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Wednesday, 23 February 2011
Page: 1326


Dr LEIGH (5:59 PM) —These are exciting economic times. While many developed countries struggle with large debt burdens and double-digit unemployment, Australian public debt and unemployment are both extremely low. Business activity and consumer sentiment remain strong. The causes of the current economic boom are unprecedented. This morning, the Reserve Bank governor told a conference in Melbourne:

Thus far, the demand for resources has stretched the global capacity of suppliers. Prices of key raw materials have consequently been driven upwards. As a result Australia’s terms of trade have risen sharply, to be about 65 per cent above the 20th century average level, … Even assuming the terms of trade soon peak and decline somewhat, they are nonetheless, over a five-year period, at their highest since at least Federation—by a good margin. With the terms of trade at their current level, Australia’s nominal GDP is about 13 per cent higher, all other things equal, than it would have been had the terms of trade been at their 100-year average level. Of course Australia has substantial foreign ownership in the resources sector so a good proportion of this income accrues to foreign investors. Nonetheless, probably about half of that additional 13 per cent of GDP accrues to Australians one way or another.

But with this growth also come new challenges. How the rapidly increasing global supply of commodities rises to meet global demand will be a critical factor in Australia’s future. David Gruen, Executive Director of the Macroeconomic Group of Treasury, said earlier this month:

There are a range of possible scenarios here. One possibility, which presumes no serious prolonged adverse developments that derail the catch-up process in China and India, is that average prices for commodities remain relatively high—well above the average cost of production—for an extended period to maintain strong financial incentives for continued rapid exploration and development of new mining capacity.

An alternative possible scenario is that, in the rush to exploit the current extremely high rates of profitability, so much global supply is brought on stream that commodity prices fall substantially over the next several years—back closer to the marginal cost of production, or even below it for some time.

While these scenarios are both possible, it seems most likely that the terms of trade will be significantly higher on average over the next couple of decades than they were in the couple of decades preceding the current mining boom.

He went on to say:

A related development, and one that is likely to be relevant over the next 15 years, is increased direct competition in the non-resource parts of the Australian traded sector from China and India, with flow-on effects to employment in those sectors of the Australian economy. The most obvious parts of the Australian traded sector likely to be subject to this increased direct competition are manufacturing—especially as Chinese and Indian production moves to increasingly sophisticated manufacturing goods (for example, automobiles) as their real wages rise, but also parts of the IT sector, where lower costs, especially in India, provide a continuing incentive to outsource. The high level of the Australian dollar acts to accelerate these trends.

Similarly, the RBA governor has noted:

… the rise in Australia’s terms of trade over the past five years is the biggest such event in a very long time. It reflects powerful forces at work in the global economy to which our country is more favourably exposed than most. It presents opportunities and challenges. With a large boost to income, we need to think about the balance between saving and spending, because we do not know the permanent level of the terms of trade. I argue for erring on the side of saving for the time being, and I think this is by and large what is happening so far. With a large change in relative prices, we should also expect to see a good deal of structural change in the economy.

As these quotations illustrate, these are exciting times to be an economic policymaker but they are challenging too. They call for a commitment to ongoing economic reform yet, sadly, that commitment has been lacking from the opposition in recent years.

In contrast, Labor has a strong and proud tradition as economic reformers. Whether it is the Curtin, the Whitlam, the Hawke, the Keating or the current Labor government, this side of the House understands the need for economic reform to ensure a strong economy. Alas the opposition is currently led by a man who has described economics as a bore. Why bother with that detail when you can simply say no? To illustrate some of this confusion I would like to go back a few weeks and read you a couple of quotes from some of the leading economic spokespeople in the coalition who seemed at that stage undecided as to whether the Australian economy was strong or weak. The shadow Treasurer, speaking on ABC’s AM program on 27 January, said:

Yet Australia is growing at above trend growth. We have unemployment at 5 per cent.

He also said:

… the Labor Party in Government today is still running what’s known as an expansionary fiscal setting. They are still running a big spending budget as if Australia is suffering the impacts of a recession.

On the same day, however, the shadow finance minister said in the Australian:

… the economy remains soft and when households are already hurting.

The economic spokespeople for the opposition cannot agree as to whether the flood levy will dampen economic activity or overheat the economy. The Leader of the Opposition, when asked about the flood levy, said:

Look, er, inevitably, um, any new tax, I think, will, um, dampen economic activity.

That is what he said to ABC Brisbane on 28 January. The day before, however, the shadow finance minister was telling Melbourne talk radio:

You do get a sense that their first option that they always jump to is another tax, and it is unnecessary. We don’t need it, and people are feeling the heat. This is going to add to that inflationary burden.

They cannot even decide whether the impact of a flood levy is going to be contractionary or expansionary. They cannot decide whether they are Arthur or Martha on this fundamental economic question.

Fortunately, though, while those opposite are prevaricating, Labor is getting on with the job. Today we are talking about two important appropriations bills. These bills, Appropriation Bill (No. 3) 2010-2011 and Appropriation Bill (No. 4) 2010-2011, will bring about fundamental economic reform. I would like to go to four aspects of that reform now: Trade Training Centres, Active After-School Communities, flood assistance, and contributions to the Global Fund to Fight AIDS, Tuberculosis and Malaria.

Trade Training Centres are an essential part of Labor’s recognition that we need to reinvigorate trades training for the 21st century. We need to make sure that young people receive the trades training that they need and deserve and because adding trades training to the school curriculum can increase school attendance rates. We know that schoolchildren who stay on to year 12 tend to do far better in the labour market. The government has already awarded more than $1 billion for 288 projects, benefiting 927 schools. To make that a little more concrete, I visited the Trade Training Centre that will be used by many students in the electorate of Fraser. It is a trade training centre set up for four schools. It is based at St Mary MacKillop College in Tuggeranong. It works in conjunction with St Francis Xavier College, Merici College and St Clare’s College. It will be the ACT’s first Trade Training Centre. When I went down to St Mary MacKillop College in Tuggeranong I was met by Principal Michael Lee. He was extremely enthusiastic about the potential of the trade training centre. He showed us around the building work which had started in 2010 and talked about the importance of improving vocational education and training opportunities. This is very much the next stage of the education revolution and it will underpin our nation’s prosperity and the prosperity of young Australians.

In his report on the Trade Training Centres in Schools Program, released on 2 February, the Auditor-General said that the program is being delivered in a generally sound manner. Alas, the Leader of the Opposition has promised to cut nearly $1 billion from the Trade Training Centres in Schools Program. Were that to happen, that would rob 1.2 million students and over 1,800 secondary schools of the opportunity to find better pathways. It would rob those students of the chance to become the next generation of electricians, brickies, hairdressers, chefs and carpenters.

I would also like to talk about the Active After-School Communities program. Under these appropriations bills, $21.6 million will be provided to the Australian Sports Commission to continue the program. They aim to engage primary school aged children who would not otherwise be physically active in sport and other physical activities. This follows the ‘Play for Life’ philosophy, aiming to inspire children, their families and coaches to continue their involvement in sport outside the program.

The Active After-School Communities program provides funding so that schools can work in collaboration with local sporting clubs—that little bit of seed funding that we know can be so important in providing the social glue that allows community sporting groups to work in conjunction with their local schools. Funding goes to things such as training to become community coaches and getting equipment, and provides up to 200,000 primary school age children the opportunity to take part in this program.

For example, in Canberra, Basketball ACT is a registered sporting organisation and junior basketball participation rates are booming in Canberra’s north—the result of the Active After-School Community sessions run by Basketball ACT coach Jesamine Wheeler. Jesamine is the winner of the 5 Star Community Coach Award in the Active After-School Communities Program for being a positive role model, delivering the ‘Play for Life’ coaching philosophy, receiving community endorsement and showing innovation in getting kids active.

This legislation will also provide $121 million to assist people in Queensland, New South Wales, Victoria, South Australia and Western Australia who have been adversely affected by the floods that began in late November last year. Those payments will go towards assisting employees, small business people and farmers who have had a loss of income as a direct result of the flooding and the severe weather. These payments have been extended to flood-affected areas of Tasmania and areas affected by Cyclone Yasi.

Lastly, I would like to go to our contribution to the Global Fund to Fight AIDS, Tuberculosis and Malaria. As I do so, I want to strongly associate myself with the remarks the member for McMillan made in this debate before I stood up to speak. He very honourably said, ‘I won’t divide my community on issues like this.’ The implication of that statement, as I take it, is that he is, as many in the community have been, concerned about the divisive attacks as a result of statements by the shadow minister for immigration and by the shadow parliamentary secretary assisting the Leader of the Opposition—statements which I think are unbecoming in this House and which, in the words of the member for McMillan, aim to divide Australians. I praise the contribution that he made in this debate and I only hope that more in his party will speak out on this critical issue.

The government is providing AusAID with another $129 million for the Global Fund to Fight AIDS, Tuberculosis and Malaria. The Global Fund focuses on some of the world’s deadliest diseases. It provides resources for research and treatment. Australia’s new commitment will provide HIV treatment for an estimated 28,000 people, provide tuberculosis treatment for 35,000 people and allow the distribution of over a million bed nets worldwide for the prevention of malaria. These are simple interventions but they are interventions that change lives throughout the world. Global poverty is an issue that all of us bear some responsibility for. As Australians we should do our part to ensure we have a world in which fewer children contract these three deadly diseases, in which fewer people have to suffer from AIDS, tuberculosis or malaria.

Since 2002, the Global Fund has saved an estimated 5.7 million lives. It is an astonishing figure: around the population of New South Wales has been saved by the Global Fund. The funding is incredibly cost-effective, used to tackle diseases which, in the case of HIV, threaten to strip away people in their most productive years. Australia is pledging a 55 per cent increase on our previous three-year pledge, demonstrating our confidence in the ongoing success of the global fund. We are a partner in HIV programs in Papua New Guinea, Indonesia and the Mekong countries. The Global Fund is doing important work throughout these regions.

I urge the House to support the bills.