Photo: AAP Image/David Crosling
PRIME MINISTER: Thank you very much Paul and congratulations to you on your incredible work as editor at the Australian and I wish you all the very best for your new role at Sky. Can I welcome the great and the good of the economics and publishing community here and can I, well I can say this about the former Treasurer Peter Costello, as he is part as one of the great media chairs in the country these days. But can I particularly acknowledge Peter Costello in the room, the greatest treasurer Australia has ever had, ever had, there is no doubt about that. Angus Taylor is here, one of my colleagues as well. And I want to thank all of you who have come here for what is a landmark event. I’m always very pleased to participate and have been doing so for many years. So I want to thank the Australian and the Melbourne Institute for the invitation to be here today and I want to congratulate the organisers once again on this Conference.
Now the central theme of this Conference has always been about the balance between economic growth and social equity in Australia. And the Conference is a chance to take stock of what I would like to call the modern Australian Compact – a compact that supports enterprise, that supports growth, that supports fairness and social cohesion across our nation. It’s the compact in Australia, a very Australian compact, that makes us, I think different, from so much of the rest of the developed world.
What lies at the heart of this compact? Well you’ve heard me say it, I suspect, a few times, not only over the last seven weeks, but longer than that as Treasurer. A fair go for those who have a go, looking after your mates and leaving no one behind. It is a two-way compact, as it should be. Rights and responsibilities. Give as well as take. A focus on making a contribution rather than taking one. This is the promise that we all make as Australians and that we seek to keep as Australians.
Yet to fulfil this promise, we must never lose sight of this most basic truth. Without a culture of enterprise and growing our economy – without a strong economy that supports jobs, fairness and communities – social equity is a mirage. It is prosperity that pays for our social safety net, not sentiment. It thus falls to each and every generation of business, of citizens, of politicians, of indeed broadcasters and journalists and those involved in public commentary, each generation to stoke the fires of enterprise and growth in Australia if we are to remain both a prosperous economy and a fair society.
That is why today I am announcing a further step forward in the Government’s, our Government’s Enterprise and Growth Plan for Australia, that I first spoke of three years ago in my first Budget. A plan to give greater incentive to small and medium-sized businesses to invest and employ Australians by dramatically accelerating the tax cuts that we have already legislated for small and medium sized businesses. We are going to help our job-producing small and family businesses grow even faster, with major tax cuts for Australia’s millions of small business people.
Australia’s economy is growing, our Budget position is getting stronger and stronger. Because of our economic management, and because of that we can provide further and major tax relief to the more than 3 million small and family businesses around this country who employ more than 7 million Australians, which is more than half the workforce in Australia today. More than half the people who work for a living in this country today work for a business that has a turnover of less than $50 million, and if you go beyond Melbourne and Sydney, south east Queensland or Perth, you go out in the regions. It’s pretty much everybody, it’s pretty much everybody who is working in those businesses that will be the beneficiaries of our plan.
So if you are running a hairdressing salon, or a cleaning business, or a plumbing business, like Warren down in the Shire, who does our plumbing. I remember when Jenny, when we went on ACA, Jenny said she wishes I was a plumber. And I saw Warren down at Cronulla Mall and he said; “Mate, ScoMo, Jenny likes plumbers.” A very Shire thing. G’day Warren.
Or a news agency, or a coffee shop, a dry cleaners, any of these things. This is good news for you and anyone you’ve been able to create a job for in your business. If you are a mum or dad running a home-based business, this is fuel in your tank for your business that you’ve been waiting for and wanting. Your small businesses, if you run a business that has a turnover of less than $50 million, you will be moving to a tax rate of 25 per cent within the next three years.
That’s right, we are going to bring forward the scheduled reduction in tax rates to 25 per cent for small and family businesses up to $50 million in turnover forward by five years to 2021-22, with the first rate cut to 26 per cent to be done in 2020-21. And we will start this process next week. We will be bringing in the legislation next week to make those accelerated tax cuts for small and family businesses law in this country.
So there will be a clear choice, as Paul said, at the next election. Lower taxes for small and family businesses under our Government, or Labor’s promise for higher taxes for small and family businesses. Because they have already said they will reverse the legislation that would have small businesses - the smallest businesses in the country - a reduction of their tax rate to 25 per cent, they have already said they will change that law if they are elected. And now I can only assume that they would seek to change these laws that we are now seeking to legislate to ensure that within the next term of Parliament, by the end of that term of Parliament, these businesses under our laws will be at 25 per cent. Under Labor, they will be at 27.5 per cent.
Now our tax changes are paid for by not proceeding with the tax cuts for large businesses. As you know, we sought to put those through the Parliament and they were rejected ultimately by the Senate, and I don’t think anyone can accuse us of not having exhausted every opportunity to pursue those. Parliament has had their say, and we have decided to move forward to ensure that the benefits of that plan are now completely focused on small and medium sized businesses around the country. It is also not done as a result at any risk or any threat to the return to balance year which is projected for 2019-20, and we will be able to continue to meet that objective on the estimates as they’re currently presented.
Our Government is unashamedly on the side of the women and men who run small and medium sized businesses in this country. And we’re on the side of the millions of people they employ. These Australians tend not to obsess about politics. You won’t find people out there wearing t-shirts calling for lower taxes for small and medium sized businesses, in orange t-shirts or green t-shirts. They won’t be walking around with placards and they won’t be belting down the doors of politicians. They won’t be hassling editors, they won’t be writing op-eds. You know why? They’re pretty busy. Their days are already pretty full – balancing the books, paying taxes, investing in their future, playing by the rules, caring for their families, giving back to their communities and their country. That’s why it’s for our Government to stand up for them and to listen to them and to understand what the challenges are they face. This isn’t a response to advocacy. This is the action of belief and conviction of a Government that believes that small and family businesses and medium sized businesses are the hope of the side, and so we’re backing them in. We’ve been saying that as a Government consistently from the day we were elected. We are backing them in because they are the foundation of this Australian Compact for prosperity and fairness that we believe in.
Let me talk a bit more about the foundations of our national compact. I want defend it today from its opponents who are increasingly filling the benches of those who represent the Labor Party in the federal Parliament. Now this compact, this modern Australian Compact arose from a shared recognition by many people from across the political spectrum some 40 or so years ago. After years of economic underperformance, a generation of Australian leaders from different walks of life came to appreciate that we could only aspire to be a good and compassionate society with a stronger, more competitive Australian economy. Now some came to this view from a liberal perspective, and Peter Costello has been the greatest champion of that view on our side of politics. Our Government at that time under the Howard Government, moving forward to achieve things in this area like few other before it. Some came to that view from different points of political perspective. And they converged on the need for modernising reforms to liberalise our economy, open it to the world and make it more productive. Under the Keating reforms, that occurred and there was a consensus. Because when the Labor Party under Bob Hawke and Paul Keating were reforming our economy, you know who was voting for those reforms alongside them? John Howard and Peter Costello. Backing in those reforms. I can’t say the favour was always returned Peter, when you were moving some of the reforms when you came to Government as well. But you could at least say that there had been some consensus that enabled the economy to modernise and to go through rather significant reform. It led to an era of reform, and they agreed that advancing equity and fairness was best achieved off the back of a growing economy where businesses thrive, where Australians are in work, and our national income rises. Where those who have a go are rewarded. Where opportunities are created for individual initiative and enterprise.
Yes, people differed – sometimes fiercely – over policies. But the mindset was not that different; the direction of travel largely agreed. From Bob Hawke to John Howard, Bill Kelty to Hugh Morgan, if you cared about prosperity and fairness in Australia, you cared and were committed to growing our economy. And how did you nurture that growth? You nurtured it by fostering a vibrant, productive, free enterprise system. The private sector employs eight in ten Australians. To be strong and sustainable, our social compact demands a vibrant, productive, free enterprise system. From this mindset arose the foresight and determination to pursue bold economic reforms, the fruits of which help to sustain the Australian Compact to this day.
Now our Government has served that legacy and acted in accordance with that legacy over the last five years. We have continued the strong, long running economic growth now in its 27th year, a world record. More than a million jobs created in five years as we promised, and before time. The lowest percentage of working age Australians on welfare in 25 years and more. The protection and maintenance of our AAA credit rating under some if its greatest threats, particularly on the other side of the mining investment boom that ripped $80 billion out of the Australian economy. Record investments in health, education and infrastructure, the essential services Australians rely on supported by a strong economy. A progressive tax system where the top 10 per cent of taxpayers are paying almost half of personal income tax and the bottom 50 per cent of taxpayers pay around 12 per cent. The bottom 10 per cent of households by income achieving the highest income growth of any group since the Global Financial Crisis. A tax-transfer system that reduces income inequality in Australia by more than 40 per cent according to the Australian Bureau of Statistics. A social security system that targets benefits to the poor more than in any other high-income country according to Peter Whiteford from the ANU. A decline in what the HILDA research calls ‘relative poverty’ from 13 per cent in 2007 to 9.4 per in 2016. And we are doing this far better than many of our other friends in other developed nations.
The lesson of the Australian Compact is that you don’t reduce poverty by bringing people down, you do it by lifting others up. The recent Productivity Commission report tells us that unlike our friends in the United States, real incomes in Australia have risen strongly across all income deciles over the last 30 years. In Australia, disposable income per capita has increased by an average of 1.6 per cent a year since the 1980s. That compares with 1.0 per cent in the United Kingdom and just 0.7 per cent in the United States. Now should we aspire to do better? Of course we should – and we are, and we will continue to. But the evidence says our Australian Compact is delivering for Australians of all incomes.
Now those who claim the Australian Compact is broken are not just wrong on the evidence. They like to trash talk deliberately, irresponsibly, and cynically, casting a pall over the future aspirations we have as a nation. They do so because they want conflict. They want to divide Australia. They want to turn every single issue into us and them, winners and losers, for their own political advantage, to push their own ideology, and to push their own barrow. They have forgotten that our compact and our social fabric is a shared one. They tear down one part of it, and they weaken us all. For short-term political purposes they seek to take us down the path of other countries where citizen is set against citizen, and where the bonds of our shared endeavour would begin to corrode.
What’s become clear is that today’s Labor Party under Bill Shorten no longer sees economic policy like the Labor Party used to. They are no longer fellow travelers, I believe, on this modern Australian Compact that began roughly 40 years ago. They no longer see this as a project they are willing to stand by. In fact, they are willing to tear it down. They have discarded the mindset of Bob Hawke, and they have embraced Bill Shorten’s politics of envy, and you know hypocrisy is not far behind. In this vein, he and Labor now says millions of workers are ‘ensnared’ by workplace laws that were written by Labor, and him in particular. The trade agreements that were endorsed by Labor as the enemy of workers. The problem with Labor’s modern view of fairness is that it begins and ends and deals only with issues of redistribution. Carving up that under Labor and those mindsets and those policies will only ever be a diminishing pie - less for everybody is the product of that thinking.
For the Coalition - and the Australian people in my experience - fairness has a broader meaning and a more ambitious aspiration. It encompasses redistribution and help for those in need, and of course that’s true. But fairness also embraces reward for effort and responsibility to have a go and be given a go. It encompasses those who need a helping hand as well as those who work hard, get up early, take risk and employ or support others.
The goal of Labor’s anti-business, union bred, union fed and union led anti-enterprise crusade is clear. It is to stoke resentment within our market economy and towards it, with those having a go in business and with our free enterprise system itself. You know you can't lead a country that you want to divide, where you want to drive a wedge between employers and employees. Where you want to drive a wedge between parents who want to send their kids to one school and parents who want to send them to another. You can’t lead a country if you want to divide it. And that’s why under our Government, we want to keep Australians together, and we want economic plans that keep Australians together. None of this bodes well under Labor’s plan for middle Australia, for low income workers and those who rely on our social compact to get by. Because when you put growth at risk - this is the real kicker - the most vulnerable to what our opponents put forward as the alternative approach are the low and middle-income earners who have a higher chance of losing their jobs when growth slows. They are the victims, yet Labor claims they are their purpose. It is a bitter irony, and a costly one for those Australians.
The Coalition Government is determined to champion and strengthen this compact. We believe that only by maintaining a strong and growing economy with thriving businesses can we aspire to be a fair society. We believe for someone to do better in Australia, someone else does not have to do worse. You don’t have to tax some people more to tax some people less. We don’t believe that. We want to lift everybody up. We believe the best form of welfare is a job. We believe our safety net should work like a trampoline not a snare, bouncing people back up. We believe in Australians keeping more of what they earn, so families can get ahead and can plan for the future with confidence.
That’s why in this year’s Budget, we announced one of the biggest personal income tax plan reforms we have seen in generations, completely removing a tier of the tax system. And yes, we did it over seven years, you’ve got to do it responsibly, you can’t do it all at once. But people should know where their Government is going, they should know what the plan is. Our plan is you get to keep more of what you earn. When you put more in, you have the opportunity to keep more of that, and under our plan 94 per cent of workers will pay no more than 32.5 cents in the dollar on the extra income they earn. We believe in that.
The Government legislated tax cuts which we have put through, which Labor will cut in half, provide I think the guarantee that Australians are looking for from their Government that it’s worth putting the effort in. And we’re seeing the response. We’re seeing businesses respond, we’re seeing the jobs created. We’ve seen over 100,000 jobs in the last fiscal year created for young people in Australia. That is the strongest year of youth employment growth in Australia’s economic history, and I know as a former Social Services Minister, if you get a young person into a job by the time they’re about 24, their chances of living the rest of their lives on welfare radically diminishes. But if you fail, the chances of them being on welfare for the rest of their life goes through the roof. Getting young people in jobs is a game changer for our nation, and our Government is delivering that. Of all the things we’ve done over the last five years, I can’t nominate one greater than that. And you know who made that happen? Small and family businesses. The look in the eye of a small business owner who employs that young person that they know in their community, whether it is down in Burney or up in Townsville or wherever it is. The sense of pride that a small and family business owner has when they employ a young person and then several years later they’re at their 21st or maybe at their wedding or then they’re at their christening or Bat Mitzvah or whatever it happens to be. That’s what family business is all about, and they are revved up and wanting to put young people in jobs.
So we’ll continue to back them with our tax cuts, which I’ve already referred to. We’ve already lifted the definition of a small business from $2 billion to $10 billion, which gives them access to a whole raft of small business concessions to make not only their paperwork lighter but their interaction and their cash flow much more flexible. We’ve made changes to the consumer and competition law to put them on a level playing field, we’ve introduced the Australian Financial Complaints Authority. We’re tackling anti-phoenixing behaviour for small and family business to help them get ahead. We’ve extended the instant asset write-off which is enabling them to invest more. And when you’re cutting their taxes, and they can invest more in their business, and they can write these things off immediately as well, you’re allowing them to get ahead.
When it comes to the future of the economy, there really are two alternative visions. Our proven policies that have delivered jobs, investment and opportunity, or Labor’s radically different path. It never used to be that radically different, but there is a big difference now. Under our Government, we have kept real expenditure growth in check at 1.9 per cent, less than 2 per cent. That’s the lowest level of expenditure in half a century. Our responsible budget management has resulted in the smallest deficit in ten years and it is moving towards a balanced Budget in 2019-20. Indeed, the release of the Monthly Financial Statements just for July and August today point to a further strengthening of our Budget position. While this is a very early read, as Peter knows who would have seen these figures come through, the underlying cash deficit is $6.6 billion better than where it was estimated to be at by now in the Budget and our expenditure is lower than expected – and receipts are $4.2 billion higher resulting from a better performing economy – with more company and personal tax receipts.
The foundations of our fiscal strategy and success are keeping expenditure under control and keeping taxes under control, because that is what drives the economic growth that’s what’s supporting our revenue growth. Labor’s plan is to walk away from controlling expenditure and jack up taxes. Labor’s five point plan, as I said on the weekend - more tax, more tax, more tax, more tax and more tax. That’s Labor’s five point plan, and that plan will throw a wet blanket on the Australian economy. It’ll slowing growth and the growth that produces the revenue that pays for the services and essential services Australians rely on.
Now they say when they announce all their expenditure that it’s being funded by savings. Savings, they say. But they’re not savings. They’re tax increases. Tax increases are not savings. Well I suppose they are in one sense, because if you’re going to fund your Budget by higher taxes, what you’re telling Australian families to do and Australian businesses to do is they’ve got to make the savings in their budgets to pay the higher taxes. So Labor won’t control their own expenditure. So they say to every small and family business, they say to every retiree counting on the imputation credits, they say to every small business that will be paying higher levels of tax, they say, “You make the cuts in your budgets, you make the changes to your expenditure, because we couldn’t be bothered and we can’t control expenditure. So we’re just going to tax you more, and we’re going to outsource the savings target to your budget, to your family, to your business, to your retirement.”
Under Labor the Macquarie dictionary will have a new definition. Savings: taking someone else’s money and using it for yourself. That’s would be their definition. Even nine months out we know there is more than $200 billion in higher taxes. Taxes on housing, taxes on savings, taxes on earnings, taxes on business, taxes on investment. All slowing our economy down. So when you hear the shiny promises - $10 billion for this, $5 billion for this, $100 million for this. Every single one of those announcements are dependent on a higher tax, and you’ll pay for it. You'll pay for it twice, actually. You’ll pay for it in higher taxes, and you’ll pay for it in the slower growth that produces the slower economy that your job and your business depends on.
The best way we can continue to build a stronger economy is to support that Australian Compact that I have talked about. And I must say that this Conference has actually championed over a long period of time, and I’ve got to say Paul that the Australian has championed over a very long period of time. To support an Australian Compact that honours the hard work and efforts of its people. I was talking to the Irish Prime Minister the other morning, we caught up. And his party is known as the party who supports people who get up early. I felt a real affinity with that as a party, as a political movement in this country. And you know it’s not just the people who get up early to go to work, but it’s also the carer who gets up early to look after a parent, or a sibling, or to do the many other important jobs that are done around our society. Because that’s what this compact is about. It’s the connection between these two, and that’s what we passionately believe in.
It encourages and rewards those who work hard. It gives a hand up to those who need help. And we believe that prosperity and fairness are not mutually exclusive, they’re not an invitation for division or warfare and phony class warfare for that matter. Rather, prosperity is the foundation of fairness and the stronger Australia that our Government is looking to lead and to drive into the future.
We believe, I believe, our Government believes in the economics of opportunity. Bill Shorten believes in the politics of envy.