14 May 2009
This year’s Federal Budget focuses on three key objectives. First, stimulating Australia’s economy and sustaining employment and business activity in the face of an extraordinary global downturn that is more severe than anything else we have seen in our life times.
The Government calculates that the stimulus packages that we have already got that are already flowing through the system are sustaining over 200,000 jobs and proving a very important push-back against those very powerful negative forces that are bearing down on Australia’s economy and helping to keep economic growth still sustainable and helping to ensure that businesses and jobs don’t suffer as much as they otherwise would.
The Government has got new initiatives in the budget that are designed amongst other things to help with that stimulus, in particular extending the first home owner’s grant and increasing the small business incentive from 30 per cent to 50 per cent for the course of this year.
We are also of course delivering on our commitment to provide a very substantial increase on the base rate of the pension. As well as delivering justice for pensioners who have really been it tough, particularly single pensioners, that will also have a significant stimulatory effect on the economy because the vast bulk of that money will be spent, will flow straight back into activity, into jobs and to spending generally.
So that is the very first and paramount objective of the budget, to make sure that we sustain economic activity and jobs in the face of huge contractory pressures.
The second objective has been to invest for the future. Invest in the infrastructure and skills that will deliver the jobs of the future and also improve Australia’s productivity performance, after a fairly extended period when that performance has been relatively modest to say the least.
So we have a major program of large infrastructure investment, whether it’s the Oakajee Port facility in Western Australia; the Northridge Rail project that will transform the city of Perth; major rail extensions in Adelaide; getting the National Broadband Network rolling first in Tasmania; a major rail upgrade in Victoria; in NSW you have got the Hunter Expressway a huge road project, and of course you have the Pacific Highway and Bruce Highway upgrades in New South Wales and Queensland; and the Gold Coast light rail program. All of these examples of major infrastructure projects that the Government has committed funding to over ensuing years.
All of these things will help deliver better economic opportunity, they will obviously create large sums of jobs in the short term as the projects unfold, but they will also deliver much greater productivity and economic opportunity in the local economies that they serve over time.
We have also dramatically reformed the structure of higher education funding with very substantial additional amounts of money dedicated to improving the indexation base of university funding, committing more to university performance linked funding, to help universities enrol more people from disadvantaged backgrounds. Reforming the base of student assistance, so that they income tests both for individual students and for families are relaxed but at the same time the eligibility for the independent rate of youth allowance or Austudy will be reduced from 25 to 22 progressively while tightening the test, the work test, to avoid some of the abuse in recent times where people from fairly well-off backgrounds have been able to access youth allowance, Austudy arrangements in circumstances where others from far more modest backgrounds have been unable to do so.
So these are all very major reforms, we are also investing additional sums in Australia’s research capacity, whether through the Education Investment Fund or the Health and Hospitals Fund or the creation of the Commercialisation Institute, and in particular the commitment to clean energy initiatives so that we will have stand alone, carbon capture and storage, solar, and other renewable efforts that go into really major projects that are designed to help shift Australia to a low-carbon economy to do the research, to do the development, to do the commercialisation that is going to be necessary for us to make that shift.
So the total picture with respect to investment for the future is very broad, it is about transport, it is about the traditional things like road and rail and ports, its about investing in our skills through universities and TAFE colleges and the technical sector, and investing in far greater research and development, and of course its about putting in place the national broadband network which will transform our economy once it is gradually rolled out in the next eight years or so.
The third equally important objective of this budget of course has about laying the foundations for returning the budget to a surplus. What has happened to our revenue is that it has dropped dramatically compared with projections of only six, 12 months ago. In fact the projected drop in revenue over the next four years is slightly higher than the total of the deficits that are projected for that period, so the bulk of the problem that we are dealing with is coming from that loss of revenue.
Now the government in the short term has resolved to borrow to cover those deficits rather than to slash and burn and therefore suck billions of dollars out of the economy and further damage jobs and businesses. But of course in the medium term we have to return the budget to surplus. The debt levels that we are projecting are modest, the a very small in world terms, the vast bulk of developed nations have much much higher government debt levels so these debt levels are entirely sustainable but of course you cant stay in deficit forever and it is critical that we have a pathway back to surplus.
We have set out projections that predict a return to surplus in six years and we have initiated in this budget a number of very substantial savings measures, some of which don’t start to kick in in terms of large sums of money for a couple of years and some are actually further away than that, but all of these savings measures will help us adjust to the new reality that the world is not paying as much as it was for the past five, seven, ten years and its unlikely to return in a big hurry to the levels we have grown used to in recent times.
We have to adapt to that and that is why the Government has had to modify arrangement for the Family Tax Benefits so that the upper limits will be frozen for three years and the indexation mechanism will be changed. That’s why we have had to change the income test for people on the pension at the upper end. That’s why we are increasing the pension age gradually from 2017 to 2023 to 67, that really is a dramatic reform, it is the first time the pension age has been changed since it was introduced over 100 years ago when it was set at 65. That is why we have changed the arrangements for private health insurance rebates at the upper end of the income scale. And that’s why we have put caps on some procedures under the Medicare safety net, because we have seen in recent years the fees being charged in certain areas literally quadrupling in order to take a benefit from the fact that there was an uncapped amount of government money flowing in to cover the difference between what the patient might pay and the cost of the procedure.
That is part of the wider picture of just putting in place savings that will get the budget back in a sustainable position in the medium term.
It has been a very difficult balancing act because we are caught in a position of severe global recession where we are predicting that Australia will experience recession over the course of this year, so we have to stimulate the economy in the short term. We have to sustain jobs and business activity in the short term that means being in temporary deficit and quite large deficits, but over the medium term as growth resumes we have to get the budget back in to surplus and we have to have a path to pay down the debt that has accumulated over that time.
All this is laid out in this budget, it is a complex budget, it’s probably the most challenging budget that a government has had to deal with in decades, and we are committed to following through to ensure that we achieve these objectives.
Sustaining economic activity and jobs, investing for the future investing for future productivity growth and the jobs of the future, and returning the budget to surplus within a reasonable period of time and ensuring the debt the flows unavoidably from the deficits that we are incurring are manageable and sustainable and that we have got a pathway to paying down that debt down to zero in the future.
| Media Contact: | Website: |
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| Nardia Dazkiw - 0418 144 690 | www.financeminister.gov.au |
