Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 17 December 2019
Reflecting on 2019 it has clearly been a year in which we had to deal with much uncertainty both here in Australia and around the world.
Uncertainty inevitably weighs on confidence, which affects consumption and the level of investment into future growth opportunities.
We had the federal election in May – with many, if not most, predicting a change of government and with it a change to a higher taxing, bigger government and anti-business agenda.
We had the massive floods in North Queensland at the beginning of this year and a significant ongoing drought impacting on large parts of regional Australia.
There were the escalating trade tensions between the US and China weighing heavily on the global economic growth outlook.
There was the uncertainty of Brexit, would it actually happen and if so how and when. What would it mean for us here in Australia?
There were other geopolitical hotspots around the world impacting on confidence around the world.
The significant downgrades in global growth throughout 2019 which followed meant that countries around the world, including the UK, Germany, South Korea, Singapore and others experienced negative quarters of growth.
Yet, in Australia, despite all of the global economic headwinds and all of the challenges in our domestic economy resulting from floods, drought and bushfires, our economy continues to grow.
We are into our 29th year of continuous uninterrupted growth.
Growth in the first three quarters of 2019 was stronger than the last two quarters of 2018. We expect growth to gradually strengthen further over coming years.
Considering our economic and fiscal performance objectively in its international context, it is clear that Australia continues to perform comparatively well.
Our economy continues to grow.
Employment growth remains strong.
Indeed the current employment growth rate across Australia is faster than the growth in population and more than twice the OECD average.
The participation rate reached a record high of 66.2 per cent in August this year and at 66 per cent remains near record highs. Importantly, the female participation rate remains at an all time high.
Wages continue to grow faster than inflation.
Disposable incomes are growing at their fastest rate in 10 years.
We remain on track to return the Budget to surplus this financial year, even after significant revenue write downs, after legislating significant income tax relief, after continuing to provide record funding for the essential services Australian rely on, and after the additional investment into key priority areas in this Budget update.
It is as a result of careful, considered budget management that we are able to:
- Boost funding for aged care to a record $21.4 billion in 2019-20, increasing to $25.4 billion by 2022-23.
- Invest an additional $4.2 billion into productivity enhancing infrastructure over the current forward estimates period (including more than $900 million in additional infrastructure investment for Western Australia).
- Provide an additional $1.3 billion to support farmers and communities impacted by the drought.
Despite increased expenditure on those high priority areas, and significant revenue write downs, we remain on track to return to surplus and remain in surplus as we continue to control expenditure growth. A surplus allows us to pay down debt and saves the country billions of dollars in interest payments. Those billions are freed up to spend on essential services Australians rely on and help make us more resilient to deal with future economic headwinds.
Since the 2016 election, we have implemented around $70 billion of budget repair measures which have strengthened our budget position. In fact since the 2013 election we have implemented more than $200 billion in budget repair measures over the period to 2022-23.
These structural savings continue to improve the spending growth trajectory over time.
Average annual growth in payments over the four years from 2019-20 is expected to remain at a record low of 1.3 per cent.
That is well below the 4 per cent average annual growth in spending above inflation which we inherited from Labor over their forward estimates period and over the medium term at the time when they lost Government.
Overall, payments over the next four years are now projected to be $11.5 billion lower than at the time of the election.
Spending as a share of GDP remains below 25 per cent over the forward estimates, with spending at 24.5 per cent in 2019-20 and reducing to 24.4 per cent by 2022-23, well below the 30 year average.
Our responsible fiscal management ensures the Budget has the capacity to deal with immediate challenges, while also providing the stability and certainty that households and businesses need to plan for the future, giving them confidence to spend and invest knowing that the Government can keep taxes low and guarantee funding for essential services over the medium and long term.
We are optimistic about our future.
As we approach 2020, the global environment is improving.
While there remains much work to be done for a sustainable resolution, we are encouraged by the progress that has been made in discussions between the US and China to resolve their trade tensions. That is good news for Australia.
The magnificent win secured by Boris Johnson in the UK elections last week provides much needed certainty about the way forward for the UK and Europe. It provides both a clear path forward for Brexit and exciting new opportunities for Australia with a high quality trade deal we are confident we will be able to finalise with the UK in record time.
Furthermore, our $300 billion in income tax relief, the low official cash rate, continued high investment in infrastructure, a pick-up in the resources sector, stabilisation in the housing market, and an internationally competitive exchange rate will all contribute to stronger growth here in Australia.
While the future is bright, it is important that as a country we continue to make decisions on future directions in a steady and considered fashion, both to seize the opportunities as well as to meet the challenges in front of us.
This is an opinion piece published in The West Australian on 17 December 2019.