E&OE……………………….…………………………………………………………………

 

Unemployment is edging up here. Inflation is rising in China. The United States is mired in seemingly permanent deficit; and the periphery of Europe is teetering on the brink of a sovereign debt crisis. The stock market is down. The spot prices of many commodities have fallen sharply overnight; and fears of a global double dip recession are growing. This is hardly the time for the government to be congratulating itself on its economic management or complacently assuming that the Australian economy can readily cope with more debt and higher taxes.

 

By all means, let’s be glad that the Treasurer has been judged international finance minister of the year (albeit by the same magazine that a few years ago picked Lehman Brothers and Bear Stearns as investment banks of the year); but let’s remember that it’s Australia’s performance that’s been praised rather than Wayne Swan’s and that it’s the reforms of previous governments, not the spending spree of the current one that is responsible for our comparative strength.

 

Yes, the June quarter national accounts showed solid growth of 1.2 per cent but this was mostly a rebound from the flood-and-cyclone-affected March quarter. Over the full year, the economy expanded by an anaemic 1.4 per cent. The Westpac-Melbourne Institute index of consumer sentiment has been trending lower for a year to levels last seen in mid-2009. Retail sales have fallen in two of the past three months and are below where they stood in April. Building approvals are down 15 per cent over the year. The demand for credit from businesses continues to shrink. Finally, the economy has added just 20,000 jobs since last November, nearly all of them part-time.

 

The public doesn’t believe the government’s claims that they are all better off. The things they want like flat screen TVs might be cheaper but the things they need like food and power are all much more expensive and the government is threatening to make a bad situation worse. As far as they’re concerned, Australia is a great country with a lousy government. People have a shrewd sense that when the government doesn’t know what it’s doing, the whole country loses direction and purpose.

 

Our national confidence is low because we know that we can be better than this and we want a government that can speak to our best selves as people and as a nation. Australians don’t expect governments to be perfect but they do expect a sense of direction and purpose and they’ve concluded that minority government is an experiment that’s failed.

 

My main purpose today is to share with you the Coalition’s plan for a more productive economy and a more prosperous Australia. Before that, though, let me outline the character of the government I hope to lead. Sixteen members of my frontbench were ministers in the Howard government. People can be confident that the Coalition will provide a competent government because we’ve been one before. The government I lead will be experienced, consultative and decisive. People can know what I will be like in government because I’ve been there before. As the people who worked with me then can attest, I listen, I learn, and I decide. Work for the Dole, the Job Network, the building industry royal commission and Medicare rebates for psychology consultations and dental services all happened on my watch because I could negotiate change from an idea to a reality.

 

Since the election, the Coalition has committed to new water management policies including more dams, a genuinely level playing field for manufacturing, and further welfare changes to give more people the chance to show what they can do rather than what they can’t. We’ve said “no” to a carbon tax because we say “yes” to manufacturing industry and “yes” to affordable power. We’ve said “no” to the government’s Malaysian people swap because that’s a proven failure while Nauru, temporary protection visas and turning boats around is a proven success. We’ve demonstrated our credentials for government by being an effective opposition and by showing that we understand what needs to be done if our economy and our country are to get back on track.

 

At the heart of the Coalition’s economic plan for Australia will be the provision of competent, effective and stable government. We will adopt for government the same economic principles that Australian businesses and households know work best for them. We will stop wasteful spending. We will rescind punishing taxes that only hurt confidence and jobs. We will encourage productivity and greater workforce participation. We will listen to business and the community before we implement policies. And we will honour our commitments in order to restore trust in government.

Australians have understood the significance and learned the lessons of the Global Financial Crisis. The savings rate has increased five-fold to the highest in over two decades. The Australian government, by contrast, has embarked on a debt fuelled spending binge unparalleled in our history. Since 2008-09, the government has successively racked up the third largest, largest and second largest annual budget deficits in our history and, even on its own optimistic forecasts, will deliver another big deficit – the fourth in four years – in the current year. The current government has predicted plenty of surpluses but it’s never actually delivered one and next year’s predicted surplus will need to be repeated for 50 years just to balance four years’ deficits. 

 

In a revealing early take on the GFC, in his notorious February 2009 essay for The Monthly, Kevin Rudd pronounced the death of thirty years of neo-liberalism. It was up to government, said our then prime minister, to rectify the systematic ills of a market economy. This fundamental failure to grasp the basic requirements of wealth creation has characterised the Rudd/Gillard government, despite its occasional rhetorical concessions to the need for responsible economic management.

 

Neither Rudd nor Julia Gillard has ever really understood that you can’t have a community without an economy to sustain it and that you can’t have an economy without profitable private enterprise. Contemporary Labor doesn’t understand the private economy because almost none of its MPs have ever worked in it. The former small farmers, tradesmen and union secretaries from the factory floor who used to comprise the parliamentary Labor Party have been almost totally replaced by apparatchiks who’ve become union or party organisers straight from university without ever holding down a serious job in the real economy.

 

To every problem, the current government’s response is a new tax, a new regulation or a new bureaucracy. Higher spending, higher borrowing and higher taxes have put upward pressure on interest rates and the dollar, squeezed household budgets and depressed consumer and business confidence. The continuing resources boom has only emphasised how deeply subdued conditions are for most of the domestic economy. Although headline economic growth has remained solid, GDP per person has increased by just one half of one per cent since late 2007 compared to annual growth of two and a quarter per cent between 1996 and the end of the Howard government. This is why so many people are convinced that Australia is a rich country at serious risk of becoming poorer.

 

The current government is making our industries less competitive with a unilateral carbon tax that’s all economic pain for no environmental gain. It’s damaging the mining industry with a success tax on our biggest exports that doesn’t give smaller miners a fair go. And it’s spending $50 billion plus connecting fibre to almost every home whether they need it, want it or can afford to pay for it while our roads are clogged, our railways antiquated and ships wait expensively at sea because our ports can’t cope.

 

The government is making our economy less productive by virtually closing down the live cattle trade in a panicked over-reaction to a TV programme. It’s progressively closing down much of the Tasmanian forestry industry as part of its alliance with the Greens. It’s spending $2 billion to close down the brown coal power stations that have been the source of Victoria’s cheap-power comparative advantage in manufacturing, and it’s spending $11 billion to buy and close Telstra’s copper network. In other words, it’s spending billions in borrowed money to put people out of work, not into it.

 

This is no way to run a government and it’s no way to run a country. By contrast, the Coalition has a clear plan for a stronger economy and a more prosperous society. The Coalition will: first, cut wasteful spending; second, abolish counter-productive taxes; and third, build a more productive economy through our six point productivity plan. Our productivity and participation plan will: first, encourage more people into the workforce; second, make public institutions more effective and responsive; third, cut red tape; fourth, improve competition rules: fifth, get greater value from infrastructure spending; and sixth, reform workplace relations to encourage higher pay for better work.

 

Cutting spending means lower borrowing and less pressure on interest rates. For example, Deloitte Access Economics estimated this year that a $13 billion reduction in Commonwealth spending would allow interest rates to be a percentage point lower than otherwise would be needed to contain inflation against the backdrop of the mining boom. Cutting taxes would mean that relatively more money stays in private hands where it is more likely to boost growth.

 

Getting more people into the workforce and especially more people more productively into the workforce will mean a larger economy, a bigger tax base and more ability for the government to fund better services without punishing tax increases or spending cuts elsewhere. The government’s own budget papers, for instance, suggest that a one per cent increase in growth through higher productivity and participation would produce an ongoing improvement in the budget bottom line of about $4.5 billion a year that would then be available to fund tax cuts or better services.

 

Budget surpluses and paying down debt are in the Coalition’s DNA. It was the Howard government, after all, that turned $96 billion in Commonwealth government debt into $70 billion in net Commonwealth assets and turned Kim Beazley’s $10 billion budget deficit into consistent surpluses of one per cent of GDP or more. It was the Coaltion which went into last year’s election with $50 billion in savings over the forward estimates period, $30 billion in improvement to net debt and a $10 billion improvement to the budget bottom line.

 

The Coalition’s expenditure review committee is now going through government programmes line-by-line to indentify unnecessary spending, inefficiencies and waste. Our starting point is to cancel the spending associated with the mining tax and the carbon tax. We won’t shrink from difficult measures because voters have demonstrated their awareness that government has to live within its means, just as they do. The economic lessons of Europe and America are that shirking hard decisions today just means even harder ones tomorrow.

 

Under the Coalition, there will be a modest company tax cut without a mining tax. There will be income tax cuts and a fair go for pensioners without a carbon tax because a tax cut that’s compensation for a tax increase is a con not a cut. These can only be achieved, though, through sensible savings in government spending and sensible reductions in the size of government so that spending is sustainable on the basis of revenue rather than borrowing. We won’t be frog marched into premature announcements about the precise quantum of saving and spending but will announce our fiscal plan in good time before the next election.

 

My main focus today is the third element in our plan for a stronger economy and a more prosperous society: namely, improvements in productivity and participation leading to a larger overall economy and a larger tax base. If economic growth is high enough through strong productivity growth, it’s possible to deliver simultaneously higher spending, lower taxes, a bigger surplus and higher wages without triggering inflation. Far from being “magic pudding” economics, this is what actually happened during much of the life of the Howard government and explains why the Howard era now seems like a lost golden age of prosperity.

 

Productivity gains are important because they mean more output for the same input or more prosperity for the same effort. As Reserve Bank Governor Glenn Stevens has said, “everything comes back to productivity. It always does”. Over the past two years, GDP per hour worked has not grown at all. Participation gains are also important because the more people’s talents are economically utilised, the more prosperous as a country we will be. Although Australia’s participation rate improved from 63.5 to 65.5 per cent under the Howard government (and has since remained at this level), it’s still only about 10th in the OECD and is particuarly low for older people and women in their 20s and 30s.

 

To improve young people’s productivity, the Coalition will provide incentive payments to employers who take young people off the dole into work. To improve young people’s work culture, the Coalition has promised a bonus to those who leave welfare for work and stay employed for a year. There will be a further bonus for a further year of gainful employment. As well, the Coalition will pay a relocation allowance to young people who move to take a job and who undertake not to return to welfare for at least six months. The Coalition will also pay incentives to employers who take seniors off welfare and into work and keep them employed for six months.

 

Incentives are important but so are the expectations we have of people to make a contribution to the society that sustains them. The Coalition aims to have all long term unemployment beneficiaries under 50 involved in work for the dole. The Coalition wants to extend around Australia the welfare quarantine arrangements that the Gillard government has put in place for long-term unemployment beneficiaries only in the Northern Territory.

 

Working age people who are capable of work should be working, preferably for a wage but in any event for the community. The Coalition supports the new impairment tables that the government has flagged for people seeking the disability pension and a different approach to people whose disabilities are less incapacitating or unlikely to be permanent. The Coalition, like the former ALP national president Warren Mundine, thinks that unemployment payments should be suspended for young people in areas where unskilled work is reasonably available because idleness on the taxpayer should not be an option when there is work available that people could reasonably do.

 

The Coalition is committed to a fair dinkum paid parental leave scheme (that’s better than the government’s rebadged baby-bonus) because women shouldn’t be forced to choose between a decent income and having more children and it’s important to encourage skilled people to stay connected to the workforce. Paid parental leave should be as much a workforce entitlement as sick pay and holiday pay. That means that it should be based on what people actually earn, not the minimum award rate, but it can’t be an employer obligation lest there be a return to discrimination against younger women. This is a long overdue reform that is pro-family as well as pro-work and I’m proud to lead a Coalition that “gets it” when it comes to women’s choice.

 

Another key component of boosting productivity is improving the responsiveness and effectiveness of vital public services. Public hospitals comprise about 2.5 per cent of Australia’s GDP and public schools about 3 per cent. Community-controlled public hospitals and independent public schools will be focussed on maximising results, not minimising costs. They will be focussed on getting more done for any given level of taxpayer support.

 

A 2009 Productivity Commission study, for instance, found that private hospitals, on the whole, have lower general and capital costs, higher productivity and shorter stays than public hospitals; while a recent study by the Cato Institute in America on the international evidence on school performance found that the private sector outperforms the public sector in most cases. Over time, better governance arrangements for the hospitals and schools that form such a large part of Australia’s public sector will mean better returns for each dollar of spending and will be a vital element in improving productivity.

 

Another important constraint on productivity is red tape. One of the current government’s many broken promises has been its pre-election commitment to repeal one existing regulation for each new one promulgated. So far, the government has introduced 12,835 regulations but repealed just 58. Based on a scheme that’s been working in Victoria for five years, the Coalition will deliver red tape savings of at least $1 billion a year to Australian businesses. Each department will be required to demonstrate reduced red tape requirements with measurable savings for the enterprises that are affected. This will enable managers to spend more time improving their businesses and less time on avoidable paper work.

 

The Coalition will improve the regulatory framework to ensure that it doesn’t needlessly inhibit business creativity. In government, the Coalition would review the Competition and Consumer Act to give small business a fairer deal. We’d reconsider aspects of the Financial Services Act and hold a son-of-Wallis enquiry to try to deliver better outcomes for bank customers. We intend to work with the states, in a National Competition Policy-like process, to streamline planning costs and approval processes and thereby to make housing more affordable.

 

There’s no doubt that Australians would be more productive if they spent less time waiting at bus stops or train stations and less time caught in traffic jams. The Coalition won’t waste taxpayers’ money on white elephants when the relevant infrastructure could mostly be delivered by the private sector in response to customer demand. We will maintain Commonwealth spending on infrastructure but want it to be more effective; hence we won’t fund projects to the tune of over $100 million without a published cost-benefit analysis from Infrastructure Australia. As well, through the provision of infrastructure bonds, we will give modest tax breaks for people investing in projects on Infrastructure Australia’s priority list because of their overall benefits to society.

 

We will announce a strong and effective workplace relations policy in good time before the next election but it will involve practical solutions to practical problems rather than the application of market theory to people doing it tough. Still, a country where the largest container port shuts down completely for lunch, to take just one example, needs further workplace relations reform. In introducing the Fair Work Act, the Prime Minister claimed that “the best thing about these laws is that they are good for productivity” but the truth is very different. A recent Australian Industry Group survey, for instance, reported that 74 per cent of large businesses had found that the Act made negotiating productivity improvements more difficult. The government should listen to business requests for the Act to accommodate much more flexible working arrangements and it should ask the Productivity Commission to undertake the promised review of its operation. 

 

It’s important that any future workplace changes have broad public support which is why the Coalition wants to see wide debate before finalising its policy and why we would prefer to improve the current Act than to start again. The government’s Individual Flexibility Agreements, which the AIG’s Heather Ridout says have “promised so much but delivered so little”, could easily be turned into a much more certain vehicle for paying higher wages in return for improved productivity and better work practices.

 

Before last year’s election, I said that the Coalition’s objectives were to end the waste, repay the debt, stop the big new taxes and stop the boats. These are still our objectives because they’re still the changes our country needs. I also said that as liberals we stood for lower taxes, smaller government and greater freedom. As conservatives, we supported the family and values that had stood the test of time. And as Australian patriots, we wanted policies that actually worked and that built on the great strengths of the Australian people. The Coalition’s main policy objectives haven’t changed since the election given that much the same ministers are making much the same mistakes. Should the Coalition win the next election we will manage a stronger economy, run a better government and foster a fairer society because that is the best way to restore hope, reward and opportunity for all.

 

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