Craig Thomson (Dobell, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister update the House on developments in the global economy and the need for reform to Australia’s economy to convert our current strength into long-term prosperity?

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I thank the honourable member for his question. I would draw the House’s attention to developments in the international economy and specifically in global financial markets over the last several weeks, particularly as they have related to Greece and, most recently and more broadly, across Europe. These have been grave and concerning developments for all those concerned with the stability of our financial markets. Developments in Europe have been of great concern to the International Monetary Fund, they have been of concern to the World Bank and they have been of concern to the whole raft of financial institutions, not least of which are the European Central Bank and the European Union. The reason for that is always the risk of contagion from one financial market to another in times of great financial instability. That is why we have been watching developments in Europe particularly closely, including over the course of the last weekend.

The statement by European finance ministers under the chairmanship of the current chair of the European community was a critical statement containing a package of stabilisation measures which are of direct relevance to credit markets and financial markets in this country. It underlines the absolute importance, therefore, of maintaining Australia’s position as one of the strongest economies in the advanced world. We have the strongest growth compared with all of the major advanced economies. We have the second-lowest unemployment, the lowest debt and the lowest deficit and we are the only country to have avoided recession—and all the time while maintaining this country’s AAA credit rating. To build on this strength for the future, what we need to do is also deal with three core challenges for the future: (1) the challenge to secure our recovery through the full implementation of stimulus (2) the challenge to keep our public finances strong through a responsible budget and (3) the challenge to reform our economy for the future by continuing a program of productivity based reform for the future.

When it comes to securing the recovery, I notice that those opposite call for an immediate abolition of all stimulus. This is completely contrary to the advice of any and every international financial institution. Their argument is that the global recovery is too insecure as of yet to pull the rug from underneath it. Treasury’s advice is that the government stimulus package has protected more than 200,000 jobs. Secondly, our challenge for the future is to keep our public finances strong, and this, of course, is something of which turmoil in Europe has reminded us. The stimulus strategy that we have implemented peaked at the end of the second quarter last year. In the budget last year we articulated tough fiscal rules to guide and return this budget to surplus. Those rules have been adhered to meticulously since that time, and will be into the future. This budget will not be a pre-election Liberal Party style spend-a-thon; this budget will be a no-frills, fiscally responsible budget to demonstrate responsible economic leadership.

Also the challenge for the future is to continue the process of reform, and questions have already come in this place about the nature of taxation reform. I draw the attention of those opposite to the fundamental need to ensure that we have for Australia an adequate pool of retirement savings for the long-term future. One of the great enduring reforms of the previous Labor government was to introduce the superannuation guarantee. It rose, against the opposition of those opposite, from three per cent to six per cent to nine per cent, and for 12 years they did nothing further about it. This government has resolved to raise the SGL from nine per cent to 12 per cent. This is not just a reform for working families; it is also a reform to boost our level of national savings.

In the midst of the most recent financial crisis, I remind those opposite of one core fact: the accumulation of our pool of national savings was absolutely critical for Australian companies to draw upon in their own capital raisings when capital markets froze around the world. My advice is that, during the course of last year, $90 billion to $100 billion was raised domestically onshore drawing from this pool of savings. These reforms will add up to an extra $108,000 on retirement super for an average worker aged 30 now. Critically, in aggregate it adds a further $85 billion to our pool of national savings.

Furthermore, the rationale for reform for the future is to bring down the company tax rate for the future as well, to make sure that our company tax rate is globally competitive, which is why the reforms we are putting forward on the basis of the tax plan advanced by the Treasurer is to bring the tax rate down to 28c with the object of heading further as public finance resources permit—an additional benefit for small business. This government has become the friend of small business. This government has put forward a tax package for small business, involving the immediate write-off—

Opposition Members:

Opposition members interjecting—

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I thought that would get them going, and it did!—of the $5,000 tax break affecting 2.4 million small businesses and, for the 30 per cent of small businesses that are incorporated, in addition to that the reduction of their rate to 28c. That is the second arm of reform.

The third is the long-term funding of infrastructure. Those opposite say: ‘Where do we fund our railroad and ports? Where do we ensure that the key economic infrastructure of Australia is funded and laid out to underpin the next level of economic growth for Australia?’ What we are doing through this tax reform is building a $5.6 billion national investment fund for the infrastructure needs of the states, in particular the resource states. So what we are proposing, to take the current strength of this economy further, is, first and foremost, bringing down the tax rate for all companies, in particular to provide a tax break for small business; second, boosting the retirement income savings of all working Australians; and, third, funding the future infrastructure needs for our roads, rail and ports for the future—building on the strength we currently have, setting up Australia for long-term strong economic growth.