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Budget 2007: Right of Reply Speech -
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Good evening, and welcome to Parliament House. I'm Jim. Two nights ago Peter Costello unveiled his
12th Budget with billions for education, tax cuts and child care. Now for the first time it's Kevin
Rudd's turn to deliver Labor's formal response, the address in reply. Over now to the House of
Representatives and Speaker, David Hawker.

The clerk.

Government business order of the day number 9, appropriation bill number 1, 2007, 2008, resumption
of debate on the Budget.

The request is that the Bill be read a second time. The Honourable Leader of the Opposition.

FEDERAL LABOR LEADER

KEVIN RUDD» MP

BUDGET ADDRESS IN REPLY

PARLIAMENT HOUSE

CANBERRA

10 MAY 2007

Mr Speaker, I am an «optimist» when it comes to our country's future.

Tonight I want to outline our plan for our country's future.

I believe budgets should not be about the next election.

They should be about the next decade.

They should reflect the ambition we have for our nation's long-term future.

Mr Speaker, we are truly blessed to be Australians.

We live in a stable democracy, when many in the world do not.

We have enjoyed great prosperity - and have benefited from a time of unparalleled world economic
growth.

And to cap this off, we have prospered from the rise of China, the rise of India and the global
resources boom.

The benefits of this are washing through the economy, creating jobs, generating new businesses and
boosting government revenues to an all time high.

Mr Speaker, there is nothing to hold us back as a nation and as a people - except a lack of
long-term vision.

We are part of a world that is changing faster than ever before.

In 2004 the world pumped out a staggering 26.6 billion tonnes of CO2 equivalent emissions into our
atmosphere just from fuel combustion alone.

China graduated half a million scientists and engineers.

India graduated more PhDs than we can imagine.

Italy will soon be laying out a broadband network for two-thirds of its population of up to 100
megabits per second.

Big changes are coming.

Big challenges are waiting around the corner.

They will dramatically influence almost every aspect of our lives - some for the better, others for
the worse.

And some will be upon us in the blink of an eye.

Mr Speaker, how we respond to these future challenges will define the security and prosperity of
our nation for generations to come. The same for our communities. The same for our families.

We can either wait for these challenges to swamp us and be left behind. Or we can anticipate them
and act now while there is still time.

We can either seize the great opportunities that have been presented to us. Or we can squander
them.

Or as a great American President once said "the time to fix the roof is when the sun is shining".

The truth is the sun is shining right now on Australia.

We must seize the day and get our house in order.

I believe Australia faces three core challenges to secure its future:

ò First, to build long-term economic prosperity, beyond the mining boom, by rebuilding productivity
growth.

ò Second, to deal with, rather than avoid, the great challenge of climate change and water before
the cost of inaction becomes far too great.

ò Third, to make sure the fair go in Australia has a future, not just a past - both within the
workplace and outside the workplace as well.

And beyond these three great challenges is the underlying challenge of remaining vigilant on our
national security in an increasingly uncertain and threatening world.

Which is why Budgets need to be about the next decade, not simply the next election.

Economic Fundamentals

Mr Speaker, the foundations upon which our long-term economic stability is built is a conservative
fiscal policy and the independence of the Reserve Bank.

If elected, the government I will lead will be grounded in the discipline of not spending more than
we earn. We will maintain a budget surplus on average over the economic cycle. We will also not
increase taxation as a proportion of gross domestic product.

That's why Labor has already identified $3 billion in savings over the forward estimates to help
fund our future priorities. Tonight's announcements are costed and funded.

If elected, the government I lead will maintain the absolute independence of the Reserve Bank and
the Bank's inflation target.

Both these disciplines are fundamental to keeping interest rates low.

On this, there is a bipartisan consensus - as noted recently by the former Reserve Bank Governor
Ian Macfarlane.

Equally we must remain committed to keeping taxes low. It's important for working families hit hard
by the cost of mortgage repayments, food prices, petrol, education and childcare.

It's also crucially important for our businesses competing on the world stage.

The Productivity Challenge

Mr Speaker, where the paths of our two parties veer in opposite directions is on the core economic
challenge of how to build long-term prosperity for Australia, once the mining boom is over.

Productivity is the measure of how efficiently we produce goods and services.

The better trained we are, the greater our productivity.

The better our use of technology in the workplace, the greater our productivity.

The better our management in the workplace, the greater our productivity.

Productivity is a bit like getting the best performance out of your engine for the least amount of
fuel.

And productivity growth is the only reliable way to bring about long-term economic growth, more
jobs and higher living standards without unleashing inflation.

Australia's recent record on productivity growth has been very poor indeed.

Productivity growth was averaging 3.2 per cent in the mid-1990s before falling to 2.2 per cent at
the turn of the decade. Last month the Government downgraded its estimate for the current decade to
just 1.5 percent.

In fact, this year's budget papers contain the staggering admission that productivity growth is
likely to be zero.

This is a sure fire recipe for slowing down economic growth for Australia - even before the ageing
of the Australian population sets in.

In Australia today, this failure to improve productivity growth has been masked by the mining boom
over the last four years.

Right now the economy is cruising along with a very strong tailwind called the mining boom. But
sometimes the wind changes direction and there can be lots of turbulence. And the only way to get
home is with powerful engines that can do the hard yards in any conditions.

The mining boom, driven entirely by factors beyond Australia's control, has pumped hundreds of
billions of dollars into our national economy.

And as older Australians who've been around for a while will tell you - mining booms don't last
forever.

The time for action is now.

That's why Labor calls now for an Education Revolution - before we lose one more day.

Education Revolution

Every country in the world knows the more you invest in the education, skills and training of your
people, the more productive your economy becomes.

The problem we have in Australia is that against so many of our competitor economies, we are
falling behind.

It is time to put a stop to this by investing in a real Education Revolution - not just increasing
investment but also raising the standards.

For Labor, we actually believe in education. It's not something we've cooked up over night. It's
one of our core values - and has been so for more than a century.

So what have we done about it?

Since the beginning of the year we have released six chapters of our Education Revolution
including:

ò early childhood education

ò literacy and numeracy

ò boosting the teaching and studying of maths and science in schools and universities by offering a
significant reduction in HECS

ò establishing a national curriculum board to develop a uniform national curriculum for the core
subjects of English, history, maths and science

ò and a program to foster the building and sharing of new first class facilities between schools,
be they government or non-government.

I am particularly proud of our $450 million policy on early childhood education providing
pre-literacy and pre-numeracy play-based learning for all four year olds for 15 hours a week, 40
weeks a year, with a fully trained teacher.

The earlier you invest in a child's educational opportunities, the better the result.

Good for the child.

Good for the country.

But while we offer this plan for the future, at present Australia ranks last out of the 32 richest
economies in the world on the amount our national government invests in early childhood education.

If we are serious about facing the future, this must change - and it must change now.

Trades Training Centres in Schools

Tonight I want to announce a further chapter in Labor's Education Revolution.

Mr Speaker, Labor sees no difference in value between a trade certificate and a

university degree.

I understand that not every young person wants to go to university.

If elected to government, we will implement one of the biggest reforms in vocational education and
training in Australian schools in history.

It's time to help bring trade training in schools into the 21st Century.

A Labor Government will implement a $2.5 billion Trades in Schools program over ten years to build
new Trades Training Centres and upgrade existing facilities and equipment in all of Australia's
2650 secondary schools - both government and non government.

This will mean an investment of $729 million spread over the four years to 2010-11.

Each secondary school in Australia will be eligible for capital funding of between $500 thousand up
to $1.5 million to build trade workshops, computer laboratories and other facilities to expand
vocational education and training opportunities.

Schools can apply to build metal workshops, commercial kitchens, automotive workshops, plumbing
workshops, graphic design labs as well as ICT laboratories.

And they can purchase equipment including drills, grinders, wood and metal turning lathes, ovens,
soldering and welding equipment and computers.

The extra recurrent costs for running the new Trade Training Centres will be negotiated between the
Commonwealth and the states.

Labor will also provide $84 million over four years to ensure access to on-the-job training for 20
weeks per year for year nine to 12 vocational education and trades students.

This is part of a new national objective I am announcing tonight to lift year-12 retention rates
from 75 percent to 85 percent by 2015 and to 90 percent by 2020.

There are two main reasons why we need to do this as a nation.

First, we have a skills shortage, and skills have become a core economic challenge for the nation.

This is particularly the case in the traditional trades.

Anyone trying to build or renovate a home right now will know exactly what I am talking about.

But the tragedy is that there are so many young people of school age - or immediate post school age
- who would be ideally suited to a career in the trades, who have simply dropped out all together.

This is the second core reason underpinning our Trades in Schools program - it's not only good for
the economy, it's good for young Australians as well.

In 2006, 540,000 young Australians aged 16-24 were not engaged in either full time learning or
work.

Access Economics has estimated that if Australia raised its year 12 completion rates to 90 per cent
from the 75 per cent it is today, we would add around $9 billion to our economy by the year 2040.

I am very proud of this new chapter of Labor's Education Revolution. It's our core business.

On Tuesday night the Government stated that it would establish three new Australian Technical
Colleges across the whole country.

Mr Speaker, if elected to government, we will make every secondary school that chooses, into a
first-class provider of technical education.

High speed broadband

Labor's Education Revolution is reinforced by our plan to invest up to $4.7 billion in partnership
with the private sector to build a high speed National Broadband Network.

If you have the best trained people in the world matched with the most modern information
technology in the world, you can turbo charge overall productivity growth.

In the 19th century, governments laid out railway networks as the arteries of the economy. In the
21st century, governments around the world are ensuring that high speed broadband networks are laid
out - as the arteries of the new economy.

Except in Australia, where we have one of the slowest broadband networks in the western world.

And for those who don't think that this is of real concern to the Australian small business
community, they need to start listening.

Labor's plan is for a state-of-the-art fibre optic to the node national network with a speed of 12
megabits per second (capable of upscaling) to be laid out over a five year period.

This is the nation building that the nation needs.

BUSINESS REGULATION

Achieving productivity growth is not just about bold visions. It also requires prudent management -
in particular the streamlining of regulatory arrangements to unleash the full potential of our
businesses.

The Government has already conducted two enquiries - the Bell Inquiry followed by the Banks inquiry
- with little effect.

So-called regulatory impact statements are widely ignored.

And the result is that business can't get on with what they do best - spending most of their time
developing new products, services and markets - as opposed to acting as compliance agents for
national and state governments.

I have already announced our intention in government of adopting a simple principle: no new
regulation imposed on business unless an existing regulation is withdrawn.

Tonight, I also want to outline a further set of measures to help get government off the back of
business and free them up to create more jobs and more wealth for the future.

Faster Commonwealth bill paying

First, Labor will give small business the right to charge Commonwealth departments and agencies
interest on bills not paid within thirty days.

Late payments are a big problem for small business because of their significant impact on cash
flow.

Small businesses often waste time badgering government for payment, taking them away from their
business.

That will now change.

A Superannuation Clearing House

Second, Labor will establish an optional Superannuation Clearing House for all businesses that want
to use it.

Currently under choice of superannuation legislation, businesses are required to make payments into
numerous superannuation funds.

This has imposed yet more form filling and checking, cost and legal liability on business.

Under Labor's policy, businesses would simply make payments into one central clearing house at
which point their legal responsibility is discharged.

A standard disclosure form for financial services products

And third, Labor will introduce a simple, standard disclosure form for financial services products.

The government's new financial disclosure regime has resulted in consumers physically being issued
with long and complex documents of up to 100 pages long. It has created an administrative nightmare
for businesses and consumers. Labor's standard disclosure form will be no more than 3-4 pages in
length, containing core information.

Financial services providers would be required to have any further disclosure information on their
websites.

International competitiveness

Mr Speaker, a core reason for rebuilding productivity growth is to ensure that our businesses are
internationally competitive.

For business it is a tough and highly competitive world out there.

Beyond the resources sector, the Budget Papers demonstrate that our export performance in the years
ahead will be poor.

Once again, we can't simply allow ourselves to ride on the back of the resources boom, just as
previous governments back in the fifties and sixties chose to ride on the sheep's back.

This is short-sighted in the extreme.

We have to be clear sighted about where Australia's international competitive advantage lies for
the future.

One such opportunity lies with the Australian financial services industry and with the funds
management industry in particular.

Since the superannuation guarantee was introduced by the previous Labor Government in 1992, funds
under management have grown from $250 billion to $1 trillion.

Australia has one of the largest and most professional funds management industries in the world.

But how can we turn our significant domestic funds management industry into a new export industry,
given the growth in retirement incomes across East Asia?

One of the concerns the industry faces is international tax competitiveness given the 30 percent
withholding tax, which currently applies on distributions from Australian managed funds, compared
with other major centres.

My objective is to turn Australia into a funds management hub for Asia, building on the existing
strengths of our funds management industry. This would earn extra income from Australia which in
turn generates jobs and grows our economy.

So tonight I announce that Labor in government will halve the withholding tax on distributions from
Australian managed funds to non-residents from 30 percent to 15 percent.

According to our advice, this tax currently generates some $30 million - but in our view halving it
will provide concrete assistance to Australian funds managers competing against tax regimes
applying to their competitors in Dublin, Luxembourg, New York and Singapore.

Our intention is to enable Australian businesses to take on the world and win.

Enabling business to engage with Asia

Mr Speaker, at the dawn of the Asia-Pacific century, Australia lies in a region that will generate
most of this century's economic growth.

We therefore must ensure that we provide our businesses with every chance in the decades ahead to
engage fully in the new business opportunities that lie ahead.

My plan is to help foster a generation of Asia-literate Australians increasingly comfortable with
the languages and cultures of our region.

This will help with future export opportunities.

Several years ago, the government discontinued funding for the National Asian Languages and Studies
in Australian Schools Strategy.

This was a cooperative program which operated with the States and Territories from 1996 to 2002,
which by that time had enabled hundreds of thousands of Australian school children to start
learning the major languages of our region.

Tonight I announce that Labor will re-establish an Asian languages and studies strategy for
Australian schools. This will cost $65 million dollars over four years and will be done in
partnership with the states and territories.

If we are going to enable our businesses to take on the best and the brightest in the region and
the world we have got to make sure they have all the skills to do so.

CLIMATE CHANGE AND WATER

Mr Speaker, preparing for Australia's long-term economic future also means acting on climate change
and on the water crisis.

Without a plan to tackle climate change there can be no long-term solution to the water crisis.

The science is in. Climate change is a reality. It's happening now. And it's effecting our future
supply of water.

The core economic reality is that there is an economic cost to Australia if we fail to act on
climate change.

The second core reality is that the economic cost of not acting will be far greater than the cost
of taking early and responsible action.

For this reason, we have already released a ten-point plan on climate change, including:

ò ratifying the Kyoto Protocol

ò reducing greenhouse gas emissions by 60 percent by 2050

ò establishing a $500 million national clean coal fund

ò as well as boosting the use of renewable energy through enabling Australians to access
low-interest loans to help install energy-efficient measures such as solar panels

Because of climate change we also need to adjust by using water more wisely.

Our proposed loan fund can also be used to purchase rainwater tanks and other water efficiency
measures at home.

We have sought to provide the Prime Minister with bipartisan support to build a national consensus
around his Murray-Darling initiative.

A truly national water plan must ensure water security for all Australians including those in our
cities and towns.

We all know our reservoirs are dangerously low.

We can do this by improving water security for local communities. That's why we've committed to
funding the Gold Fields Superpipe for Bendigo and Ballarat, the Geelong Shell Refinery water
recycling project and other major urban water projects.

Across Australia we have about 175,000 kilometres of water mains. Leaks from these pipes remain a
major impediment to future water security. According to the National Water Commission, in some
towns up to 30 per

cent of water is lost from leaky pipes and burst water mains. More than 155 thousand megalitres
goes down the drain in our capital cities each year.

Water is too valuable and too precious to waste.

Tonight I announce that if elected, we will begin by establishing a modest national fund to start
plugging the leaks in the water pipes of our towns and cities.

In office, Labor will work with state and local governments to identify relevant projects and take
action.

We will provide matching funds for practical projects that can achieve measurable water savings
outcomes.

We will allocate $250 million dollars over the forward estimates to commence this program.

It is a modest, practical program - but one we believe represents an important foundation on which
we can later build.

The national government cannot simply sit on its hands and do nothing about the water crisis
affecting so many of our towns and cities.

THE FUTURE OF THE FAIR GO

I said earlier that our nation faces three core challenges for our future:

ò building long-term prosperity beyond the mining boom

ò acting on climate change and water

ò and making sure the fair go has a future, not just a past.

The Government's industrial relations laws have gone too far.

They know it. The Australian people know it.

That's why four months before an election, they have pretended to change them.

If we are elected to form the next government of Australia, we intend to restore the balance -
because we believe you can build long-term prosperity without throwing the fair go out the back
door.

We believe we can get the balance right between fairness and flexibility.

The government believes that it's either one or the other.

And we intend to prove them wrong.

We want to unite Australia, not see it divided.

CONCLUSION

Mr Speaker, I conclude my remarks where I began.

I am a great «optimist» when it comes to our country's future.

I did not come into this place tonight to outspend the Prime Minister and I have not.

Instead I came here to offer an alternative plan for Australia's future.

I believe if as a nation we rise to the great challenges I have outlined tonight, we can build a
better and more secure future for our families and for our country.

Mr Speaker, so many Australians are depending on us to do so.

Our farmers battling the drought.

Pensioners and carers struggling to make ends meet - notwithstanding the one-off payments they have
received.

Working families under financial pressure, for whom tax cuts are always welcome, together with
childcare relief.

All this, however, depends on building a strong economy into the future.

All this depends on us now seizing the day on revolutionizing our approach to education.

All this depends on us seizing the day on climate change and water.

And all this, Mr Speaker, still depends on ensuring that in this great country of ours, the fair go
has a future, and not just a past.

APPLAUSE

So with apologies to Richard Nixon we're all Conservatives now with Kevin «Rudd» declaring himself a
fiscal Conservative. But he did unveil new spending, too, fully-funded he says. The latest salvos
in the education revolution are $729 million for trades training centres at high schools, as well
schools, as well as $65 million toe boost Asian language teaching. Not forgetting $250 million for
leaky pipes. For now, that's all from Parliament House. Goodnight.