I see what needs to be done and I will do it: Speech to the National Press Club
THU 27 JANUARY 2011
Yesterday was Australia Day, and in some ways, it was an Australia Day like any other.
Picnics and barbecues, tennis and cricket, a new Australian of the Year and new Australian citizens - in so many ways it felt just like last year did and just like next year will.
But yesterday in Toowoomba, Australia Day felt different to any I have known.
I went to Toowoomba yesterday to be with some of the people I have met in these last weeks. I went to Toowoomba, where shock has been followed by horror and horror has been followed by grief and where grief’s long season has only now begun, because I wanted the people I have met to know that their Prime Minister won’t let them go.
I also went to Toowoomba to express my admiration for the way Australians have started rebuilding already. Whether with a mop or a shovel or a bulldozer, Australians see what needs to be done and are doing it.
It is no different for the Government. I see what needs to be done and I will do it.
We will rebuild.
The great floods of this summer have been a national tragedy, not just a natural disaster, because of the awful loss of human life.
The great floods of this summer have destroyed billions of dollars of wealth and robbed us of billions of dollars of income. In time they may prove to be the most expensive disaster in Australian history.
We are grieving.
We are burying the dead.
We are thanking many thousands for their courage and selflessness.
We are moving from crisis to recovery.
Now is the time to count the cost and to start to rebuild.
THE TASK BEFORE US
So today, I want to explain what we already know about the task before us and what we plan to do.
Queensland is of course the worst affected, but there are flood affected areas in almost every state, and the effects are being felt in the whole country today.
In order to think clearly about the best way to rebuild we need to understand not only the costs to the economy and the Federal Budget, but the growing capacity constraints on the economy, as well as the importance of the Government’s long-term reform agenda.
The economic costs begin with the immediate cost of damage and destruction of property.
Private homes and cars have been wrecked, business equipment ruined, public ferry terminals and highways have been damaged, even the ocean floor of Moreton Bay itself needs cleaning up.
That is a huge, one-off cost – simply replacing the things the floods have destroyed. These costs will be shared by people and families, by firms and insurers, by all levels of Government.
The Australian Government’s greatest part is through direct payments to affected individuals and businesses and through the cost of rebuilding. And in rebuilding, the Australian Government pays the greatest share. Under our longstanding natural disaster arrangements with the States, we meet 75 per cent of this cost for major disasters.
Today’s estimates of the Federal Budget costs of these floods over the next four years are of course preliminary, but they are the best figures we have before us.
The Australian Government Disaster Recovery Payments – which have given short-term financial assistance to half a million Australians affected by the floods – are estimated to cost over $600 million. The Disaster Income Recovery Subsidy – helping workers, small businesspeople and farmers who have lost income – will cost another $120 million.
At this stage – and I stress the estimates are preliminary and costs may well rise – the cost to the Australian Government of rebuilding flood affected areas outside Queensland is estimated at $1 billion.
Rebuilding flood affected areas in Queensland itself is estimated to cost us $3.9 billion.
Bringing all of those elements together the best preliminary estimate of the direct cost to the Federal Budget of this summer’s flood disaster is just over $5.6 billion.
So that is the immediate Budget challenge, to find over $5 billion.
Although our economy remains strong, there is also the one-off effect on economic activity because of the immediate disruption from the floods.
When a city of millions is closed for business for days, the cost to the economy is huge. When roads are closed all over a State that represents a fifth of GDP, the cost to the economy is enormous.
And the cost of this disruption continues into the future. Some coal mines won’t return to full production for months and farming will be affected for seasons.
Treasury’s preliminary estimates are that GDP growth in this financial year will be around half a percentage point lower due to the floods. The Treasurer will be saying more about the future impact on the economy in coming days.
But we still have the advantage that our overall economy is strong and that means we have the capacity to pay as we go”.
With our growing economy and rising national income, we can pay for rebuilding now. And if we can, we should. We should not leave the task of finding the money until future years.
My experience in Government since 2007 tells me that while we must plan to sustain growth we must never take future growth for granted, so we should not put off to tomorrow what we are able to do today.
Solely borrowing to rebuild Queensland is a soft option I am not prepared to consider.
My Cabinet’s job is still to make the decisions which will bring the Budget back to surplus in 2012-13.
In a growing economy, we pay as we go.
In addition to the Budget challenge there is a wider economic challenge as well: building and managing economic capacity.
This is because we don’t only need to be able to pay for the new things we now need – we quite literally need to be able to make the new things we now need as well.
The floods have not washed away piles of hundred dollar notes. They’ve put holes in roads, buckled rail, broken up sections of ports, wrecked factory equipment, washed away fencing on farms.
So we’re not just going to need money, we’re going to need concrete and rubber and steel – and more importantly, we’re going to need carpenters and bricklayers and road gangs.
And while the advantage of a strong economy is felt when we come to fund the rebuilding, the challenge of a strong economy is felt when we look for the capacity: delivering the actual rebuilding itself.
There is unprecedented demand in many parts of Australia for skilled labour.
Unemployment is already low and participation is already rising.
And that’s before we add one extra tradie or truck driver to rebuild after the floods.
There is unprecedented pressure on Australia’s infrastructure as well.
More infrastructure is already needed to nurture the mining boom and support economic growth, so the Government is investing in long lived economic assets and infrastructure like high speed broadband, ports, roads and rail.
Now we have thousands of kilometres of roads and rail to rebuild as well.
Simply spending to rebuild without addressing the balance between supply and demand in the economy as a whole is not an option.
That would only drive up the cost of skilled labour and the cost of building materials and other economic inputs, reduce value for money in the rebuilding itself, rob our mining industry and other economic sectors of the skills and material they need, and ultimately spill over into higher inflation and interest rates.
To make up for the demand we are putting into the economy with our rebuilding efforts the Government must take some demand out of the economy at the same time.
So sound Budget principles say we should pay as we go – and sound economic principles say we should not add to capacity pressures.
And we must drive reforms for the future as well.
I know Australians expect that while we rebuild after the floods, the Government will not lose sight of our long-term reform agenda.
Australians expect their governments to do more than one thing a time.
So 2011 remains a year when I will be delivering the national broadband network, creating more opportunity through education reforms and improving health care as well as a year when I will make long-term decisions on workforce participation and a carbon price.
That is my job and that is what I will do.
Here’s how I’ll begin.
I will make an immediate upfront payment to Queensland of $2 billion.
With this money rebuilding can start in more than 60 flood-affected communities across Queensland.
The payment will be made in the current financial year, as soon as financial controls and arrangements are finalised.
I’m acutely conscious of the desire of the Queensland Government to use their powers to cut through red tape and deliver rebuilding as fast as they can. I want to ensure that nothing in the funding arrangements holds them back.
I want this money to be available immediately. In my meetings with Premier Bligh and with Major General Mick Slater they’ve stressed that no town should be closed for a day longer than is necessary because of a lack of funds ready to be spent. And from my discussions with local community leaders and small and medium business owners, they want funds to flow as soon as possible so economic life can return to the main streets of regional towns.
A National Partnership Agreement with Queensland will establish the conditions of the funding. I expect this to be a simple, transparent and generous set of guidelines which ensure public money is spent in the right ways and at the right time.
Queensland will get what it needs.
The money will be managed by the Queensland Reconstruction Authority, which will scope and coordinate the total statewide rebuilding program and develop a statewide reconstruction plan. This will take into account unique local problems and opportunities in each flood affected community.
Payments to other states will be made through the Natural Disaster Relief and Recovery Arrangements in the usual way. We are working closely with the responsible State Governments to ensure all this assistance is delivered when and where it is needed.
The Australian Government’s total commitment – which our best estimates suggest will reach $5.6 billion – is absolutely vital to the rebuilding of our country and our recovery from the floods.
FUNDING AND SKILLING REBUILDING
We will meet the cost.
Rebuilding after the floods in an economy with growing capacity constraints for the present while delivering reforms and making decisions is a big joband there’ll inevitably be setbacks.
But as a nation we are up to the challenge and we are up to managing the economic strains.
So we can do just that, I have made a set of decisions on funding and managing economic demand.
I announce today a $5.6 billion funding and skilling package for flood rebuilding.
A balanced package which cuts some spending programs, defers some new infrastructure and applies a one-off levy to most Australian income earners from 1 July this year.
Two dollars are saved in spending cuts for every dollar raised by the levy.
With other changes to ensure we have enough skilled workers to get the new work done.
First, we will deliver a one-off levy. It will not include lower-income earners.
A levy of 0.5 per cent will be applied on taxable income between $50,001 and $100,000 and a levy of 1 per cent will be applied on taxable income above $100,000. Anyone earning under $50,000 will not pay the levy.
In other words it is not like the Medicare Levy, which for most taxpayers applies to all their income – it is like income tax rates which apply only above certain income levels.
Under this levy, someone who has an income of $60,000 will pay just under $1 extra per week. A person earning $100,000 per year will pay just under an extra $5 per week.
The levy will apply only in the 2011-12 financial year and it will raise $1.8 billion.
People who were affected by the floods will not pay this levy.
Anyone who receives the Australian Government Disaster Recovery Payment for a flood this financial year will be exempt.
And importantly, this levy is completely separate from donations.
People who have generously donated are helping out individuals in their time of need. People who pay this levy will be helping to rebuild the infrastructure – roads, bridges, ports – which has been torn apart by these floods.
The great majority of Australians are ready to contribute, I have no doubt about that.
The legislation will be introduced into the Parliament in the first sitting week.
Second, we will defer some infrastructure projects to help manage capacity constraints and to redirect funding to immediate rebuilding.
Six Queensland roads projects will be delayed by periods of one to three years. This will save $325 million in the Budget period. And these changes have been agreed to by the Queensland Government.
I have also identified a number of projects in other states where delays and reductions in Australian Government funding will save approximately $675 million. Over coming days I will be discussing these projects directly with the affected State Governments before the Minister for Infrastructure publicly announces the details of our changes.
The savings from these infrastructure decisions make a major contribution to funding the rebuilding. Perhaps even more important, these decisions will free up skilled labour for rebuilding. This is part of ensuring we not only pay as we go, but manage capacity as well.
These decisions will also ensure value for money when these projects are delivered.
That’s an important part of my thinking in deferring these infrastructure works: for these long-term projects, I am determined to ensure value for money. Pressing ahead now would inflate the cost to taxpayers considerably.
Third, we will cut some spending programs and cap some others.
I am abolishing, deferring and capping access to a number of carbon abatement programs.
These include the Green Car Innovation Fund, Cleaner Car Rebate Scheme, the Carbon Capture and Storage Flagships and Solar Flagships, the Solar Hot Water Rebate, Green Start Program, Solar Homes and Communities Plan and the Global Carbon Capture and Storage Institute.
The key to these carbon abatement program savings is my determination to deliver a carbon price.
There is complete consensus that the most efficient way to reduce carbon is to price carbon. Some of these policies are less efficient than a carbon price and will no longer be necessary – others will be better delayed until a carbon price’s full effects are felt.
And these decisions also mean cuts to industry programs. Business will be doing its part.
With the major call on the Budget for rebuilding, it is now appropriate to reduce this spending, in the knowledge that the objectives will be delivered better through the Government’s more economically efficient policy of a carbon price.
I am also capping some programs to limit their cost: the National Rental Affordability Scheme and the LPG Vehicle Scheme. And some lower priority education spending, where the desired outcome can be achieved through other programs, will be discontinued. This includes the Capital Development Pool and the Australian Learning and Teaching Council.
And Building Better Regional Cities funding and Priority Regional Infrastructure Program funding will be redirected to the highest priority infrastructure demand on Government – flood rebuilding.
There are no easy savings, but this package is balanced and appropriate.
I am confident Australians will understand the need for these decisions.
Skilled labour will be as important as funding for rebuilding.
The 457 visa program for temporary skilled migrants has proven to be very responsive to prevailing economic conditions. The program is entirely demand driven by employers.
So I am announcing quicker approval for temporary skilled migrants who work on flood rebuilding. There will be extra resources, assistance to employers and simpler processes to ensure a five day turnaround for ‘decision-ready’ applications for workers in a host of nominated occupations to work on rebuilding Queensland.
I am also doubling the pilot of relocation assistance for people on income support and directing it to Queensland. Up to 4 000 eligible jobseekers who want to get a job helping out will now receive support to move to Queensland and make a difference on the ground.
The offer to these jobseekers is simple: we can get you help to get there if you can stick at the job.
The funding and skilling package is the right one.
Two dollars saved in spending cuts for every dollar raised through the temporary levy.
Cutting less efficient carbon abatement programs because the carbon price will deliver a market based solution. Business doing its part through cuts to industry programs.
Capping demand-driven programs to limit costs. Redirecting infrastructure spending to the highest priority, flood rebuilding. Delivering the skilled workers we need as quickly as we can.
Paying as we go and managing demand.
THE INVALUABLE WORK OF THE COMMUNITY AND BUSINESS
As important as the role of government is in responding to this disaster, others will also play a vital role.
Australians have given generously to the Premier’s Relief Fund in Queensland and similar funds in other states. I am very proud of that helping hand of mateship.
This will help meet the hardship and distress of individual flood victims.
The Australian Government has pledged contributions to these funds as well as encouraging business to give generously.
And I do want to take a moment to pay particular tribute to corporate Australia’s contribution in the crisis. Hundreds of Australian big, medium and small businesses have already pledged money and donations in kind.
My meeting with business leaders in Brisbane on Monday confirmed that more money was on its way to rebuild and repair – as well as trucks to remove the rubbish, bottled water for drinking, clothes and toys for people whose houses were lost or damaged.
These are just examples of the substantial corporate assistance coming through.
I’m proud of the way corporate Australia has given something back this month.
I believe all insurers should show as much compassion and flexibility in dealing with individuals affected by the floods.
Australia's insurance industry has a very positive record of assisting communities after natural disasters, but I know a number of questions have arisen as a result of the floods about definitions, coverage and consumer protection.
Already the Treasurer and Assistant Treasurer have engaged in a frank and constructive dialogue with the Insurance Council of Australia and the major flood affected insurers and we have seen RACQ lead the way by announcing a $20 million package to assist flood victims.
This is an example the industry should follow.
But the rebuilding cost for government is something quite different from corporate assistance and the relief funds or the costs met by insurance.
Donations will provide invaluable extra help.
Government funding will provide the core assistance all Australians rely on and rightly expect from their Government. This will largely fund the restoration and replacement of essential public assets and long-term economic infrastructure.
Roads and rail to get farm produce to market and coal to port - Integral parts of the public infrastructure, which urgently need to be brought back into service, and for which the costs run into the billions.
A CHALLENGE FOR OUR NATION
I’ve spent a lot of time in flood-affected parts of our country in the past two weeks.
I wanted to be on the ground to make sure that the Queensland Government could get whatever it needed from the Government straight away.
I also wanted to be able to see my Government’s efforts with my own eyes and ensure it was all working at its best, across the country.
What I have learnt has certainly been instrumental in my own thinking as we’ve put together this package to rebuild after the floods.
And while what I learnt was important, what I was reminded of was so much more.
I was reminded about our people.
Flood affected people in Queensland who feel the sorrow, even the grief, but who know the sun will come up and are determined to endure.
Flood affected people outside Queensland who keep telling me there’s worse off than them, and they are glad there hasn’t been greater loss of life in their parts. But flood damage is flood damage and in a quiet way, they also say to me ... don’t forget us.
Australians not affected by floods who just want to help. Not just Brisbane’s amazing clean up volunteers, not just friends filling sandbags for friends, but all Australians, especially those far from the waters, are looking for a way to make a difference.
As I reflect on these floods and what has happened, I can’t escape the sadness. None of us can. But I won’t forget the pride in what we have done together.
But then I look forward and I know what needs to be done: Investing in rebuilding; investing in future growth; managing demand; reforming for the future. That’s what we will do.
My plan for rebuilding after the floods is the right economic solution, but it is more than that.
It is what Australians have a right to expect.
Putting the national interest first.
Working to build consensus.
Tackling the big challenges.
Focussing on delivery.
Doing it the Australian way.
Sharing and sticking together.
Everyone doing their part.
We put out a hand to help the flood victims on the first day when they needed us. They still need us.
We won’t let go.