CUTTING COMPLIANCE COSTS AND BOOSTING PRODUCTIVITY

AUSTRALIAN FINANCIAL REVIEW BUSINESS SUMMIT

SYDNEY

11 MARCH 2024

Thanks Michael and James, thanks Phil for the chance to have a chat shortly, and thanks to the Financial Review and BHP for hosting us here in Sydney, and for the invitation to speak today.

I acknowledge the Gadigal people on whose lands we meet, and pay respects to elders, customs and traditions.

I’m really pleased to be back here with some of the nation’s most important and influential business leaders.

It’s a welcome opportunity to identify and flesh out ideas and policies that will help make our businesses more productive and our economy more dynamic and more competitive.

We have similar objectives and I think a common understanding of our challenges and chances.

I know from engaging with the business and investor communities of Perth, Sydney, Melbourne and Brisbane just these past few weeks –

And from engaging with international colleagues and counterparts at the G20 in Sao Paulo, then at ASEAN in Melbourne –

That the uncertainty we see in the global and domestic economies can be overcome with a degree of confidence but not complacency about the next year, and the next decade.

The overwhelming sense I get from all this engagement is that to meet the moment, we need to modernise our economy, to maximise our opportunities, to benefit middle Australia.

These are not new objectives for our government – I hope they’re familiar to you by now – but I want to talk to you about some new next steps we are taking to turn priorities into reality.

And what we’re doing to help boost productivity, minimise compliance costs and improve the investment environment.

But first I want to situate this in a sense of how I see the economic conditions evolving and how this is shaping our thinking when it comes to our economic and budget strategy.

ECONOMIC CONDITIONS

One of the key takeaways from the G20 was the soft landing we seek at home and in the global economy is assumed but not yet assured.

Global inflation has peaked, risks in the global banking system have been well-contained, the US economy has been strong.

But the UK and Japan finished the year in recession, and around a quarter of the G20 has either recorded a technical recession or narrowly avoided one.

That’s before the effect of synchronised monetary policy tightening around the world is fully felt.

And last week Chinese authorities announced that they expect a period of softer growth to continue there.

The Southeast Asian economies have shown remarkable resilience in the face of all this.

That’s another reminder that ASEAN is where the action is, and the meetings in Melbourne and our Southeast Asia Economic Strategy were and are all about getting a bigger slice of that economic opportunity for our people and businesses in ways that strengthen the region as a whole –

So that our economies are as resilient as they can be in the face of evolving global risks.

Australia’s medium-term prospects in the region are strong, we are optimistic about that.

But in the here-and-now we’re not immune from slowing global growth, strained supply chains and the uncertainty and volatility that comes from conflicts in Europe and the Middle East.

The recent National Accounts confirmed that our economy is slowing, more or less as expected.

Australians are tightening their spending as the impact of higher interest rates and persistent inflation bites.

We see that in the consumption data and in savings too.

Markets and economists expect growth to remain weak in the first half of this year.

But we face these challenges from a position of strength.

Inflation has come off substantially since it peaked in 2022, and it’s now much lower than what we inherited.

This has helped ensure annual real wages growth is back as a feature of our economy, ahead of schedule.

We’ve now seen three consecutive quarters of real wages growth for the first time since 2018.

So, people are earning more, and from July 1 our tax cuts mean they’ll keep more of what they earn as well.

Our labour market is softening but it’s still a standout performer.

Around 650,000 jobs have been created since we came to office, more than any other first term Government.

We’ve seen faster jobs growth than all major advanced economies over the same period.

Even with the recent uptick in the unemployment rate it’s still below where it was before the pandemic. 

All of this combined means that real household disposable incomes are now growing on an annual basis.

We’ve also seen a welcome turnaround in business investment.

New business investment has grown every single quarter since the election – and if that doesn’t sound impressive, remember it fell nearly two thirds of the time under our predecessors.

And after recording the first budget surplus in 15 years, a second one is in striking distance.

The turnaround we have overseen in the budget has been world leading too.

Amongst the G20, we had the biggest improvement in the budget balance between 2021 and 2023.

This wouldn’t be possible without our disciplined approach, which has been recognised by the IMF, OECD, RBA and the rating agencies.

ECONOMIC STRATEGY AND THE BUDGET

So, we understand people are still under pressure, and there is no shortage of challenges coming at us.

But we’ve come a long way in a little under two years, and the big improvement in the near-term fiscal position is just one example of that.

We’ve done this with an economic and fiscal strategy that is carefully calibrated to the evolving economic conditions and circumstances.

This was a defining feature of our first two budgets and it will be the guiding light as we put together the third.

The balance of risks is shifting in our economy, from inflation to growth, and our approach will shift along with it.

This won’t be a fundamental shift.

I want to be very clear about that.

We will maintain a primary focus on inflation, but not a sole focus on inflation.

Inflation is still the main game, but we can’t ignore the way the economy is slowing.

Our strategy is guided by three familiar principles.

Relief, repair and reform.

Relief – from cost-of-living pressures, without adding to inflation.

Repair – of our budget and supply chains.

And reform.

As I said, our reform agenda is about modernising and maximising – and it’s about making our people, businesses and industries the big beneficiaries of the big changes underway in our society and economy.

We’ll do this by building a more productive and prosperous economy that creates more opportunities for more people in more parts of the country.

Last week’s National Accounts showed we’ve now seen two consecutive quarters of productivity growth.

This is encouraging but we’re obviously not getting carried away.  We know quarterly movements can be volatile.

And it will take more than a few good quarters of productivity growth to turn around a few decades of disappointment.

All of us here have an interest in a more productive economy.

Many of you understand we won’t make it more productive by just asking people to work longer for less.

We’ll make our economy more productive by:

Renovating our competition settings;

Training and educating a more skilled and adaptable workforce;

Harnessing data and digital technology more effectively;

Delivering quality care more efficiently;

And investing in cheaper, cleaner energy in the net zero transformation.

And we’ll make our economy more productive by easing compliance costs on business where we can.

That brings me to the main thrust of my contribution here this morning – to update you on four important new initiatives:

To abolish hundreds of nuisance tariffs;

To clarify and improve the regulatory approvals process;

To provide some direction and certainty in the financial sector;

And to work towards a better way of assessing mergers and acquisitions.

These initiatives will reduce compliance costs and ease the burden on business, and make them more productive.

That’s better for business, better for consumers and better for the economy.

NEXT STEPS – TARIFF REFORM

I’m particularly excited about the progress we’ve made on tariffs.

Because of all the work we’ve been doing behind the scenes, I can announce today that we will permanently abolish almost five hundred nuisance tariffs on a vast array of imports from July 1 this year.

We will eliminate import tariffs on hundreds of imported goods including toothbrushes, hand tools, fridges, dishwashers, clothing, menstrual and sanitary products.

This is the biggest unilateral tariff reform in at least two decades.

It will cut compliance costs, reduce red tape, make it easier to do business, and boost productivity.

As it stands, tariffs make these products more expensive, and cost more to administer.

But these nuisance tariffs do nothing to protect Australian businesses and workers because they apply to goods that often arrive under a concessional rate.

So only on a small portion of goods, or sometimes none, is the tariff actually paid.

This means the Government and businesses spend more administering and complying with the tariff system than we receive in revenue.

Australian workers and businesses are not protected by these tariffs, but they still have to navigate the red tape involved and bear the compliance costs.

Many of you in this room navigate this system, you know it can be complex and costly.

There are 18 Free Trade Agreements and around 16,000 Tariff Concession Orders.

Much of our trade is tariff free, but not free of the associated compliance costs.

The complexity of the current system means businesses are not fully benefiting from trading opportunities.

And the compliance burden disproportionately impacts small businesses and occasional importers who are less able to manage the costs of accessing preferential or concessional rates.

Removing these tariffs will streamline around $8.5 billion worth of annual trade.

It will save businesses over $30 million in compliance costs each year, or over $120 million over the next four years.

It will simplify the system, reduce costs, improve supply chain resilience, and make it easier and cheaper for businesses.

Also – and I don’t want to overstate this bit – it will provide a bit of extra help with the cost-of-living challenge by making everyday items such as toothbrushes, tools, fridges, dishwashers and clothing just a little bit cheaper.

Let me give you a few examples of just what we are talking about here:

Australia imports over $660 million worth of fridge-freezers each year – but the tariff raises less than $28,000.

From $490 million in imported washing machines we raise less than $140,000.

Across 2020-22 Australia imported around $80 million worth of toothbrushes.  And the actual tariff revenue raised? Less than $22,000 per year.

In the same time period Australia imported x-ray film worth about $160,000.

The revenue raised was less than $200.

There are hundreds of these tariffs on mushrooms, chopsticks, hand saws, kitchen knives, sleeping bags, puzzles, paint brushes, ball point pens, and crayons, the list goes on.

Nuisance tariffs strangle productivity and weigh business down in red tape with very little return.

That’s why we’re eliminating almost 500 of them.

Here I want to pay tribute to my colleagues, Don Farrell, Murray Watt, Clare O’Neil and Ed Husic for all their help, which makes them co-authors of this reform.

They have worked with me to ensure we get these benefits while not adversely impacting Australian industries, or constraining us in sensitive FTA negotiations.

As we continue to negotiate agreements and look for opportunities to streamline trade, we will look for more opportunities to ease this burden.

In other words, I’d love to do more of this if we can build support for it.

Today we are releasing the initial list of nuisance tariffs we plan to abolish, for consultation, with the aim of publishing the final list and costs in the upcoming budget.

Removing these tariffs is a good illustration of our broader economic strategy, delivering relief, repair and reform.

Relief for business and consumers, by reducing unnecessary costs.

Helping to repair supply chains.

And delivering the next stage of tariff reform – with a productivity dividend.

NEXT STEPS – APPROVALS, REGULATION, MERGERS

Simplifying our tariff system is just one way we are modernising our economy and reducing some of the unnecessary costs of doing business, but not the only way. 

We want to facilitate more investment without compromising on standards, scrutiny and security.

That’s why we’re looking to improve and streamline a range of approvals and regulatory processes as well.

Including through reforms to streamline the Environmental Protection and Biodiversity Conservation process and make sensible changes to the Petroleum Resource Rent Tax.

We understand and value the contribution mining and resources make to our national economy –

And we have consulted widely with industry on our changes to the PRRT, and there is broad support.

Unfortunately the Opposition has sought to delay and complicate these sensible changes, dashing off letters and making threats, and this has created unnecessary uncertainty.

That’s why in recent days I’ve written back to the Shadow Treasurer and Senator McDonald regarding the PRRT, to assure them that some of the changes to environmental approval processes they are seeking to negotiate are already happening –

For their own good reasons, not as a bargaining chip.

We agree there is a need to update Australia’s offshore regulatory gas arrangements and broader environmental approval processes.

Our changes provide more funding to:

Invest in data so we can identify where the environmental risks are upfront.

This will accelerate approvals through better use of data – meaning better, faster decision making and clear priorities without cutting corners on environmental protection –

Resulting in faster yesses and faster nos.

We will clarify consultation requirements for offshore oil and gas storage regulatory approvals, making consultation more targeted and effective.

And provide better upfront guidance on when approvals are required so proponents know if their project needs to go through the process.

Our changes are designed to be better for the environment, better for business and better for our economy.

They are a practical way to clarify what our national environmental standards are and make it faster and easier to assess whether a project meets them.

We have already committed that all changes will be grandfathered so existing projects are assessed under a stable set of rules.

Our reforms will deliver better outcomes, but they are not tied to the passage of the PRRT.

The Coalition should support our sensible changes to the PRRT on their merits. 

Our changes will mean the offshore LNG industry pays more tax sooner –

Provide industry and investors the certainty they need to invest in sufficient supply of domestic gas –

And ensure Australia remains a reliable international supplier and investment partner.

Today, I can also announce we’re clarifying the regulatory regime for our banks, particularly the medium-sized and smaller players.

We will introduce a financial sector regulatory initiatives grid to make sure the standard business of regulation is carried out in a more coordinated and coherent way.

The grid will provide transparency around the regulatory landscape for the financial sector –

Giving greater certainty to industry to support engagement with proposed reforms and their implementation.

It will be modelled on the grid used in the UK, which has helped streamline regulation.

The financial services industry, in particular the Customer Owned Banking Association, has been calling for this for some time, and I’m pleased to be able to deliver it.

A regulatory grid will help financial services businesses engage with the Government and regulators more effectively –

And allow regulators to avoid duplication, build shared strategic priorities, and focus on how to best implement reforms.

It will also allow businesses to allocate their resources more efficiently when implementing regulation – reducing compliance burden and costs.

A fourth and final area I want to touch on today is merger reform and competition policy.

We want to make our mergers regime:

Simpler – by streamlining legal pathways to a merger.

Faster – by allowing low risk mergers to proceed quickly, and setting timeframes when in-depth assessment is needed.

And more transparent – by providing a more comprehensive picture of the mergers happening in our economy.

We understand that the current merger system is too slow and that these delays are costly for business, as they wait for formal authorisation which can hold up transactions.

We know the current system risks harming productivity growth.

The feedback is that current merger rules may be too permissive, allowing some mergers that don’t deliver benefits but do increase concentration.

And certain kinds of acquisitions by large firms – creeping acquisitions – are not adequately captured by existing competition laws.

We want to take a balanced approach to merger clearance.

One that reduces costs for business, promotes competition, protects consumers and shortens approval times while bringing us in line with our international peers.

The Treasury Competition Taskforce has wrapped up consultation on options for merger reform.

I’m looking forward to working through that and concluding a position and announcing it as soon as I can.

MUTUAL BENEFITS

We’ve got some time now for a Q&A with Phil, and I’m looking forward to that so let me just draw these threads together and say that across these four policy areas I’ve detailed today –

Abolishing hundreds of nuisance tariffs –

Clarifying and improving the approvals process –

Providing direction and certainty in the financial sector –

Working towards a better way of assessing mergers and acquisitions –

All designed to get costs down and productivity up –

We are showcasing the disciplined and methodical approach required to rebuild the competitiveness and dynamism of Australia’s economy.

So that we are maximising not just managing the opportunities that the next decade presents.

For the mutual benefit of our people, our communities, our businesses and our economy.

Thank you once again, and I look forward to the discussion.

ENDS