super and shares as a result.
The first back‑to‑back surpluses in almost 2 decades.
The biggest nominal improvement in the Budget in a parliamentary term.
An overall budget position $200 billion better off than we inherited.
More than $90 billion of savings, with more to come.
Real spending growth about a third what our predecessors averaged.
And spending as a share of the economy down from almost a third to closer to a quarter.
Because of our efforts, debt is down by more than $170 billion this year which means billions of dollars of savings in interest costs, one of the 6 biggest spending pressures in the budget.
This means the surpluses in the first 2 years and a much smaller deficit this year, compared to what we inherited, are making a structural difference.
As do the structural changes we’ve made to the NDIS and aged care to ensure spending is more sustainable.
So, we are making meaningful progress on 3 of the 6 biggest pressures.
While spending on the others – health, early childhood education, and defence – is growing in warranted ways.
Australian exceptionalism
Every Australian has played a part in the progress we are making.
That progress is even more remarkable when you remember what we inherited when we came to office.
Inflation higher and rising.
Interest rates already going up.
Living standards and real wages going backwards.
The worst productivity growth in more than half a century.
A decade of deficits and not enough to show for a trillion dollars in Liberal debt.
Because of all our efforts, inflation is down, incomes are strengthening, unemployment is very low, interest rates are coming down, debt is down and growth is picking up.
This is a remarkable combination, and it’s exceptional.
Exceptional when you look around the world and when you look back through history.
Unique among comparable countries, unprecedented in Australia, and defying the economic orthodoxy.
We’ve got inflation down without paying for that progress with mass job losses or negative growth.
We’ve seen the opposite overseas.
Take New Zealand.
Inflation has fallen from its peak here just as quickly as it has across the Tasman –
Except for 2 key differences.
New Zealand is currently in recession and its unemployment rate is above 5 per cent.
In the UK, inflation has also come down at a similar rate to us.
But there it’s now ticking back up, they fell into recession, unemployment is rising and already in the mid 4s.
The last 3 times Australia has come down from an inflation spike, unemployment rose significantly, and growth went badly backwards.
In the mid‑70s, unemployment increased by a staggering 50 per cent and the economy went into recession.
In the 80s and 90s, the unemployment rate doubled to more than 10 per cent and there were also deep recessions.
If our unemployment rate had risen by that much, almost 900,000 more Australians would be unemployed right now.
Soft landing
Our progress has been deliberate, not accidental.
It’s the dividend of the economic strategy we have been pursuing for 3 years.
And guided by 3 principles: relief, repair and reform.
Providing cost‑of‑living relief in a meaningful but responsible way; repairing the budget; and reforming our economy.
Making sure every taxpayer got a tax cut, not just some.
Delivering responsible cost‑of‑living relief that’s taken some of the edge off energy, health and rent costs.
Maintaining a primary focus on the fight against inflation without ignoring the risks to growth.
And repairing the budget at the same time.
We said from the outset we would rather a soft landing in our economy than cleaning up after a hard one.
And thanks to that strategy, a soft landing is looking more and more likely.
Budget preview
This is the foundation and the momentum we will build the Budget on.
It will be a responsible Budget which helps with the cost of living, builds our future, and makes our economy more resilient in this new world of global uncertainty.
Our economic plan is working but there’s more to do.
The Budget will flesh out and advance that plan for prosperity.
There will be 5 major priorities.
Supporting the recovery and rebuilding from Cyclone Alfred, including the $1.2 billion provision I’ve announced today.
Helping with the cost of living, finishing the fight against inflation, and rebuilding living standards.
Strengthening Medicare and funding more urgent care clinics.
Investing in every stage of education.
And making our economy more competitive, dynamic and productive as the foundation for a new generation of prosperity.
Most of the big initiatives under these headings have already been announced.
The $8.5 billion investment in strengthening Medicare is a cost‑of‑living policy with economic benefits, because more bulk‑billing and more GPs means less pressure on families.
Same goes for the $644 million in new urgent care clinics and more than half a billion dollars for women’s health.
Multi‑billion dollar investments in Whyalla, iron, aluminium and our Future Made in Australia agenda will support jobs and industry.
As will funding our Buy Australia campaign.
Another $7.2 billion for the Bruce Highway here in Queensland, $2 billion to transform Sunshine Station in Victoria and $1 billion for new rail links in Western Sydney will connect people, communities and economies faster and more safely.
Our 3‑day guarantee for early childhood education and broader investments in every stage of education will help workforce participation.
Slashing $19 billion in debt for 3 million Australians and lifting the compulsory repayment threshold will ease cost‑of‑living pressures for students and graduates.
And policies to improve competition in aviation, secure banking services in our regions, revitalise National Competition Policy and finish the NBN will all strengthen the economy.
This is more than we’d typically unveil before the Budget.
And there’ll be provisions in the Budget for policies we will announce in the campaign, not next week.
All this means there will be fewer surprises on Budget night.
Already some of the speculation has been way off.
For example, some commentators have made wild and wide‑of‑the‑mark predictions about big surges in revenue.
Some wrongly predict the tax‑to‑GDP ratio will go up this year, when Treasury expects it to be stable or even a bit down.
Revenue upgrades have actually come off very significantly since the highs of October 2022.
Treasury doesn’t expect the bottom line this year or over the forward estimates to change very substantially from MYEFO.
We need to remember here that revenue upgrades are the exception, not the norm.
Over the past 25 budget updates, upgrades have occurred in less than half of them, and in around only 1 in 5 budget updates before the pandemic.
What you’ll likely see in the Budget is that Treasury expects any upgrade next week to be about a sixth of the average of our budget updates.
The smallest revenue upgrade of the 4 Budgets, by far.
This is largely due to commodity prices and volumes dipping and our labour market normalising.
This will constrain our choices and put an even bigger premium on what’s responsible, affordable and achievable.
The worst time to put progress at risk
I’m conscious of time and hope you’ve noticed I have largely focused today on economics, not politics.
I have always believed if you get the economics right the politics will sort themselves.
But I know some of your questions will be political so let me briefly set the scene with 3 quick points.
First point – only one side has put a coherent economic plan out there.
I’ve given you a sense of ours today and the Budget will flesh it out further.
Our opponents have had 3 years and still haven’t come clean on a single costed, credible or coherent economic policy.
Every time they try it falls in a heap.
We saw that with migration, nuclear, tax breaks for long lunches, work‑from‑home, and all the comical contortions they have put themselves through over insurance.
We saw that in their militant, mindless opposition to everything we’ve done to help people with the cost of living.
We see that in their secret costs and hundreds of billions of dollars in secret cuts that the Opposition Leader has said Australians won’t find out about until after the election.
We saw this in 2014 with his surprise GP tax to undermine universal Medicare, when he was health minister.
Second related point – is that this poses an unacceptable risk to living standards and to the progress we are making together.
Our opponents seek to dismiss and diminish this progress, and they’d derail and dismantle it if they win the election –
Taking us back to the rorts, wage stagnation, missed opportunities and warped priorities which defined their wasted decade in government.
They have to find $600 billion to build their nuclear reactors that will jack up power prices and slow growth.
This can only come from stripping funding out of Medicare again, coming after pensions and payments again, or cutting housing, education, wages and services.
They should come clean on their secret cuts.
If we’d taken their advice Australia would have already gone into recession.
If they’d had their way on tax and wages and energy rebates Australians would be thousands of dollars worse off already – and worse off still if they win.
So the third political point is a very simple one –
These issues and these differences will be absolutely front and centre in this election.
Because there could not be a worse time to put the progress we are making at risk, by doubling back to Dutton.
It will be an election on the economy and that’s what we want.
Responsibility and opportunity
That’s another reason to welcome the chance to hand down a Budget next week.
It’s a welcome opportunity and also a rare one.
Rare because for the first time since Chifley more than 3 quarters of a century ago there’ll be 4 Budgets in one term.
Welcome because it puts the economy front and centre, on the eve of an election, and brings our policies and plans together.
This will be another big collective effort.
Drawing on the talents of our whole team, from the PM, his Cabinet and our caucus, the public service and staff – and the Finance Minister, Katy Gallagher.
I left her until last because it’s Katy’s birthday today and that warrants a special mention.
The uncertainty all of us see is an unwelcome new normal.
We can’t wish it away or hide and hope it passes us by.
When the storm is raging, the urgent and important thing to do is fill sandbags and help each other through.
But we’re also thinking about what comes next, how we go beyond building temporary defences and create permanent structures.
We’ll do that by investing in our competitive advantages.
By looking for opportunities to join with our partners in new, resilient supply chains.
By becoming an indispensable part of the net zero economy.
And by preparing our people to adjust to and succeed in this new world of churn and change.
This is a key motivation for our economic agenda and central to this Budget too.
It struck me during the heavy weather, and strikes me now, that what joins the experience of recent weeks with what we’ve seen in the national economy –
Is really that story about Australian exceptionalism, in uncertain and unpredictable times.
That’s our platform for the progress and prosperity to come.
That’s what I’ve sought to flesh out for you today.
The best sense of our fourth Budget can still be found in the first 3.
All were defined by responsible economic management.
Responsible in the specific sense of making it add up.
But responsibility in a broader sense too.
Our responsibility to Australians cleaning up and rebuilding.
Our responsibility to help people under pressure.
Our responsibility to build another generation of progress and prosperity and share it with the people who do the hard yards.
And our intergenerational responsibility to ensure our people are beneficiaries not victims of churn and change in the world.
We accept this responsibility and embrace this opportunity.
To build the kind of future Australians need and deserve –
And the Budget will be an important part of that plan.