ADDRESS TO THE JOHN CURTIN RESEARCH CENTRE
11 November 2019
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Thanks for the opportunity to be with you here at KPMG and on the traditional lands of the Wurundjeri people whose elders, customs and traditions we begin by acknowledging.
On Remembrance Day we also commemorate the selfless courage of all those men and women who served, suffered and died for our country and the cause of peace.
The nation they knew, the Australia they fought for in the mud of the Western Front, on the cliffs at Gallipoli or the desert sands of Beersheba, is in many ways a foreign place to us now.
A century of change has made us a more independent, more confident, more prosperous, more open, more diverse place.
And none of that progress was the product of chance, or luck.
Even when the world brought the forces of change to our doorstep, it still required imagination, courage, planning and leadership to make that change work for Australia.
The Party of Growth
In that context, today I want to talk about why in times of rapid change in our region and uncertainty in the world, Australia needs a new strategy for economic growth.
Some of you may be aware the United States recently made a big deal of 10 years of uninterrupted expansion.
But all of you would be aware that here in Australia we have passed 28 years of growth without interruption.
A truly remarkable feat.
My side of politics is proud that Hawke and Keating built the modern economic framework for this prosperity.
And just as proud that Rudd and Swan defended it from global catastrophe. Not just weathering the storm – growing through it.
In recent speeches I’ve talked about Labor as the Party of aspiration and opportunity; the Party of the suburbs; the Party of engagement with the world.
Anthony Albanese has spoken about Labor as the Party of jobs and the future of work, and later this month he’ll present his second vision statement, on the economy.
Today I want to talk about what guides some of that thinking and policy development, including the underlying conditions.
Mostly I want to talk about why Labor is the Party of growth.
Because so much of what Labor seeks to achieve for Australia from creating good jobs in the regions to extending new opportunities to our suburbs, comes back to that.
It’s a foundation principle I bring to this job as Shadow Treasurer.
I reject and rebut the false choice between growth that is strong and growth that is fair.
The world’s best economists have come around to Labor’s long held view that growth is stronger when it is fair – when more people have a stake in it.
We champion growth and redistribution, not growth or redistribution.
We’re the Party of growth because we want middle Australia to get ahead, not just get by.
We’re the Party of growth because we want to help communities thrive, not just survive.
We’re the Party of growth because we believe the next generation of Australians deserve a broader set of opportunities and a better standard of living.
But of course none of that will just happen.
Wishing and hoping won’t cut it – we’ve seen that for six years.
Our nation needs a government with a plan to sustain growth, strengthen it and make it more inclusive.
And in the current climate this is becoming more and more urgent.
Running on Fumes
It’s true today, all things considered, that our economy is more likely to keep falling short of its potential than it is to go dramatically backwards.
But at the moment, too many new pieces of data tell the same distressing story.
GDP growth has tumbled to 1.4 per cent, the slowest annual growth in ten years.
That’s well below Budget forecasts, half the rate of trend growth, and around half of its 30 year average.
Consumption growth has fallen; productivity has declined; business investment hasn’t been this weak since the early 90s.
Wages growth has repeatedly fallen short; household debt is at record highs; living standards have gone backwards; almost two million Australians are looking for work or more work.
You may also be aware that the economy is growing slower than the population.
But we’re not just going backwards in per capita terms; the domestic private sector is also contracting.
Private final demand went backwards last year and for four quarters in a row for the first time since the 1990s recession.
Labour productivity in the market sector went backwards last financial year, for the first time ever.
The Liberals have broken new records on government debt, now the highest in Australia’s history – $400b-plus of net debt, again, for the first time ever.
These are not the kind of records you want to be breaking.
These are not good ‘firsts’.
These are not signs of a strong, sustainable and diverse economy.
Put bluntly, the Australian economy is running on fumes.
Growth is too weak, too uncertain, and too narrow.
It’s neither trickling down to the people nor out to the suburbs.
Cancer of Complacency
Yet as all these challenges are bearing down on us, the Liberals are frozen in the headlights.
This is probably the biggest risk facing our economy.
Not the drought here at home or volatility overseas – as concerning as both of those things are.
The greatest threat to Australia’s future growth is a cancer of complacency which cripples this Morrison Government.
The complacency which says, if you can’t think of a solution, just pretend there isn’t a problem.
The complacency which assumes good luck is a substitute for good management.
The complacency which prioritises political posturing over policy action.
The complacency which confuses stubborn, smug inaction with strong leadership.
It’s now been seven and a half months since the Budget.
This is the longest period of time any government has gone without updating its budget, since the Charter of Budget Honesty was introduced by Peter Costello in the 90s.
Next Tuesday will be 33 weeks; and if they wait until mid-December it will be 37 weeks since the April budget was brought down.
This silence on the budget update speaks volumes.
The Treasurer has no idea and the Government has no plan.
And this know-nothing, do-nothing, say-nothing, learn-nothing approach doesn’t hold Australia still – it drags us back.
The Reserve Bank has tried to fill some of the policy vacuum with three post-election rate cuts, driving official interest rates down to 0.75 per cent.
This is one quarter, or 2.25 percentage points, below the ‘emergency lows’ seen during the GFC.
The RBA recognises the gravity of the situation and that’s why last week they revised down their expectations yet again.
So do the OECD and the IMF, which have slashed their growth outlook for Australia year – by more than the downgrades to other advanced economies.
Responsible, Proportionate, Measured Stimulus
Our business leaders and leading private sector economists also understand something must be done.
The Business Council of Australia, AiGroup, MasterBuilders and others have called on the Government to step in in one way or another to promote stronger growth.
None of these organisations are equating this period of weak growth with the GFC and neither is the Labor Party.
It’s different this time around and nobody is calling for kitchen sinks to be thrown at the problem.
We all agree on this:
The Australian economy needs responsible, proportionate and measured stimulus to get it going again.
The Liberals’ latest excuse is to wait for the September quarter data.
But for growth to improve, all that’s required is a quarterly outcome above a weak 0.3 per cent, when last September quarter’s contribution to annual growth is replaced by this one.
All that will show is the Liberals lowered the bar last year and tripped it over this year.
And frankly, the signs for this current quarter are not exactly strong, based on what we know now.
The tax cuts and rate cuts are helping, but not enough.
Retail trade volumes went backwards this quarter – and recorded their first annual decline since the 1990s recession.
Private sector credit has been subdued, and despite some positive signs in housing, annual growth in housing credit has fallen to a record low.
More recently, consumer confidence plummeted to a four-plus year low, and business confidence remains below average.
That’s not to say there won’t have been some improvement in activity in the September quarter – the tax cuts and rate cuts should have some positive impact over time.
With the economy already growing at its slowest pace in 10 years, few expect it to get significantly worse and it would be alarming if it did.
But the key point is this: based on the information we have now, there is no sign that our major and longstanding economic challenges are getting any better.
Some are cyclical, some are structural, all are unattended.
Weak demand, exacerbated by years of persistently and abnormally low wages growth.
Declining living standards.
Declining productivity, caused in part by capital shallowing, with business investment 20 per cent lower under the Liberals.
These longstanding problems are the inevitable consequences of a Government with a political strategy for its opponents but no economic policy for longstanding threats to growth.
Another quarter’s National Accounts won’t change the fundamentals of that.
Four-Part Growth Strategy
Because crossing your fingers and hoping for a better set of numbers isn’t a plan for the future.
Australia needs a growth strategy.
Not growth for growth’s sake, but the right kind of growth – strong, inclusive and sustainable.
That won’t come from more of the same deliberate wage stagnation, energy policy paralysis and anti-union rhetoric.
It won’t come from clinging to the busted model of neoliberalism, which sowed the seeds of the global recession.
We need a growth strategy that brings everyone along and leaves nobody behind.
A strategy that creates good well-paid jobs, gets us on the path to full employment and lifts living standards.
Since taking on the role of Shadow Treasurer, my priority has been engaging business, unions, industry groups and experts around Australia on a real plan for growth.
In recent months I’ve spoken with more than a hundred businesses and industry associations, individually and in roundtables, to discuss our ideas, and get their views.
The level of engagement has been really encouraging and I wanted to put on record my appreciation for that.
These discussions have informed my view that any meaningful growth strategy should involve four key elements:
Taking immediate action to boost demand;
Tackling the major drags on Australia’s productivity;
Anticipating the big forces bearing down on our economy; and
Approaching the task of reform with a mindset of genuine partnership and cooperation.
These are the four ingredients of a real growth strategy.
The first is taking immediate action to boost demand by supporting consumption and investment.
The RBA is doing all the heavy lifting and as the Governor has made clear, there’s not much scope to do more.
For months, we’ve been calling on the Government to bring forward a plan to support demand.
We have proposed a range of sensible, no-regrets proposals that would boost demand now without jeopardising the surplus.
Like bringing forward infrastructure investment, particularly small-scale, labour-intensive upgrades, where wages are more likely to be spent locally.
Bringing forward parts of the tax cuts for middle income earners, and responsibly reviewing and increasing Newstart.
A comprehensive plan to boost wages, starting with restoring penalty rates for workers most likely to spend that money.
And a new investment allowance, like Labor’s previous proposal, to boost business investment in Australia.
We think some combination of these can be done while getting the budget back to surplus.
There’s room in the Budget to ensure it needn’t be a choice.
Labor doesn’t see the surplus as an end in itself, but it will help pay down the Liberals’ record debt which costs the budget over $16 billion a year in interest payments.
Another urgent task is action to reverse our productivity problem – the second component of any real growth plan.
Poor productivity caps Australia’s growth potential and drags down wages over time, which is exactly what we’ve seen.
We need to boost productivity, particularly where there are opportunities to create more well-paid jobs.
Infrastructure is a big part of the story, so is reviving private investment and innovation – not only through tax incentives but genuine cross sector partnerships.
We need a big push on skills – a key focus of Anthony’s first vision statement.
Because we shouldn’t have skill shortages while nearly two million people look for work or more work.
Repairing our VET system should a priority, as should building effective pathways for workers in a changing economy.
We need to end the chaos on energy policy – an issue that’s raised with me in every boardroom I visit.
Australia has the resources to be a low-cost energy economy and renewable energy superpower.
Instead, the absence of sensible energy policy is damaging productivity right across the economy.
We need a strong focus on competition.
Particularly to ensure household essentials are affordable, accessible and provided responsibly, but also so we get value from our data in the digital age.
Supporting small and medium-sized businesses is also critical for healthy competition in many sectors and regions.
Our exporters still face non-tariff barriers and the complexity of trade agreements still limits their growth opportunities.
These are just some of the areas we should focus on, if we want a real plan to boost productivity and growth.
The third part of any serious growth plan is how we anticipate and respond to the megatrends shaping our economy.
That’s why we focus on rapid changes in technology, our growing and ageing population, the rise of Asia, and the impacts of climate change.
As Anthony said in Perth, how we diffuse technology is key, and no serious growth or jobs strategy can ignore it.
Population change matters too – it shapes our industries, jobs and communities.
The aged care crisis has implications for our health and caring industries, including quality of care, jobs and workforce training.
We also can’t forget that while regional growth has slowed, we’re still located in the most dynamic part of the world, home to a growing number of middle class consumers.
We need to improve our cultural and economic relationships, while advancing our interests and staying true to our values.
And no growth strategy is complete without a plan to deal with climate change – to give business certainty and grasp opportunities in renewable energy and emerging industries without abandoning traditional strengths.
A plan to deal with rising costs and financial stability risks, including from more frequent and severe natural disasters.
And again as Anthony has emphasised, a plan to cut pollution that creates jobs across the economy.
These are all big challenges but they shouldn’t be beyond us.
We need to approach them with a mindset of partnership and cooperation, particularly with trust in institutions waning.
This means getting better at listening, communicating and partnering – with industry, workers and communities – with employers of all sizes.
And it means not giving up on the federation and COAG reform either, as difficult as progress has been.
28 years of consecutive growth is a great national achievement but we need to focus on the next 28.
Yes, Labor modernised the economy to kick-start that growth.
Yes, we kept the economy growing, businesses open, people in work and households afloat during the GFC.
But we understand the lion’s share of the credit belongs to the effort and endeavours of Australian employers and employees, who seized the chances Labor helped create.
That’s the lesson of the past 28 years and it’s the truth Labor has always known: growth comes from extending opportunity.
Growth comes from investing in people and their potential.
But after 28 years of growth people are struggling and the economy is now floundering.
This moment of urgency is no time to succumb to the cancer of complacency.
Because doing nothing doesn’t mean nothing changes, it means we go backwards.
It means we drop further and further down the league table of comparable countries.
Doing nothing means eroding the health of our economy, degrading our living standards.
Doing nothing makes us weaker, more vulnerable to a crisis.
Doing nothing puts strain on families trying make ends meet, as bills outstrip their wages.
Doing nothing hurts small businesses struggling with finance and keeping their customers.
And worsens the hardship faced by the unemployed and those looking for more work.
That’s why Labor will keep putting forward ideas for stronger, more inclusive and sustainable growth.
Not just for the next election, but in the hope our ideas will finally spur some action from the Government before then.
Thanks very much.