Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Policies supporting opportunity and aspiration prevailed
Thank you for inviting me back to address the prestigious Sydney Institute.
When the Australian people voted to re-elect our Government just over 100 days ago, they did more than just vote for a set of policy promises, which we will of course deliver on during this term.
A majority of Australians put their trust in the positive power of the policy values underpinning our agenda.
A set of policy values which were persuasively promoted, and contrasted with the alternative, by our Prime Minister Scott Morrison.
At the last election Australians voted for policies supporting opportunity and aspiration and they voted against the economy harming, opportunity lowering politics of envy and division.
As a Government we believe in the positive power of freedom, free enterprise, reward for effort, in encouraging people to stretch themselves, take risks and have a go.
We believe in the positive power of lower taxes, smaller government, a pro-business agenda where every Australian is encouraged and has the best possible opportunity to get ahead.
Because we know that in Australia and all around the world, the values we stand for are the values which deliver better living standards, a better life for individuals, their families and the communities they live in – compared to the impact of the alternative on offer at the most recent election.
It’s about allowing millions of quiet Australians to fulfil their own personal vision.
Arguably, during the 1980s and early nineties that was increasingly the view adopted by Bob Hawke and Paul Keating, which underpinned their sustained political success over more than a decade.
They, more than any other Labor government before or since, embraced the positive power of free markets and enterprise and a policy agenda which genuinely understood and supported opportunity and aspiration.
In 2007 Kevin Rudd sought to present himself as an ‘economic conservative’ – as a safe carbon copy of John Howard.
We know now that he wasn’t. Wayne Swan had different ideas. It was back in 2007 when Labor’s political march back towards the socialist left began in earnest.
I put it to you and, respectfully to the Labor Party, that it has cost them dearly at every federal election since – especially in 2019.
Our policy agenda is based on supporting equality of opportunity. That used to be the Hawke-Keating agenda too, while Labor in more recent years explicitly committed itself to the flawed socialist pursuit of equality of outcomes – falsely asserting that Australia had a major and growing inequality problem.
Equality of opportunity is what makes our country stronger and Australians more prosperous.
The socialist pursuit of equality of outcomes via the divisive rhetoric of class warfare and policies to increase taxes and engage in greater income redistribution – with no plan to increase the size of the economic pie – demonstrably, would make our country weaker and ultimately, over time, Australians and Australia poorer.
So to bring all this together – Labor lost an election that many believed and asserted was a foregone conclusion.
Because in the end Labor’s political gamble that enough Australians had forgotten the historical failure of socialism failed.
Because Australians, like our government, stand for opportunity and aspiration.
Because Australians, like our government, stand against class warfare and the destructive power of the politics of envy.
Which is why, despite all the political challenges we were facing as a Government in the lead up to this most recent election, when faced with having to make a choice about who to trust with our economy, their jobs, their future prosperity and opportunity to get ahead, a majority of Australians decided to put their trust in us and what we stand for.
Because Australians instinctively know that our country will be stronger if every individual Australian has the best possible opportunity to succeed.
They know that their desire and ability to get ahead and succeed is not helped by demonising their fellow Australians or tearing down those who are economically successful.
It is surely telling that some of the strongest swings towards the Coalition were in comparatively lower income areas across Australia.
It was a clear rejection of Labor’s class warfare rhetoric and their high taxing policies.
Which brings us to the key question for the future –
Has Labor under Anthony Albanese and Jim Chalmers learnt the lessons of the last election?
I would suggest that the answer so far is a resounding “no”.
They may have banned the words ‘top end of town’ from their current rhetoric.
But they have not as yet committed to dropping the punitive and divisive policy agenda which flowed from it.
In fact, in my home state of Western Australia over the weekend Anthony Albanese presided over a Labor Party Conference that took a massive step in the wrong direction.
WA Labor this past weekend formally passed a motion to reassert its commitment to the socialist objective, reinserting it into its WA Labor Party Platform.
It’s a commitment that had previously been removed back in 1999 in an effort to modernise the WA Labor Party and make them more electable.
Nationally, while it’s supposedly ‘under review’, the Labor Party has never actually removed its ‘socialist objective’, which has remained enshrined in its Platform since 1921.
The socialist objective is a complete anachronism in Australia’s modern, open, market-based economy.
How can Labor possibly still cling to this destructive political relic from a long bygone era – and expect that aspirational Australians will take them seriously?
It is in Australia’s national interest for Labor to listen and properly learn and act on the lessons flowing from the last election.
They should remove the socialist objective from their platform, not reintroduce it where it had previously been removed.
The socialist pursuit of equality of outcomes and its program of higher taxes on middle class aspirational voters removes the critically important incentive to work harder and take risks to get ahead.
The opportunity for better outcomes based on effort and having a go is the fundamental and necessary driver for stronger growth, more jobs and increased prosperity into the future.
As such it is also the necessary driver for increased revenue to fund the essential services Australians rely on in health, education, welfare, national security and infrastructure.
Australians need a government which continues to encourage and incentivise effort and hard work, while making sure all the appropriate safety net arrangements are in place.
We need to support aspiration not flatten it with punitive, aspiration destroying and economy weakening higher taxes.
Because holding any Australian back from reaching their full potential means holding all Australians back.
That is the lesson in countries all around the world where the socialist experiment has been tried and failed. It is beyond belief that Labor in 2019 has not as yet learned this lesson.
The last election demonstrates that this is an assessment shared by a majority of Australians.
After the election, our first legislative priority for our Government, was to deliver on our promise to provide a further $158 billion in income tax relief to all hard working Australians.
This brings the total tax relief legislated over the past two years to more than $300 billion.
Yes we prioritised low and middle income earners in the first instance, putting more money into their pockets immediately, helping them deal with cost of living pressures, while also stimulating the economy.
The Australian people responded strongly, literally bombarding the Tax Office with their tax returns in record numbers.
As of today, the ATO has received over 7.2 million lodgements, a 16 per cent increase, or over one million more lodgements, than at this time last year.
Already more than 5 million individuals have received their income tax refunds.
That’s tax refunds with a total value of over $13 billion with an average tax refund of $2,578.
There was very quick evidence of the positive effect of that money kicking in.
Less than two weeks after the package passed through the Parliament, The Executive Connections quarterly confidence index rallied 16 points to return to positive territory.
That index reported that the passage of the income tax legislation was one of the biggest drivers of positive economic sentiment.
In the same survey expectations for the economy over the year ahead by CEOs and business owners jumped by 27 points.
But – and this is very important – while our personal income tax reform allows Australians to keep more of their own money, it does more than deliver a short term stimulus.
Our plan, phased in over a seven year period, enshrines strong structural reforms, simplifying and flattening our personal income tax system and addressing bracket creep.
Bracket creep left unaddressed would undermine aspiration and weaken the economy over time.
Whereas addressing bracket creep, making sure Australians don’t go backwards and have the right incentive and reward for effort helps make our economy stronger.
Under our plan, by 2024-25, 94 per cent of taxpayers will pay no more than 30 per cent income tax on any of their income.
That is a significant, genuine tax reform.
Our economy needs all three stages our income tax reforms to help create more jobs and drive stronger growth now and over the medium and long term.
It is carefully calibrated and phased in across an extended period to ensure it is affordable within the Budget while guaranteeing there is record funding available for essential services such as health, education and infrastructure.
Yet Labor, still clinging to their socialist objective, greater income redistribution and even higher taxes, sadly remains opposed to a significant proportion of our income tax relief plan.
In fact Labor has left open the possibility of rolling back about half of our tax cuts legislated last year.
Our personal income tax relief has been complemented with lower taxes for small and medium sized businesses.
A 25 per cent tax rate for businesses with a turnover of up to $50 million from 2021-22.
The instant asset write off for businesses with a turnover of up to $50 million, encouraging investment in a business’s future expansion of up to $30,000 per investment.
This is benefiting around 3.4 million businesses employing around 7.7 million workers.
Our $2 billion Australian Business Securitisation Fund which will increase access to more competitive finance following analysis that small to medium enterprises were finding it inappropriately hard to access the finance they need to start or grow their businesses.
This new pool of capital will help address this gap, as smaller banks and non-bank lenders will have access to more capital specifically for the small and medium sized business sector.
We will ensure small business is paid on time, both by government and by big business.
Our commitment to lower income taxes and lower taxes on business is only one part of our agenda to build a stronger economy, more jobs, stronger wages growth and sustainable funding for all the important essential services Australians rely on.
We are committed to 1.25 million more new jobs over five years.
This commitment includes a commitment to 250,000 new jobs for young Australians.
More new jobs don’t grow on trees.
Nearly 90 per cent of workers are employed in the private sector. Sustained real wages growth for these workers comes from stronger economic growth, stronger productivity growth and lower unemployment – not from waving a magic legislative wand in Canberra.
The future job opportunities, job security, career prospects and wage increases for nine out of 10 working Australians depend on the future success and profitability of private sector businesses across Australia.
That means it depends on their success to sell as many Australian products and services as possible.
Not just in Australia – but around the world.
Ours is a comparatively small domestic market. Our future economic success as a country, and hence the future economic success of individual Australians and their families, will continue to depend on the future success of businesses around Australia.
That’s why we need to continue to work hard to help ensure our businesses can be internationally as competitive as possible.
Both in markets around the world and in the fact of import competition here in Australia.
Talking about wages.
Both public and private sector wages continue to grow above inflation.
Public sector wages are growing at 2.6 per cent and private sector wages at 2.3 per cent – both above CPI of 1.6 per cent.
Fulltime adult average annual total earnings in the public sector is running at about $95,000 per annum compared to a lower $85,000 in the private sector.
Lowering personal income taxes, as we have done, puts more money into public and private sector wage earners pockets on top of above inflation wages growth.
And it does so without the need for Government to pay for it with higher taxes on business and individual taxpayers down the track which we know would weaken our economy into the future.
Even higher real wages will come from opening up our markets to the rest of the world – which is why our commitment to free trade remains so vital.
Protecting and improving market access for our exporting businesses to important markets around the world creates jobs, increases wages, and boosts household incomes.
Australia is a globally focused open trading economy.
Our commitment to open markets and free trade is more important than ever.
It has helped deliver nearly 28 years of continuous growth so far and a substantial lift in our living standards.
When we came into government just 26 per cent of our two-way trade was covered by trade agreements.
We have already been able to lift that to 70 per cent and are working to increase that further to more than 90 per cent during this term.
During our period in government we have successfully finalised free trade agreements with China, South Korea, Japan and Indonesia as well as the strategically and economically important Transpacific Partnership Agreement – a key achievement of the Turnbull Government.
Those trade agreements are critically important to both protect and improve market access for our exporting businesses in the growing markets around the world – in particular in our neighbourhood.
With a relatively small domestic economy Australia would never reach its full potential by being predominantly inward looking and by overwhelmingly selling products and services to ourselves.
Australia’s real GDP has grown faster than any G7 economy over the past 28 years.
Real GDP per capita has risen around 60 per cent since the early 1990s.
This compares with an average rise of 44 per cent in the United States, Japan, Germany, Canada and the UK.
Trade has always been central to our plan. One in five Australian jobs relies on trade.
New export deals during our period in government have given Australian exporters improved access to an extra 1.75 billion consumers in the world’s largest, fastest growing economies.
We will keep going.
We are currently negotiating free trade agreements with the European Union and India to further expand our global footprint, while we are also very optimistic that we will be able to conclude an attractive trade agreement with Britain very quickly post Brexit.
Our government is delivering a record $100 billion, 10-year federal infrastructure pipeline.
It is designed to help build a stronger economy by boosting the efficiency and productivity of our trading infrastructure. It will bust congestion, save lives on our roads and ensure that Australians can get home sooner and safer after work.
When we put our last Budget together we were absolutely aware of the global and domestic headwinds our economy was facing.
The combined impact on our economy of our income tax relief plan and our infrastructure investment plan just over the next four years of our forward estimates period is almost $95 billion.
Yes, nearly $95 billion more money in our economy over the next four years because of the combined effect of our government’s income tax relief and infrastructure investment plans.
We identified infrastructure investment opportunities all around Australia based on proper, sensible and objective assessments to identify the right priorities for Australia.
We are prioritising productivity enhancing, economy enhancing, congestion busting, amenity improving infrastructure.
We are now working with the States in order to ensure that the infrastructure funding is taken up as swiftly as possible and is translated into new roads and new rail lines as soon as possible.
There is more, much more work, to be done to make it easier for businesses to do business in Australia.
We have re-dedicated ourselves to the important task of driving an ambitious deregulation agenda across government with the Prime Minister giving direct responsibility for that agenda to his Assistant Minister Ben Morton.
To make it easier for business to be successful in Australia so they can hire more Australians.
In 2013, when we came into Government, Tony Abbott as Prime Minister launched a major ‘Cutting Red Tape’ Initiative.
Between September 2013 and December 2016 that initiative delivered about $5.8 billion in cost savings to business from red tape reduction.
However, the burden of government remains too high.
Compared to international standards it remains too hard to get projects of all sizes approved.
To drive stronger business growth and more jobs we must remove unnecessary regulatory and bureaucratic barriers to businesses investing and creating more jobs.
There is a clear need to improve the timeliness of project approvals and to reduce the cost burden from filling in too many too lengthy forms.
We want to remove any unnecessary and inappropriate barriers to investment in all the key sectors of the economy.
We are engaging with business to provide advice to us on the opportunities to remove those barriers to investment and future business success where ever that can appropriately be done.
The key will be to ensure that any deregulation successes at a federal level, lowering the cost of doing business in Australia, are not immediately wiped out by increased red and green tape at a State and local government level.
All levels of government must commit themselves to pro-actively explore opportunities to lower the burden of government on business.
LOWER ENERGY PRICES
To build a stronger economy with more jobs and the best possible opportunity for Australians to get ahead needs access to more affordable, reliable and sustainable energy supplies for Australian households and businesses.
That is what we are committed to help deliver.
This year we gave the green light to the Snowy 2.0 project by committing to a $1.4 billion equity injection to help make it a reality.
The project will firm up intermittent renewable energy by bringing 2000 megawatts of new renewable pumped hydro capacity into the system that will provide up to 175 hours of storage which can meet the peak demand of up to 500,000 homes.
We’ve joined with the Tasmanian Government to accelerate the Battery of the Nation and Marinus Link projects by providing $56 million for the Marinus Link interconnector – a second electricity transmission connection between Tasmania and Victoria.
To ensure a sufficient supply of reliable energy, we will underwrite investment in new reliable generation.
This will support increased competition in the National Electricity Market and help reduce wholesale electricity prices.
To reduce electricity costs for households, we will stop price gouging by energy companies.
This includes banning sneaky late payment penalties, making energy retailers pass on savings in wholesale prices and stopping anti-competitive behaviour.
A price safety net will stop big power companies ripping off loyal customers.
We are already seeing results: the ABS has found that power prices fell 1.7 per cent nationally in the June Quarter.
Last month the Australian Energy Market Commission (AEMC) found that retail prices generally decreased over the year to March 2019, with median market offers down between 2 and 7 per cent in South East Queensland, New South Wales, Victoria and South Australia.
Since 1 July, our price safety net came into force, capping standing offer prices - customers who were on the highest standing offers before 1 July, could save up to $657 in New South Wales, $526 in South Australia and $663 in South East Queensland.
Our plan to build a stronger economy where private sector businesses create more jobs also includes a clear commitment to an ambitious skills agenda.
This includes initiatives we took to the last election aimed at helping young people enter the workforce by:
- Ensuring Australians have the skills they need through a new $525 million skills package with 80,000 new apprenticeships in addition to record education funding.
- Establishing 10 training hubs in regional areas to create better connections between local industry and schools to improve outcomes for young Australians.
- Expanding the Youth Jobs Path program to pilot up to 10 industry-led job pathway programs to better target the training and internship experiences for young people.
- Expanding the successful Transition to Work service, to allow young people aged 22 to 24 years to also voluntarily access pre-employment services that help prepare them for work.
- Transforming our employment services system to help Australians who need extra support to get a job.
The training hubs will help create better connections between local industry and schools to improve outcomes for students, employers and the VET sector.
They will be an on-the-ground presence where new approaches are needed to help students transition from school to training and work.
The Hubs will provide additional education for trainers as well as career advice and mentoring for young people with a specific focus on traditional in-demand trades.
They are a great example of the practical initiatives this Government is putting in place that will help strengthen our economy.
Higher productivity and hence stronger wages growth and higher living standards also require an ongoing commitment to innovation.
Not innovation as an end in itself but as a means to an end across all sectors of the economy.
It is no secret that the way value and wealth is being created in our global economy is rapidly changing.
All you have to do is look at the sort of companies that now appear at the top of the Dow Jones index.
They are all technology companies – you know them well – Apple, Amazon, Microsoft and Facebook, among others.
As a Government we have to be able to encourage and facilitate Australian technology innovation.
We have to be a part of this global change and capture our part of the market.
We have to incentivise more successful commercial application and exploitation of Australian inventions.
Many of the jobs of the future will be technology driven and our economy does need to keep up with this change.
But let me say it again – we need to ensure that we see innovation as a necessary means to an end.
It has to be applied across all sectors of the economy as a way to remain competitive across the board.
It should never be seen as an end in itself.
We have the ability to be part of this economic revolution with our highly skilled and well educated workforce and our high quality research and tertiary institutions.
The private sector is best placed to drive technological innovation.
The Government’s job is to get the policy settings right to allow our entrepreneurs and business operators the freedom to get on with the job of innovating.
That freedom will allow them to use technology to drive productivity.
After six years of Budget repair effort we remain firmly committed to getting the Budget back into surplus from this financial year and to keeping it in surplus over the medium and long term.
That is because we believe today’s generation of Australians should take responsibility for its own cost of living and not shift it onto future generations of Australians.
Because we want to ensure that funding for all the essential services Australians rely on is affordable, sustainable and can be guaranteed over the very long term.
Because we don’t want to chase ever increasing levels of expenditure with ever increasing levels of taxation when we know that increasing the tax burden on the economy would weaken it and leave Australians ultimately worse off.
Living within our means, ensures we can deliver both increased funding for health, education, social welfare, national security and infrastructure while also delivering income tax relief to hard working Australians.
We inherited a rapidly deteriorating budget position from our predecessors. Today, after more than a decade in deficit, we are finally in a position to return the Budget to surplus.
It has been a long road from where this process started when the Government was first elected.
In 2013-14, five years after the Global Financial Crisis, the deficit was still the second highest in Australia’s history.
Since then, the Government has made steady progress to repair the budget and chart a responsible path back to surplus.
The total turnaround in the budget balance between 2013-14 and 2019-20 is projected to be $55.5 billion, or 3.4 per cent of GDP.
The Government has kept a tight rein on spending and is no longer borrowing to pay for everyday expenses.
The net operating balance is expected to be in surplus for a second consecutive year, with a surplus of $12.9 billion likely in 2019-20 and sustainable surpluses expected across the forward estimates.
This is the second consecutive year the Commonwealth is no longer borrowing for recurrent spending. The last time this happened was before the Global Financial Crisis.
We expect the average real spending growth to remain the lowest of any Commonwealth government over at least the past 50 years.
Our responsible fiscal management ensures Australia is better equipped to deal with future challenges and to reduce the burden on future generations.
We are now on track to fully pay off net debt by 2029-30.
The Government is also reducing total borrowings (gross debt) as a share of the economy over time.
Gross debt peaked in 2017-18 at less than 30 per cent of GDP.
By 2029-30, it is projected to fall below the 30-year average to 12.8 per cent of GDP.
Net financial worth is also projected to improve over time, consistent with our fiscal strategy.
When Australia lives within its means it helps put Australia on the strongest possible economic and fiscal foundation for the future with a strong and prosperous future – in particular for our children and grandchildren.
Deficits left unaddressed are tomorrow’s tax increases.
I’ve said it before and still believe it – restoring our fiscal position and making it sustainable in the long term is just as important for our future generations as respecting the environment they will inherit.
When we were elected in 2013, the economy was weakening, unemployment was rising and the budget position was rapidly deteriorating.
Today the economy is stronger than it would be on the back of Labor’s high taxing agenda, employment growth remains strong, at 2.6% over the past year well above the long term trend of 1.8%.
Over 1.4 million new jobs were created in our economy on our watch.
A record number of young Australians and women are in employment.
Australians are participating in the jobs market at record levels, including record levels of female participation.
Not only are there more women in work than ever before, the gender pay gap is at its lowest level on record at 14.2 per cent and well below the 17.2 per cent gap when Labor left office.
Dependency on the welfare system is at a thirty-year low.
In fact if the proportion of those on welfare had remained at the same level it was under Labor in 2013, Australia would have an extra 350,000 people on welfare compared to where we are at today.
We turned that around – keeping those extra 350,000 people off the welfare system.
We are grateful to the Australian people for giving us the opportunity to continue to serve them.
We understand why they have chosen us over the alternative.
We will not let them down.
We will continue to work very hard every day to deliver on our agenda and on the promises we made in the lead up to the last election.
We will continue to work very hard every day to ensure Australians today and into the future have the best possible opportunity to be successful and get ahead.
And we will continue to work very hard to help ensure Australia is as strong and as prosperous, as safe and secure, as we can possibly make it.