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[AUDIO BREAK] I come to this event having spent two days in the tax forum. Thank you very to you
for your very hard work and having set your alarm clock early three days in a row. I'm very

My task this morning is to give you a sense of the opportunities and challenges that we face in the
contemporary Australian economy and in the days of the future, what I have referred to as the
patchwork economy, and against that backdrop of the trends in our economy, then set a series of
expectations for what we will achieve in this room today. So, it is going to be a day of hard work.

I'm going to be assisted by some diagrams, so they'll be coming up on the screen in front of you.

First, given the importance to individuals of having a job, to their families, and the importance
to the nation of sustaining high levels of employment, I think we always have to start by
recognising where we are and how we came out of the global financial crisis. We came out strong,
and we should be proud of that because it's a shared achievement, and people in this room
contributed to that achievement, not only through the work of government but through the work of
employers and unions.

This is just showing you the difference between employment and employment growth in Australia and
the United States, starting with the first loses of employment in the days of the global financial
crisis. You can see that we've got employment growing and we've grown by 5 per cent since the days
of the global financial crisis starting.

You can see that the US has not yet even got back to pre-global financial crisis employment levels.
Indeed, they are substantially below.

To put that another way, if Australia had the same unemployment rate as the US there would be
around 1 million Australians out of work. Instead, what we've seen since 2007 is more than 700,000
jobs created, and there are 140,000 more Australians employed today than there were 12 months ago.

So, we've come out of the global financial crisis strong, but there continue to be risks in the
global economy. This should be a slide that is telling you about financial market volatility in
Europe. Unfortunately is hasn't got the squiggly line for you, but if you could see the line it
would be telling you about what interest rates you could expect if you chose to purchase Greek
bonds. You may not choose to do that, but if you chose to do that you would be getting an interest
rate pretty near to 25%. That extraordinary interest rate is telling you about risks in the
European zone and particularly for the economies of a number of nations, including Greece.

The International Monetary Fund overnight has warned about these risks again, and for the global
economy there continue to be risks about volatility stemming from Europe and it's very important
that we see the Europeans get their economic house in order because we are not immune from those
global economic events.

But we do live in the part of the world that is rapidly growing. We have termed this as the Asian
century that we are a decade into, and as a result of Asia's rapid growth we are seeing record
terms of trade and mining investment.

So, if you look across the sweep of that graph starting in June 1991, it of course is showing you
peak and troughs and movements, but if we look at where we are now, even with some slight downturns
in the terms of trade we are in a different zone than we have been before. And we expect high terms
of trade to be sustained for the foreseeable future, and we know that mining investment at record
levels will be sustained in the foreseeable future as well.

What that means is that we're seeing rapid growth in employment in mining. There are around 200,000
workers employed in mining. In the last 12 months that grew by 14 per cent - 27,800 workers.

There are around a million workers employed in construction, and construction is going to be drawn
upon very heavily as mining projects come onto stream. Over the last year, we saw 3.1 per cent
growth in construction - that's more than 31,000 jobs. Interestingly, those jobs were concentrated
in Victoria and in New South Wales. What that's telling you is we haven't seen the construction
boom associated with mining really start to roll out in its most major phase yet.

Skills Australia is telling us that with this resources boom we will need skilled persons for
construction and for mining. For mining projects they are expecting demand to rise by more than
270,000; in construction by more than 150,000. So, whilst we live in an age of some global economic
risks, we live in a region of huge opportunities today and opportunities which will be sustained in
the future.

This record strong terms of trade is making sure that the Australian dollar is strong too, and this
is giving you a feel about the levels of the Australian dollar since we floated, or since 1983, I
think that is, at the start. What that's showing you is the record of some of the economic events
that we remember, including the global financial crisis, but even with continuing movements up and
down we can see that we are in a zone of strength for the Australian dollar now that is likely to
be sustained for the foreseeable future.

That strong Australian dollar means that we are putting pressure on some sections of our economy,
consequently leading to what I refer to as the patchwork economy.

There are pressures in manufacturing. The long-term trend in manufacturing has been one of decline
in employment - you can see that clearly over that graph - but we have seen some sharp changes in
the last 12 months. Manufacturing employs around 950,000 Australians. We saw a net fall of more
than 53,000 jobs in the year through to the September quarter.

Now, at the same time we don't want to conclude that everything in manufacturing is doom and gloom
- because it's not. During the course of today you will hear some of the success stories, and we
should note in the financial year 2010-11 manufacturing exports actually increased by 5.3 per cent,
but certainly manufacturing is an industry sector under pressure. We've seen that with job losses
in steel, for example, and we've seen it more broadly across manufacturing and the economy.

We are also seeing an effect in our tourism sector as an industry under pressure. This is showing
you the number of people who come and go, and interestingly the number of people arriving here to
take their holidays is being sustained. We are seeing people come for holidays from other nations
to Australia, but what we are seeing is a spectacular increase in the number of departures - that
is Australians who are holidaying overseas, that's the red line. This of course is a direct effect
of the strength of the Australian dollar making that holiday overseas comparatively cheaper for
people, and so the net is shown to you at the bottom in terms of the comings and goings, and you
can see that we got a reduction in tourists in our nation as a result of these trends.

Having said that we shouldn't conclude either that everything is tourism is doom and gloom, because
that wouldn't be true. I direct you to a report that has been released by Ministers Ferguson and
Sherry about tourism's contribution to the Australian economy, and to what we know from the tourism
industry - that even with these trends they do, in sections of the country, struggle to get the
labour that they need.

So, you wouldn't want to conclude that this trend means that we are seeing necessarily big job
losses across all of tourism. In some parts of our tourism sector they continue to see vacancy
rates in the order of 9 per cent and find it difficult to get the workforce that they need.

Then, we've also seen effects in retail. This is showing you both the trend in retail trade and the
trend in consumption, and sometimes in the public debate I think these two trends are assumed in
peoples' mind to be one and the same thing, but there is of course a difference between things we
go the shops and buy and other things that we consume, and what you can see is that there has been
softness in retail and that's been commented on a great deal in our domestic media, but you do see
there that personal consumption rates, growth rates, are higher than what we are seeing in retail.

What that means is that we are seeing softness in retail. We're also seeing some substitution
effects when people are moving from buying things to consuming services, and clearly part of that
would be correlated with people purchasing holidays overseas, that they have directed their
consumption and their income towards that rather than direct purchases.

Once again we would be making an error because of the pressures on retail to say that they are
necessarily immediate and direct effects for jobs. Despite weak retail growth, we've seen
employment in the retail sector increase by more than 16,000 positions in the last 12 months. We're
talking about workforce of 1.2 million workers.

Now, in these slides I've directed your attention to those sections of our economy that we know are
under pressure today due to Australian dollar effects in part, but just because I've taken you to
these three sectors, no-one should conclude that that is the story of employment in the Australian
economy. In fact, the largest number of new jobs as we look to the future is expected to come from
healthcare and social assistance. That's as a result of our increasing needs to consume services
like childcare and support for older Australians, and we will see very strong jobs growth in the
professional, scientific and technical services area, together with construction - so, healthcare,
social assistance, construction and these professional and technical services - that is expected to
account for more than 50 per cent of total employment growth in the five years to 2015-16.

We also are a land that lives with rising opportunities as Asia rises, and this why we have asked
Ken Henry to lead a process to create a White Paper on the Asian century. I could give you any
number of statistics about the growth in Asia, but I think this graph does a very good job about
telling us that the region of our world is going to be a region of a hugely burgeoning middle
class. So if you look across those bar graphs, 2009, 2020, 2030, the yellow is the growth in the
middle class in the Asia-Pacific - absolutely huge growth.

To give you one statistic there, we are expecting the middle classes of Asia to increase by 1.2
billion people by the end of this decade, 1.2 billion people who will want things the way people in
our society want things and the way we consume things: they'll want good food; good wine; access to
services; they'll want access to travel; they'll want access to very high-quality manufactured
goods - that is, they will have consumption patterns quite like ours. 1.2 billion of them, great
opportunities there for Australia as Asia rises.

Then, in terms of discussions about what we need to do to be successful in this era of economic
transformation, as the rise of Asia, the strength of the resources boom, the strength of our
Australian dollar, transforms our economy, there are things we need to do at all levels. I'll come
in a moment to the things that Government needs to do, but I wanted to direct your attention first
to what successful businesses do to make sure that they are at their most highly productive and
they are best positioned to seize opportunities. Often we don't tease these factors out as well as
we should and much of the public commentary about the productivity debate is simplistic indeed.

So I wanted to direct your attention to the characteristics of successful businesses. This is the
kind of agility that we are going to need to show in our economy to succeed during this period of
transformation: innovation, networking, skills, differentiation, responsiveness and management, and
on the strength of management and what we need to see in leadership of firms, I'd also direct your
attention to the report, the Vamos Report released today about leadership culture and management
practices of high-performing workplaces in Australia, taking you directly to a number of these

So, in this age where we are seeing continuing global instability, particularly the problems in
Europe, we know we live in a region of growth. We are seeing a resources boom which is hungry for
people, for skills, and for infrastructure. We're seeing a high Australian dollar that is putting
pressure on other parts of the economy. We know that we will need more workers in areas like
healthcare and childcare and aged care. What do we do to manage this patchwork? What can government

Well, we can get the foundations right, we can get the big decisions right for national economic

It's about bringing the budget to surplus.

It's about seeking to harvest more taxation from the turbocharged area of the economy and using it
to support businesses and our national savings pool, as well as infrastructure, and we will do that
through the Minerals Resource Rent Tax.

It's about unleashing the opportunities that come with a clean energy future, and that is why we
are determined to price carbon, and that legislation will go through the House of Representatives
next week.

It's about continuing the human capital revolution that we have been very dedicated to since the
early days of this Government, including now the delivery of a reform agenda in skills financed by
the last budget with a $3 billion allocation.

It's about being sensitive to the needs of regions and the differences in regions, not only through
providing transitional assistance to regions under pressure, as we are for example in the
Illawarra, but recognising that we need to do more than we have in engaging with regions so that we
don't see parts of Australia left behind.

And it is about supporting business capabilities. This is the work of Kim Carr's Department in
innovation and business practice, as well as work that extends across Government through Chris
Evans' work into skills, and through the work of our other Ministers that relate directly to
sections of the economy.

So, against this backdrop, what is our task today?

Well, we're not coming at this task as if a starters' gun has just been fired. Each and every day
the Government has been in office it has been focussed on jobs, and we have been very focussed on
the development of this patchwork economy and the pressures that it would bring, which is why we
already have a large number of policies which are about managing those pressures. We've also been
on the drive for high skills, higher productivity, clean energy as part of this nation's future,
and the Government's skills settings, innovation settings, industry settings, things like
enterprise connect, all of those have been very focussed on that drive for high skills, high value,
clean energy.

So, we come to this discussion against that backdrop.

What am I hoping to achieve from this discussion and the work that will follow it, because of
course not everything can be done in this room today?

What I am hoping will be achieve is the following: that we will develop a deeper and shared
understanding of today's trends and tomorrow's opportunities in the Australian economy; that we
will develop a shared and deeper understanding of the vision we have for the future of individual
sectors of the economy.

During this phase of economy transformation, we want to make sure we retain diversity in our
economy. We need it today, and we will certainly need it tomorrow in the days that lie beyond the
resources boom, however far away those days are.

Third, that we have a sophisticated discussion about the drivers of productivity - the drivers of
productivity including innovation, improved business practices, higher skills, moving up the value
chain, all of the collaborations and work that businesses do and government can facilitate to take
us up the productivity curve.

And finally, too, we look at mechanisms to ensure that in this phase of economic transformation and
growth, as we see the resources industry growing so strongly, that we find the best ways of
connecting that growth to other sections of the economy. We are already partway down that journey
with the buying Australian at home and abroad package we had in the budget, by the work of Peter
Beattie and others who we've asked to act as supplier advocates, but of course we want to see that
huge demand for things that can be generated by other parts of the economy coming out of resources,
benefitting other parts of the Australian economy.

Now, that doesn't mean that we are turning our back on being a great trading nation - we are a
great trading nation - but there are smart things we can do to ensure that, for example,
manufacturing gets to see its fair share of that spectacular growth and that is a challenge before
this group today.

We come to this not only against the backdrop of the Government's policies and plans so far, but
against the backdrop of a tax forum discussion which did very much focus on these questions of the
patchwork economy, and the Deputy Prime Minister will deal with some of the things that were
discussed there which are also a backdrop to our discussions today.

Can I conclude where I started, but thanking you for coming along. This is a working day. You're
deliberately sitting at tables because we're expecting a lot of hard work and discussion between
the groups gathered in the room. I'm looking forward to it.

Thank you very much.