Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
Political choices matter
Thank you for the invitation to join you tonight.
Earlier today, the Treasurer and I released the Government’s Mid-Year Economic and Fiscal Outlook.
It proves beyond doubt that the economic offerings of the two major parties are further apart than ever before.
And the gap is widening.
On one side, our Liberal-National Government led by Scott Morrison, which believes in enterprise, aspiration and economic freedom.
A government which understands that supporting enterprise, reward for effort, encouraging people to stretch themselves, take risks and have a go – combined with a well targeted social safety net – is the universally proven way to lift living standards and to help ensure Australians have the best possible opportunity to get ahead.
Indeed a government which understands that to achieve inclusive growth we need to achieve growth.
And then on the other side, the Labor alternative under Bill Shorten – suspicious of markets, resentful of success, antagonistic towards business and preoccupied by identity politics.
An alternative government pursuing an agenda, which would make Australia economically weaker and Australians poorer.
Our half-yearly budget update confirms that the Coalition is the party of sound and responsible economic and fiscal management.
The Australian economy is growing at a robust 2.8 per cent, even with the headwinds of the drought.
That’s faster than most developed countries and faster than all the G7 economies except the United States.
Our economy is delivering record numbers of new jobs.
Young Australians are securing jobs at the fastest rate since records were kept.
Our careful economic management has enabled us to fix the budget mess we inherited from Labor.
The Budget will return to surplus in 2019-20, and our fiscal discipline will ensure these surpluses exceed 1 per cent of GDP over the medium term.
Spending growth over our period in government is lower, much lower than at any time over the past half a century.
Given some recent inaccurate commentary by our political opponents it is worth dwelling on this point for a moment
When we came into Government, expenditure growth was running at about 4 per cent above inflation on average per year
Labor had locked into legislation massive additional spending growth, conveniently starting from year one outside the published forwards estimates period, while at the same time imposing an inaccurate and misleading modelling assumption on their expenditure growth over the medium term.
Indeed, Labor imposed a modelling assumption on their expenditure growth over the medium term that spending would not be allowed to increase by more than 2 per cent per year above inflation, at a time when their policy decisions meant spending growth was about double that.
Labor never ever made the policy decisions required to get spending growth below the 2 per cent reflected in their budget projections, seriously understating the true state of the spending and debt growth trajectory they left behind.
This was, appropriately pointed out, in the independent Pre-Election Economic and Fiscal Outlook in 2013.
And as the National Commission of Audit identified, when we came into Government the spending growth trajectory we inherited from Labor was taking federal government expenditure to an incredibly high and unsustainable 26.5 per cent of GDP by 2023-24 and rising beyond that period.
We have been able to turn that situation around.
As a result of our decisions to control expenditure, we have been limiting real spending growth to 1.9 per cent on average per annum since our election to government and over the forward estimates period.
Spending as a share of GDP is now down to 24.9 per cent and on a firm track down to 24.6 per cent from 2020-21 – below the 30 year average
Better control of our expenditure has been a central foundation on which we built our budget repair strategy
It has taken two terms for the Liberal-National Government to repair the damage done by two terms of Labor governments, to now be in a position to deliver a surplus budget on the eve of the next election.
Now that we have repaired the damage Labor left behind and now that we are in a position to build on that foundation to put Australia on the strongest possible trajectory for the future, I would caution anyone against putting Labor back in change of our country, our economy and our budget.
There are many risks facing the economy. None are as grave as that posed by Bill Shorten himself.
He is poised to commit one of the greatest acts of economic vandalism this country has ever seen.
By his own admission his agenda is more ambitious than Whitlam’s.
He will not only dismantle the Hawke/Keating legacy but lay ruin to the past five years of fiscal repair.
He will seek to fundamentally restructure the economy, the tax system, superannuation and industrial relations at a time we are already facing a level of global economic uncertainty.
This is not the time for Bill Shorten’s great socialist experiment.
By marshalling a culture of resentment, seeking to pursue his drag-down politics of envy, he would also rewrite the social and economic fabric of our nation through punitive taxation for those who dare to strive for a better life.
This is the antithesis of Australian values but also a sure fire way to kill an economy and jobs.
Our economic plan is laying the platform for continued strong growth.
We are delivering lower taxes for hard-working Australians.
We are bringing forward tax relief for small and medium businesses which employ millions of Australians.
We have submitted ourselves to the discipline of a 23.9 per cent tax as a share of GDP cap.
Our improved budget position enables us to invest more in the services that Australians rightly expect.
Services which improve the quality of life of Australians every day.
Quality health care, aged care, child care and schools.
Improving economic security for women.
Record spending on infrastructure.
Less congested roads.
Inland rail – between Brisbane and Melbourne
And a new Western Sydney Airport – breaking a deadlock that had eluded successive governments for decades.
Reforms which strengthen our federation, by providing for a fairer, more stable approach to the sharing of GST receipts.
Additional resources for our corporate and financial regulators to ensure our businesses do the right thing.
These strong economic outcomes do not happen by accident.
They are the dividend of a disciplined pro-growth economic and fiscal strategy.
When we came into government, we inherited a weakening economy, rising unemployment and a rapidly deteriorating budget position.
If we had kept the policy settings in place which we inherited from our Labor predecessors, our economy, employment growth and our budget position today would be weaker.
If Labor got the opportunity to take us back to its agenda of higher taxes combined with Bill Shorten’s drag-down politics of envy, we would be going back to a situation of lower growth, higher unemployment, and on the back of higher unemployment lower wages.
The budget position would again deteriorate. And as Labor inevitably runs out of money again in Canberra they will come after your money with ever higher taxes.
Under Bill Shorten as Prime Minister Australians today and into the future would have less opportunities to get ahead.
I can give you one assurance.
If the Coalition is returned at the next election, our country will be stronger, our economy will be stronger, Australians will be better off and our nation will be more secure.
Under Bill Shorten and Labor our country would be weaker and Australians would be poorer.
Compare today’s economy to the one we inherited from the Rudd-Gillard-Rudd Government.
Five years ago, economic growth was limping along at just 2.1 per cent.
Today our economy is growing at 2.8 per cent – one of the strongest economies in the developed world.
The unemployment rate was at 5.7 per cent and rising.
Chris Bowen told the National Press Club in December 2013 that a key test of our economic performance as a government would be whether we would be able to keep the unemployment rate below 6.25 per cent.
Today our unemployment rate is 5 per cent and falling.
Under Labor, youth unemployment was at 12.5 per cent and rising. Today it is 11.2 per cent and falling.
In the last year, youth employment grew by 100,200 – the biggest jump in history.
There are more women in work than ever before. Women’s workforce participation reached a record high in 2018.
The Gender Pay Gap is down to a record low of 14.5 per cent.
In 1976, about the time Malcolm Fraser set up the Office for Women, female participation in the workforce was just 44 per cent. Today under our Government, it is 60.3 per cent.
In 2013, the small business sector was struggling. Since then it’s added hundreds of thousands of jobs.
Under Labor, carbon and mining taxes were in place. They are gone.
Electricity prices were surging. During six years of Labor Government, power prices doubled and went up each and every year.
Now they are coming down. Consumers in QLD, NSW and SA have already benefited from lower prices since 1 July 2018.
And another 458,000 Australian families and 39,000 small businesses will get a better deal from 1 January 2019 after energy retailers signalled they will lower standing offers.
The contrast with Labor is sharpest on fiscal responsibility.
There have been twenty federal budgets since 1998.
There have been ten surplus budgets over that period.
Liberal-National Governments have delivered all of them.
In 2019-20 we will deliver another one.
In fact, Labor Governments have not delivered a single federal surplus budget since 1989‑90.
Over the last 30 years, Labor Government have been in office for 14 years. In that time they have not delivered a single surplus budget.
That is what you call a pattern.
Labor is allergic to fiscal responsibility.
Even worse, Labor routinely leaves massive deficits for incoming Coalition Governments to sort out.
In 1996, the incoming Howard Government inherited an underlying cash deficit of $7.6 billion or 1.5 per cent of GDP. Today that is equivalent to a deficit of $26 billion.
In 2013, the incoming Abbott Government inherited an underlying cash deficit of $47 billion or 3 per cent of GDP.
Labor’s approach is supremely cynical. In fact, it gives cynicism a bad name.
It goes like this.
Labor inherits a strong budget position.
In government, they spend money they haven’t got, leaving the budget in a mess.
Inevitably Labor is thrown out of office under the weight of its own economic and fiscal mismanagement.
The Coalition is then left to clean up the mess with Labor complaining that we are not cleaning it up fast enough.
We cannot repeat this cycle again. We must not give up all the gains we have made.
We cannot expose our economy and the opportunities for Australians today and into the future to get ahead to ‘Shorten risk’.
This is a fundamentally important point.
Bill Shorten is a different kind of Labor leader. He is no Bob Hawke. He is no Paul Keating.
Mr Shorten will take economic policy in our country in a direction it has not been for nearly 40 years.
For significant periods of the last three decades, there has been a relative consensus amongst the major political parties on core economic policy directions.
That is evident in the records of the Hawke, Keating and Howard Government’s and that of the Liberal-National Government since 2013.
Under Bill Shorten, Labor is ditching many central core economic principles that have underpinned national economic policy directions since the early 1980s.
This process of disagreement began during the Rudd/Gillard/Rudd years, but is accelerating dramatically under the leadership of Bill Shorten.
Remember that Kevin Rudd at least pretended before the 2007 ‘Kevin 07’ election that he was an economic conservative.
He revealed himself to be just another high taxing, high spending Labor Prime Minister, but think about it – Bill Shorten is not even pretending to be an economic conservative.
At the forthcoming election Australians will have to decide about which economic policy agenda gives them and their children and grandchildren better opportunities to get ahead.
It will represent a crossroads moment in the Australian economic policy journey.
Shorten Labor has walked away from a cross-party consensus centred on several core propositions:
- The importance of aspiration in an open, free enterprise economy.
- The imperative to internationalise the Australian economy, including by ensuring policy settings do not constrain the competitiveness of Australian businesses in a fiercely competitive global economy.
- Responsible budgeting
- And competitive domestic markets, and a commitment to trade liberalisation, especially with Asia-Pacific trading partners.
That commonality of view made it possible to achieve economic reforms across a broad front, including:
- The floating of the Australian dollar and deregulation of financial markets.
- The tearing down of tariff walls.
- Competition policy reform and privatisation of selected public assets.
- Fiscal restraint.
- Strong progress on retirement income policy.
- Successive waves of personal and company taxation reform, and
- A leading role in multilateral, regional and bilateral trade liberalisation.
This is not to pretend that at times there were not significant, even fierce differences on the prosecution of these policy reforms.
But in his survey of the 1980s in The End of Certainty, Paul Kelly underlined the fact that both parties contributed to the reform agenda aimed at modernising the Australian economy.
Kelly wrote that “the political story of the 1980s is how Labor and Liberal, once joint upholders of the old system, became joint architects of the new system.”
And it was a tradition that continued through the 1990s and the 2000s when the challenge of increasingly rapid globalisation tested our economy and our politics.
In his 2009 book, The March of Patriots, Kelly noted that “beyond their compulsion to win elections, Keating and Howard had a patriotic mission: to reshape Australia’s political tradition for the transformed world they confronted.”
Kelly said that their common mission was the ‘renovation of Australia for a more exacting chapter of global history.’
Both parties understood that no-one owed us a living.
Our living standards would depend on our ability to compete in a fiercely competitive global environment and on marshalling the enterprise and aspiration of individual Australians.
The dividend for Australian households from this period has been substantial.
Between 1960 and 1991 the Australian economy had six recessions.
But since 1991, Australia has enjoyed 27 years of uninterrupted growth.
Over this period, our output of goods and services has much more than doubled, comfortably exceeding the growth of the UK, or the US, or Canada, or Germany, or Japan.
Real GDP per capita has grown by 60 per cent.
Our goods and services exports have increased by more than 500 per cent.
Male employment is up by 46 per cent. Female employment is up by 80 per cent.
Labour productivity and real income per capita have increased by two-thirds.
Australia is a stronger, more productive, more resilient economy as a result.
But we cannot assume that this trajectory will continue.
This achievement can be easily undone.
And that is a real and present danger.
The domestic political consensus to build a more competitive international economy has frayed.
I can assure you that the commitment of the Liberal-National Morrison Government to this important mission has not diminished.
We recognise the importance of aspiration.
We understand the importance of more and better jobs to the living standards of hard-working Australians.
We set a target of a million new jobs and we met it.
More than 300,000 jobs were created in the last year.
This is taking Australians off welfare.
The percentage of working age Australians on welfare is at its lowest level for a generation.
We’ve provided tax relief for more than 10 million Australians, with 4.4 million Australians to receive the full $530 benefit in the 2018-19 income year.
We are also lifting tax brackets to protect Australians from the ‘silent theft’ caused by bracket creep.
And we will ensure Australians pay less tax by making personal taxes simpler, removing an entire tax bracket. It means that around 94 per cent of taxpayers are projected to face a tax rate of 32.5 per cent or less.
We will retain negative gearing and capital gains tax settings to ensure that hard-working Australians have a chance to get ahead – able to leverage their existing income as employees and the value of their existing assets, to invest in income producing or capital appreciating assets.
And we do not want to put further downward pressure on falling house prices.
We recognise that our business tax and regulatory settings must allow our firms to compete in global markets.
That’s why we have cut taxes for 3.3 million small businesses employing around 7 million Australians.
And why we are determined to keep tax as a share of GDP below 23.9 per cent.
We recognise the need for lean, focused government and responsible budgeting.
Our efforts to repair the budget are working.
Our underlying cash balance is forecast to improve from a $14.5 billion deficit at Budget to a $5.2 billion deficit in 2018-19.
This $9.3 billion improvement to our budget bottom line this year comes on top of a $19.3 billion improvement to our Budget bottom line compared to budget in 2017-18.
The Budget is now expected to reach a surplus of $4.1 billion in 2019-20.
That represents an improvement of 2.5 per cent of GDP since 2013-14.
Put another way, the net impact of non-tax related budget savings measures implemented since the 2013 election is an improvement of more than $400 billion to the Budget bottom line over the medium term from 2018-19 to 2028-29.
- net savings from better targeting welfare payments of about $100 billion (including about $20 billion from the cessation of social security payments linked to Labor’s failed mining tax).
- net savings of around $80 billion from a more sustainable foreign aid budget.
- savings of around $58 billion from abolishing business compensation linked to the carbon tax.
Our AAA credit rating has been confirmed. Australia is one of just ten nations with a triple A credit rating with all three ratings agencies.
Our budget position will strengthen further.
We have halved the annual growth in spending from 4 per cent per year under Labor, to below two per cent for the period from 2013-14 to 2021-22.
That’s the lowest of any government in the last 50 years.
In just five years the Coalition has embedded Australia into the major economic engines of our region, with transformational agreements with Japan, Korea, China, the 10 other nations of the Trans-Pacific Partnership, as well as a landmark agreement with Indonesia. Our exports have increased by $100 billion since the Government was elected.
In 2013, our free trade agreements covered just 26.4 per cent of our total two-way trade. Today, our free trade agreements cover nearly 70 per cent of our total two-way trade. That will rise to 88 per cent when we complete current negotiations.
This is the most effective hedge an open trading economy like Australia can adopt against the new protectionist sentiment prevailing around the world.
Our fidelity to the common economic policy principles of the last three decades is unquestioned.
But a structural shift is underway steadily weakening this consensus.
The defining principles and legacy of the Hawke and Keating Governments are being ruthlessly purged from the Labor policy offering.
It is being replaced with a witches’ brew of ‘us-and-them’ class warfare and smug elitist progressivism.
Let’s test Mr Shorten’s record against the key elements of the economic agenda that has served Australia so well over the last three decades.
First, the importance of aspiration as a key driver of growth in the national economy and society.
Remember that the Hawke/Keating Governments reduced the top marginal personal income tax rate from 60 to 49 per cent.
But today’s Labor dismisses aspiration. Mr Shorten sneers at those who want to get ahead and only promises them a higher tax burden.
Not surprisingly, former Prime Minister Paul Keating has warned that under Bill Shorten Labor has “lost the ability to speak aspirationally to people and to fashion policies to meet those aspirations.”
He went on to say that “The Labor Party today has not taken ownership and leadership of its own creation: that is the huge and wealthy middle-class economy which Labor exclusively created,”
Under Mr Shorten, the defining principles of economic policy are envy and resentment.
He wants to repeal tax cuts that will reduce bracket creep and lower rates.
By pledging to reverse stages 2 and 3 of legislated personal income tax relief, Shorten Labor has signalled they will rip $70 billion in extra income tax from working Australians' pay packets over the next ten years.
Mr Shorten regards nurses, firefighters and police officers who invest in a second property as tax rorters.
He is going after pensioners and retirees with his ears laid back.
He plans to rip $55 billion out of retiree incomes over the next decade.
This will hurt 230,000 pensioners. It will hurt 610,000 Australians on taxable incomes less than $18,200, including many self-funded retirees.
Mr Shorten has no plan to harness the enterprise and ambition of Australians to create wealth and new opportunities.
Second, Shorten Labor is indifferent to the importance of a globally competitive tax and regulatory regime.
Remember it was the Hawke/Keating Government which reduced the company tax rate from 49 to 33 per cent.
But Shorten Labor strenuously opposed all business tax reform.
He has demonised business, small, medium and large every week of every month in every state and territory for the last five years.
He only supported elements of the Coalition’s tax reform when it was a fait accompli and he was left with no choice.
It is why Paul Keating believes that Shorten Labor has given up on tradies and small business.
“Not too long ago,” Mr Keating said, “a traditional tradesman might have been a plumber with a ute, a dog and his tools.”
“That person today might employ twelve or thirteen people and run a little business. That person should be a Labor person but we’ve let them go.”
“We’ve lost them,” he said.
That is a devastating indictment on modern Labor.
Under Hawke and Keating, tax reform meant lower taxes. Under Shorten, tax reform means $200 billion in higher taxes.
Third, unlike the Hawke/Keating Labor, Mr Shorten is dismissive of the need for budget restraint.
Former Prime Minister Paul Keating said Labor believed in an active but focused role for government. As Keating put it, “using the government to steer the boat, not row it.”
But there is no such discipline in contemporary Labor.
There is no impulse towards restraint, in part because public sector unions have unprecedented sway in the Shorten policy camp.
In truth, Labor has been weak on budget policy for a decade or more. In office, Labor inherited a healthy surplus and turned it into a total of $240 billion in accumulated deficits over 6 years.
And Shorten Labor is opposed to serious budget repair.
Fourth, while the Hawke/Keating Governments embraced Asia and its abundant opportunity, Shorten Labor is in full retreat from this opportunity.
Bill Shorten had to be shamed into supporting the passage of the China Australia Free Trade Agreement (ChAFTA).
Shorten Labor urged the Government to abandon the Trans Pacific Partnership, declaring it dead. He said the Coalition was deluded.
Mr Shorten’s understanding of the Asia Pacific region was so weak, so misguided and so flawed that he decided that pursuit of a TPP without the US was a lost cause.
There is hardly a better example of the risk to jobs and living standards posed by the poor judgment of the Leader of the Opposition.
If Mr Shorten had got his way, there would have been no TPP-11.
The cold, hard reality is that he is seeking to purge the Hawke and Keating model from Labor’s memory.
Under Mr Shorten, Labor is living up to the prediction made by former Labor Finance Minister, Lindsay Tanner in his thoughtful book, Politics with Purpose, in 2012.
Tanner wrote then that “no amount of careful presentation can disguise the fact that Labor has become an electoral machine largely devoid of wider purpose.”
Labor lacks, he said, “an inner calling.”
In other words, there is no central economic core. No guiding economic principles.
And most importantly, no plan to drive growth. No plan to drive the growth that will deliver the proceeds necessary to improve the living standards of everyday Australians.
Just an economic agenda which is overwhelmingly guided by prejudice and envy.
With no firm political anchor, Labor is directionless, increasingly prone to pander to an increasingly narrow range of vested interests from an increasingly narrow section of the Australian economy.
In 1999 Paul Keating said that the Hawke Keating Governments embraced rational economic solutions and market-oriented policies because “they were the best way of getting growth and therefore the best way of ensuring the future of ordinary Australians.”
I couldn’t agree more.
But Bill Shorten doesn’t agree.
He leads a Labor Party that has lost its bearings.
A Labor Party which will make Australia poorer.
A Labor Party which dismisses the operation of a free market, as “trickle down economics” when in fact it is the free market which has unquestionably delivered significant increases in living standards for Australians and for people all around the world.
The Labor Party does this while pursuing the drag-down politics of envy which in countries around the world throughout history have made countries weaker and their people poorer.
All of which makes the choice at the forthcoming federal election more important than ever.
 See Hon. Peter Costello AC, ‘To the Brink 1997-2001: Black Holes to Surplus Budgets,’ Address to University of NSW, Canberra 15 November, 2017.
 Australian Treasury, Mid-Year Economic and Fiscal Outlook 2013-14, December 2013.
 Paul Kelly, The End of Certainty, Southwood Press. 1992. p.15
 Paul Kelly, The March of Patriots, Melbourne University Press, 2009. p.1.
 See Paul Keating, The Three Great Transformations: Retrospective and Policy Address, The Committee for Economic Development of Australia, Annual Dinner, Sydney, 14 November 2017.
 ABC Cat. 5204. Table 1.
 ABS Cat. 5368. Table 2.
 ABS Cat. 6202. Table 1.
Keating, op cit.
 Quoted in Kerry O’Brien, Keating, Allen and Unwin, 2015. p.761
 P J Keating, ‘The Labor Government, 1983–96’, Address to the University of New South Wales. Sydney. 19 March 1999.
 Lindsay Tanner, Politics with Purpose, Scribe Books. 2012. p.335.
 Paul Keating, op cit.