Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Hansard source

I am sure everybody in the House is aware how those opposite ignored something like 20 warnings from the Reserve Bank about the emergence of capacity constraints in our economy that put upward pressure on inflation and upward pressure on interest rates, and how they used to come into this House, day after day, and say that infrastructure was nothing to do with the Commonwealth government; it was all the responsibility of state governments. They simply washed their hands of important responsibilities during mining boom mark I, and, of course, the consequence of that was rising inflation and rising interest rates.

One of the key challenges this government faces is that there is a resurgence in global commodity prices, and that brings great opportunity for Australia because even in the middle of all of the uncertainties that we see in the global economy, particularly caused by uncertainty in Europe, what we do know is that this region is growing strongly. I want everyone to think about this at the moment. Take the first three months of this year, the first quarter of this year: on an annualised basis, the Asian economies have grown by 10 per cent. Think about that and think about where we have come from in such a short period of time, and compare that with the gloomy outlook elsewhere in the global economy. This demonstrates that we have a two-speed global economy. And, when that translates to this country, it can also translate into a two-speed domestic economy. We certainly welcome the fact that global commodity prices are up. We have the price of iron ore doubling since last year and very large increases in coal prices. This is great news for Australia providing we handle it properly, plan for the future and invest in infrastructure.

And, as the Prime Minister pointed out before, the agreements that were signed here today with the Chinese officials point to very strong inward investment into the sector. Seven out of the 10 agreements that were signed today were in resources and energy. And, of course, our terms of trade are expected to rise to their highest level in 60 years. The terms of trade are going to hit their highest level in 60 years. That exceeds the peak of the previous boom.

Consider that in this context. There was a report from the IMF last week. This is what the IMF had to say:

… within five years Asia’s economy … will be about 50 per cent larger than it is today—

think about that—

… account for more than a third of global output, and be comparable in size to the economies of the United States and Europe.

Why is all this important? This is important because what it does bring is great opportunities and great challenges for our domestic economy.

Last week we had the Deputy Governor of the Reserve Bank, Mr Battellino, talk about the stresses and strains that are put on an economy when you have a terms of trade boom and implications for inflation, particularly if we do not deal with the capacity constraints and particularly if we are not concerned with those sectors of the economy that are not the immediate beneficiary of a terms of trade boom. Many small businesses and many medium-sized businesses have to compete for labour and have to deal with the higher dollar. All of these things become a reality in the middle of this great opportunity that Australia has that comes from the Asian Century. And we can only maximise our opportunities from that if we are forward-looking and we put in place tax reforms which deliver the benefit to everybody in the economy and tax reforms that recognise that we are having a terms of trade boom and that the price for our mineral resources—the mineral resources we own 100 per cent; the mineral resources that can only be dug up once—should be reflected fairly in the return to the Australian people. If those prices are going to be permanently higher, then we, as the owners of those resources, are entitled to a share of it.

What do those opposite say? They want to see this boom, this windfall, walk right out the door and do nothing about these essential challenges facing our economy. They want to do nothing about investment in infrastructure, do nothing about making our companies more competitive by giving our small businesses a tax break, do nothing about making the corporate rate lower and do nothing about any of those things because their approach to this is to do nothing—except to say the miners are paying too much tax, and not even the miners are game to say that.

So we do need to talk about this as a nation because what we need to do is to leave to our children a lasting legacy from this boom that comes from the bounty and the opportunity of the Asian Century, and that is why we on this side of the House are so determined to build up our national savings so that we can fund some of that investment. We know how important national superannuation was, and that pool of savings was used last year to recapitalise our companies coming out of the global recession. We are going to need our savings increased to fund further investment in this country as we go forward.

But what is the view of those opposite? Do nothing, ignore it. We know that there is a two-speed domestic economy. We know that even now, despite the fact that we are one of the strongest growing advanced economies, many in small business are still struggling, and they will continue to struggle in a two-speed domestic economy. That is why it is the responsibility of government to face up to the hard-nosed reforms that are required to make our economy more prosperous. But, of course, those opposite only have one solution: to bring back Work Choices, cut wages and oppose any future reforms. We on this side of the House understand the challenge of reform, how to maximise the opportunities flowing from the Asian century and how to support our businesses and their employees, and we will continue to do it.

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