Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Will the Treasurer update the House on the latest forecast for the economy and the challenges ahead?

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

I thank the member for Blair for his question about the latest forecast for the economy, because I think there is something very special that we have seen in our recent forecasts. The impact of the economic stimulus, combined with all Australians, both employers and employees, working together, and a better global outlook, has meant that we are the fastest growing advanced economy. That is something we should all be proud of, because it has been the efforts of all Australians, working together, that have delivered that outcome. It is an outcome that has meant unemployment has been lower than it otherwise would be. It is an outcome that has meant we have had fewer business bankruptcies than we otherwise would have had. What that has meant is that there has been less skill destruction in the Australian economy, fewer long-term unemployed and less of a legacy of destruction for communities. And many more businesses have kept their doors open as a result of our economic stimulus. All of these outcomes were particularly underlined for me during my meetings at the G20 in Scotland and also at APEC in Singapore last week. What they show is the effectiveness of the economic stimulus and, as I said before, improved prospects in the global economy.

That has also meant we have performed better than expected. Only a week or two ago I released our Mid-Year Economic and Fiscal Outlook, which forecast stronger growth, lower unemployment, lower deficits and lower debt compared to the budget. Our growth will continue to be stronger than any other advanced economy, growing by 1½ per cent in 2009-10, when every other advanced economy will this year contract. Unemployment in Australia is now expected to be 6¾ per cent by June 2010. That is much lower than the peak of 8½ per cent forecast in the budget and well below the double digit rates of unemployment in many other advanced economies. This is the result of community resilience, the success of the stimulus and the combined impact of economic stimulus by other governments around the world, including conservative governments, who understand the importance of intervening in these circumstances to support their economies. The result is that more than 200,000 Australians have kept their jobs and Australia has avoided a very deep recession. But there are some hefty challenges ahead. As we have seen—and as the Prime Minister indicated before—from the meetings over the weekend, there are still challenges and uncertainties in the global economy. The IMF cautioned again this month that the global recovery is uneven, it is not yet self-sustaining and it certainly does remain dependent on policy support.

Domestically, our economy does have spare capacity. This was demonstrated yet again by last week’s unemployment figures. Unemployment rose a little, with some 670,000 Australians still looking for work. We have to be aware that domestic incomes are still under pressure. There has been a sharp decline in global commodity prices. There has been a cut in hours worked. Company profits are expected to shrink by 3¼ per cent. The reduction in hours worked is equivalent to a loss of around 200,000 full-time jobs. All of these things weigh heavily on incomes. And business investment is expected to fall by 6½ per cent in 2009-10.

All of these things mean that we must continue with our stimulus. We judge a gradual withdrawal of stimulus is still the best way to go to support employment and to support small business, unlike those opposite, who want to rip it out and rip out the rug from underneath the recovery. Gradual withdrawal has the full support of the business community in this country. That is why I think all Australians can be proud of what we have achieved together. We have come through the worst of the global recession in a stronger position than any other advanced economy. The government is working just as hard on the post-crisis economy as we did on surviving the crisis itself. We did the hard yards to position ourselves as the strongest performing advanced economy and will do the hard yards to turn this into something much more enduring. In many ways we are just beginning.