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Treasurer's Economic Note: 12 September 2010

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My first economic note since the resolution of the parliamentary situation is the perfect opportunity to take stock of our economy and the priorities for the Gillard Government’s second term in office. There is no better prism through which to see our economic strength than the remarkable Australian jobs number that was reported on Thursday. We also heard in President Obama’s speech on Wednesday and press conference

remarks on Friday just how formidable the challenges are for the US, which along with the Euro area continues to suffer an unemployment rate around double that of our own. We’re proud of what responsible economic management and the efforts of employers and employees have achieved here at home. Despite the carnage in the global economy, our economy has created half a million jobs over the past three years.

Jobs were our focus during the past three years, and they’ll be the focus of the next three as well. When I’m asked to summarise our objectives as I travel around the country, or at mobile offices in my local community like the one I held yesterday, I always start with jobs. Because never far from our minds is the human cost of unemployment and what it means for families, communities and workers whose talents are wasted. At the core of our economic policies is the understanding that creating jobs and delivering job security are the most important ways we can ensure our strong economy delivers for more Australians. From that basis of a prosperous, working community we build the strong, modern economy our kids and grandkids deserve.

Employment Figures

That’s why Thursday’s labour force figures which showed 53,100 full-time jobs were created last month and unemployment falling to 5.1 per cent were so welcome. One of the most pleasing aspects was the number of full-time jobs created over the past year. Of the 349,700 jobs created in Australia over the past 12 months, over three-quarters have been full-time positions. That’s a great result for so many breadwinners around the country. All up, the economy has now created 567,000 jobs since we came to office in November 2007.

The employment outlook in Australia couldn’t be more different to that being faced in many advanced economies around the world. While unemployment in Australia has fallen to 5.1 per cent, unemployment has increased to 9.6 per cent in the US and remains unchanged at 10.0 per cent in the Euro area.

Speaking ahead of a conference to be held jointly by the IMF and the International Labour Organization on policies to support employment-orientated growth, IMF Chief Economist Olivier Blanchard pointed to the importance of bringing down unemployment, saying “whether unemployment is 10 per cent or 5 per cent is a very big deal, not just for the pain it imposes on the unemployed but for the anxiety it creates for many of the employed. And when you realise that the crisis has led so far to 30 million more people becoming unemployed, you get a sense of the immense human cost of the crisis.”

Global Economy

With unemployment close to double-digits in the US and growth slowing to just 0.4 per cent in the June quarter, President Obama has announced additional steps to grow the economy and create jobs, including a US$50 billion transport infrastructure plan. This investment echoes our own nation-building investments in the 2009 Budget in road, rail and port infrastructure, which both supported growth and helped build long-term productive capacity. The small business tax cut currently before Co ngress is also a reminder of the small business tax break we put in place in December 2008 and expanded in February 2009. And Japan last week approved a US$11 billion stimulus package to help its ailing economy which also includes initiatives to support small business.

The OECD’s latest Interim Economic Assessment is a reminder of the ongoing challenges facing the global economy. It talks about a “great uncertainty” surrounding the global economic outlook with recent indicators pointing to a slowdown in the pace of the world economy’s recovery. The OECD reports that it is not yet clear if the loss of momentum in the global recovery is temporary or if it signals a greater underlying weakness in private demand as policy stimulus winds down. In contrast to many of the big industrialised economies which are struggling to maintain economic momentum, our economy continues to grow strongly, with GDP increasing by 3.3 per cent through the year to the June quarter.

The OECD report also highlights the strength of Australia’s public finances, confirming we have the lowest gross government debt of any reported OECD country. This follows Standard & Poor’s announcement on Monday re-affirming Australia’s AAA sovereign credit rating. In making its announcement, the global ratings agency stated that Australia’s “fiscal position remains stronger than most AAA rated peers”, pointing to our “low public debt and strong fiscal discipline”.

Regional Australia

The Gillard Government knows that despite the success of our national economy, not every part of the country or every sector of the economy is benefitting. We understand the big contribution that regional Australia makes, which is why our long-term plans will support balanced economic growth right across the country. As part of this plan, we will invest up to an additional $10 billion in regional Australia to deliver better services, infrastructure and opportunities for economic development.

For the first time, we will open rounds of the Health and Hospitals Fund and the Education Investment Fund exclusively for investments in regional Australia, delivering additional investments worth up to $1.8 billion in health and up to $500 million in education. And in another first, we will make sure one third of the money from important health and education service programs goes to regional Australia. We will also provide an extra $1.4 billion for investments in infrastructure and the economic development of regional Australia. This comes after we already committed to significant investments during the election campaign, including the $6 billion Regional Infrastructure Fund and the National Broadband Network. All of these commitments have been made within our strict fiscal framework, which will see the budget return to surplus in three years.

Strong Economic Team

I want to finish by congratulating my colleagues in the new frontbench team the PM announced yesterday. There’s a great deal of talent in there, all of us focused on job creation and job security. I want to single out for a special mention the new Finance Minister Penny Wong, and my own Treasury team, which includes Bill Shorten from Victoria as Minister for Financial Services and Superannuation and Assistant Treasurer, plus David Bradbury from Sydney’s west, who will help me as the Parliamentary Secretary covering competition policy, consumer affairs, corporate law and tax, and financial literacy.

I’m really excited about working with Penny, Bill and David to do really good things for the country - strengthening our cities, suburbs, towns and rural areas by strengthening our economy and ensuring we’re rewarding more Australians for what they do to create prosperity despite such difficult global conditions. We’ve got a massive task ahead and, with your support and the support of the Parliament, we’re ready to start building the consensus we need behind our economic plans and policies for the future. The resolution of the political deadlock that we’ve seen in Australia these past few weeks gives us a big opportunity to do things a little differently, as I write in my column today, and we’re certainly going to grasp it.

Wayne Swan Deputy Prime Minister and Treasurer of Australia Sunday 12 September 2010