A Post-Budget Address to the National Press Club in Canberra
***Check Against Delivery***
I want to thank you Sabra and the National Press Club: for having me back today on Ngunnawal and Ngambri land, for the Shadow Treasurer’s Budget reply; for welcoming key members of our economic team; and for all the work the press gallery has put in to helping the Australian people better understand what was in the Budget, and what wasn’t.
The world has changed since I last spoke here mid-last year, in ways none of us could have predicted or imagined. But the truth of last week’s Budget was not enough has changed.
Yes, our country is now in the deepest, most damaging recession in almost a century. But growth was already well below-trend, in fact it was the weakest since the Global Financial Crisis.
We are now facing a full-blown jobs crisis. But back then the labour market was already being corroded by insecure work, record low wages growth and rampant underemployment and that left us vulnerable.
We do now have a lifetime of debt and record deficits as far as the eye can see. But debt was already well-over double what this Government inherited, and it was already growing.
COVID-19 may be the defining event for the 97 percent of the global population born after the Second World War. But for too many Australians it hasn’t brought a change in course, just an acceleration in trajectory. A matter of speed and scale, not substance.
This pandemic has entrenched the disadvantages of age, gender, geography and education. It has magnified structural weaknesses in growth, investment, dynamism and productivity. And it has exposed the unfairness and uncertainty inflicted by years of cuts to essential services, growing casualisation and financial insecurity.
So for all the saturation talk we hear of ‘unprecedented times’, the truth is the problems gripping our economy existed long before COVID arrived – and the solutions need to endure long after it’s gone.
That’s the transformative opportunity in front of us. That’s what we need to salvage from the hardship of this moment. The chance to convert this crisis into a turning point for Australia. To go beyond recovering and rearranging what we’ve lost and instead re-imagine and renew an Australia stronger and fairer and more secure than it was before.
An Opportunity Lost
But instead of rising to this occasion, instead of mirroring the resolve and courage our people have shown through this pandemic - the Liberals blew the Budget on business-as-usual.
The Treasurer’s Budget speech was the longest in 34 years. Yet never have so many words offered so little to so few.
The big deficits couldn’t disguise a document of small ambitions. The eye-watering numbers couldn’t compensate for the lack of vision. The boastful rhetoric couldn’t hide the modest thinking.
When Australia needed an ambitious Budget, instead we got something somehow less than the sum of its parts. The country needed a plan to respond to the recession, kickstart the recovery and redefine the future – instead we got a grab bag of limited opportunities and lowered horizons.
We needed new recognition of the good that comes from government and community working together – and instead we saw a reheating of old ideology.
All of which means the biggest spending budget in our nation’s history will be remembered only as Australia’s most expensive missed opportunity.
What the Liberals served up last week wasn’t just uninspired and unimaginative – it was unworthy. Unworthy of the moment and the challenge before us– and unworthy of all those Australians who have carried us through this crisis.
I’ve spent a lot of time in recent weeks on the highways and backroads, and in the cities and towns, of regional Queensland. Out west, to Roma, Warwick and Stanthorpe. To Emerald and Biloela, in Central Queensland. To Bundaberg, and to Hervey Bay on the Fraser Coast. And just before Budget to Cairns, in the tropical far north – possibly the place outside of Melbourne most impacted by this crisis and by premature JobKeeper cuts.
Eight towns in nine weeks, thousands of kilometres, mostly by road. Talking to small businesspeople, aged care workers, growers and miners, tourism operators, apprentice diesel fitters, and local mayors. In workshops, on farms, at sale yards, packing rooms, ports and marinas, TAFEs and yes a few pubs at the end of the day as well.
Everywhere I go, I speak to Australians showing all the resilience and imagination and courage that was missing from the Budget.
Those who lived through the Great Depression never forgot it, they never wasted anything because they knew what it was like to have nothing.
Bizarrely, this government seem determined to forget this crisis while it’s still going. The ship is listing in the eye of the storm and they’re telling everyone ‘come out on deck, the wind has died right off’.
With nearly a million unemployed – and unemployment forecast to stay unacceptably high for unacceptably long – they are pulling support too early. Plunging more small businesses into desperate financial trouble. Pushing more people back below the poverty line. And cruelling the recovery.
Having spent months telling us these measures were life support for the economy – now, in a recession, they’re pulling the plug.
Rather than heeding the lessons of this crisis, the Liberals are actively promoting the failed policies that left us so vulnerable to it: flexibility as code for workplace insecurity, active suppression of wages, disinterring the old false choice of a secure retirement or fair pay.
This is what the Prime Minister’s ‘snapback’ was always really about. And the big risk here for our country, the great frustration of watching last week from the wrong side of the parliament, is that Australia might miss this once-in-a-generation chance to dig deep, to break the old deadlocks, to do something meaningful and lasting. Not just accumulating a lifetime of new debt to finance a return to the inertia, inequality, and insecurity of the past.
Five Ways the Budget Fell Short
This is the real story of last week’s Budget: opportunity cost – and opportunities lost.
There were some worthy initiatives that Labor had been calling for, but these will not by themselves do enough to create jobs, build a better future or provide support to people and industries hardest hit.
This Budget racked up a trillion dollars in debt, made $98 billion in new promises, and still fell short in at least five ways.
First, even after all this spending unemployment is still expected to be too high for too long.
160,000 Australians are still expected to lose their jobs between now and the end of the year. Unemployment isn’t even expected to get back down to pre-COVID levels at any stage of the four-year forward estimates. This gets nowhere near any reasonable estimate of full employment, which is what’s needed for broad-based growth in wages.
Yet – when unemployment gets back below 6 per cent – around its peak during the GFC – government policy officially snaps back to austerity. They want to slam on the brakes before the recovery even gets into second gear.
Yes, young Australians have been hard hit by this recession. But the proposed new hiring subsidies may not support the kind of secure or permanent jobs that young Australians need. The Liberals have form when it comes to programs like this – think of the failed Youth PaTH program, which was so ineffective that it was quietly cut in this year’s Budget as part of a bigger $1.4 billion cut to employment services.
The business tax incentives will do some good, but won’t by themselves ensure enough jobs will flow from such a big investment.
And there’s still millions of jobs at risk from the speedy withdrawal of support. This is not only about premature JobKeeper cuts, it’s also about a new cliff in 2021-22, when spending falls by a record 17.5 per cent. This is being withdrawn when unemployment is 7.25 percent, when there are still almost 300,000 extra people unemployed compared to pre-crisis levels. This is what the IMF warned against overnight.
Second, after all this debt and all this spending, too many Australians are still left in the lurch.
This Budget comes up short for those who were struggling before the crisis, and those that have been hit hard by it – too often the same people.
Young and vulnerable Australians, including many casual workers, who have been deliberately excluded from vital support and forced to wipe out their retirement savings.
Industries that have faced some of the toughest restrictions, shed the most jobs, and been the most excluded from support – like hospitality, tourism and the arts.
Women – who are overrepresented in hard-hit industries and in insecure work, do most of the care work, and who may face an even greater gap in pay, retirement incomes and participation.
Anyone relying on JobKeeper or JobSeeker – who have seen their payments cut, with no guarantees they won’t soon be living on $40 a day. When a tax cut won’t make up for losing $300 a fortnight in wage subsidies, and when a tax cut’s no good to you if you don’t have a job.
The 928,000 Australians over 35 on unemployment benefits who are deliberately excluded from the hiring credit scheme.
The 678 elderly Australians who have died and the many more who have suffered from the Morrison Government’s aged care crisis.
Third, somehow a Budget that commits $98 billion in new spending leaves too many important policies out.
Unusually, this Budget was defined more by what’s not in it than what is. Nothing for childcare, or cleaner and cheaper energy. Nothing for social housing, no plan to tackle insecure work or to address the crisis in aged care.
Nothing to advance equality for women, leaving a gap that shreds the credibility of this Government. Gender equality is a moral and economic imperative not a tick-a-box exercise. Yet the Treasurer provided four times the investment in his own portfolio agencies than in specific opportunities for Australian women. I still don’t know if these were oversights or omissions – and I can’t work out which is worse.
Fourth, even welcome initiatives won’t undo seven years of damage – often in the very same areas.
Under the Morrison Government, Australia’s trend growth rate declined from 3 per cent to 2.75 per cent even before Coronavirus. And the Prime Minister and Treasurer have never overseen trend growth in the seven quarters they’ve been in their current roles.
It’s a similar story for investment and for productivity. Before the pandemic, business investment had already declined by 20 per cent under the Liberals.
And while a temporary investment allowance that brings forward investment makes sense in a crisis, there are questions of size and balance here. At $27 billion it was the single largest measure in the budget, and relies on business doing the heavy lifting in the face of persistent structural barriers to investment. This includes the policy uncertainty created by of 22 energy policies in seven years.
Even steps to boost apprenticeships won’t offset the 140,000 fewer we’ve seen over the last few years or the billions cut from TAFE and training.
Young people can access hiring credits but they’ve had opportunities thieved from them by cuts to training, universities and penalty rates, and the intergenerational carnage wrought by early access to super.
And, fifth, the black hole in this Budget is where the vision should be.
This is why Anthony Albanese’s Budget-in-Reply was so important. It provided a vision for the future so conspicuously absent just two nights earlier. It recognised that when borrowing is necessary, then what matters is bang for buck, including how it tackles key challenges in the economy and society, and its lasting benefit.
Bang for Buck
In the depths of a recession when unemployment is high and debt is skyrocketing, every borrowed dollar must be value for money.
The immediate challenge is to ensure stimulus is cost-effective – maximising the economic activity for each dollar invested. This is what economists call the fiscal multiplier. A high fiscal multiplier is important not only because debt must ultimately be repaid, but because it helps create more jobs.
Work from the IMF, OECD, the Grattan and others show that government investment and consumption tend to have the highest fiscal multipliers, with close to $1 of GDP for every dollar invested. In contrast, the personal income tax cuts only deliver around 50 cents in GDP for every dollar.
The targeting and design of earlier policies has also limited their bang for buck in the recovery phase. JobKeeper and the Cash Flow Boost have provided critical support and relief during the crisis, but too much has gone to those who least need it. Too many were excluded, others received too much – with company profits soaring by 15 per cent in the same quarter that GDP contracted by 7 per cent and hundreds of thousands of jobs were lost.
Direct government spending often has a bigger fiscal multiplier, and its impact can be several times larger when interest rates are close to zero. This only bolsters the case to make government investments in things like social housing, as Labor is proposing.
To create the most jobs we also need policies that support the most labour-intensive sectors, which are often found in the care economy. This is one of many compelling reasons for the Government to focus on aged care, in childcare, and in hard-hit areas like arts and hospitality.
In contrast, the Government’s business incentives are likely to favour capital intensive industries.
According to the Government’s own budget, each job created by these incentives costs over half a million dollars.
That’s why the initiatives we’ve announced are so important – they tick so many boxes.
Our childcare policy generates a substantial boost to GDP, including through boosting workforce participation and productivity. It increases demand for this labour-intensive service sector, creating more jobs. By removing barriers to work, it allows women to earn more, helping to close the gender gap in pay and retirement incomes. And it promotes better educational outcomes for kids, with flow on benefits in terms of wellbeing and life chances.
Analysis from KPMG and the Grattan Institute suggests that for every dollar invested in childcare, there is a GDP boost of at least $2. That’s equity with an economic dividend.
Our Rewiring the Nation policy will support the economy and create jobs in new and traditional industries, including in the regions. It will put downward pressure on electricity bills for households and businesses, by ensuring transmission gets built at lowest cost. And it will unlock new sources of cheaper, cleaner electricity generation around the country.
Public investment in social housing, as we’ve suggested, will boost GDP and jobs in construction. At the same time as it improves the quality of housing for vulnerable Australians. And delivers benefits for the community and economy through reducing poverty, inequality and immobility. It’s a stimulus package that serves social justice.
Our Australian Skills Guarantee will mean spending on major projects in infrastructure, defence and the care economy which will benefit local workers and communities, better connect training to industry needs and help train the next generation.
Debt and Deficit
This is what makes our proposals so responsible in the Budget – not just what they cost but what they earn.
The Government has made much of its new fiscal strategy. Their last one promised a surplus in the first year and every year but delivered only deficits. It promised to pay down debt but instead multiplied it.
All those crates of ‘back in black’ mugs at Liberal Party headquarters tell the story of a Government that put souvenir sales ahead of substance. They are a little ceramic reminder that the days of the Liberals lecturing Labor on debt and deficit should be well and truly over.
We have acknowledged throughout that this pandemic is having a big impact on the economy and the budget – that’s obvious. But the Prime Minister has the wrong plan to respond to the Morrison Recession – and is taking the wrong approach to the recovery.
And now, predictably, when the Labor Leader announced new policies and new directions on Thursday night, Peter Dutton and Scott Morrison insisted new spending be entirely and immediately offset. This is the stupendous hypocrisy that says the Liberals can announce $98 billion in new commitments without identifying savings to offset them, but our $6.2 billion for childcare is somehow different.
I’ll tell you how it’s different – it’s more responsible, more inclusive, it helps women as well as men, helps the regions and the cities, boosts GDP by billions every year – and delivers returns in a generation from now.
That’s how what we are proposing is different. Our plan for the recovery builds lasting benefit.
We’ve been consistent all along. When the economy is weak the government needs to step in. At times like this we don’t have a choice between borrowing or not, but we can choose whether we have anything to show for it or not. Borrowing is unavoidable right now, but we should not be borrowing to build nothing, change nothing, fix nothing.
As the Government’s old, dishonest rhetoric collapses under the weight of its hypocrisy, I predict at least two new con jobs will replace it: first, that seven months of COVID-19 can explain or excuse seven years of underperformance and mismanagement of the economy; and second, that any natural recovery in jobs and the economy is because of government policy and not part of a natural rebound from a deep recession.
If Labor was in Government now, our fiscal and economic strategy would be anchored around a more ambitious approach to employment. To chart a path back to full employment, in a way that starts to tackle insecure work and chronic underemployment.
This approach doesn’t have to mean more debt, it means debt that’s better deployed to kick-start the recovery and create more jobs. To boost demand now and put in place policies that lift the speed limit on growth, to make it stronger, more inclusive and sustainable.
For many Australians next year will look like a recovery but feel like a recession. The next election will be partly about that – about what’s happening in the labour market and how the Government has dealt with it and is dealing with it.
But primarily it will be about the future. It will be about whether the best Australia should hope for is a snapback to the insecurity of the past or whether we choose to build an economy and a society stronger after the pandemic than it was before.
For Labor this is natural territory. We’ve always seen change as our responsibility, our mission.
Sometimes we drive that change ourselves. But – just as often – it’s our responsibility to manage change thrust upon us, to make change serve the interests of our people. Not to slow the pace of change but to find a place for people in change.
If the election is next year, as many of you expect, I believe we will only win it as the Party of the future. We’ve only ever won that way – in 1972, in ’83 and in ’07. Anything else is a cul-de-sac. That’s why the future-focused announcements Anthony made on Thursday are so important.
In a year full of turmoil and strife, the Budget is already disappearing from the national conversation. But the year it was delivered will scar our memories.
I said earlier that for 97 per cent of us born after WW2, this is likely the defining moment of our lifetime. Future generations will wonder what it was like, will look back at these days and guess at how we felt and try and imagine what we feared – in much the same way we look out the doors of parliament down Anzac Avenue and try to picture the nation that saw bombs fall on Darwin and sent its young people across the world to die for the cause of freedom.
If that Australia could emerge from a global conflict with new ambitions, with a new vision for what our people and our government could do – in science and infrastructure and energy and health care and education. And with a new confidence to innovate in policy, chase full employment, and speak for ourselves in the councils of the world. Then surely our nation and our generation can emerge from this global pandemic with a vision for more and better than we had before.
With an ambition to be a world-leader in skills and advanced manufacturing, a superpower in renewable energy and a standard-setter for early education and childcare.
That’s the vision Anthony Albanese laid the foundation for last week. That’s the ambition Labor wants to help Australia achieve. And that’s the future we want to make the next year, and the next election, all about.