Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Administration, Senator Minchin. Will the minister inform the Senate of the economic challenges faced by the government in 2006 and the steps taken to further strengthen the Australian economy during the year? What have been the results of these measures?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I thank Senator Fifield for that question. It is an interesting fact that the Howard government’s 10th year has been probably one of the busiest we have had in terms of important economic reform to secure the future of this country. 2006 was the year we repaid the last of Labor’s $96 billion in debt, which of course allows us to save $8 billion a year in interest payments and spend that money on things like health, education and defence instead of paying it in interest.

In March, the Work Choices reforms took effect, freeing the labour market from union domination. The Australian economy has now seen 197,300 new jobs created since Work Choices came into effect, and today’s statistics show that the unemployment rate remains at its 30-year low of 4.6 per cent.

In this year, 2006, the government delivered personal income tax cuts worth $36.7 billion over four years, cutting the top two tax rates and raising tax thresholds to ensure that 80 per cent of taxpayers face a maximum marginal rate of no more than 30c in the dollar. This year’s budget also unveiled the largest ever reforms to the taxation of superannuation, completely abolishing the end benefit tax on pensions and lump sums from standard accumulation schemes, and we welcome the opposition’s support for those reforms.

This year, we created the Future Fund and deposited the first $18 billion into that fund. By next year, the fund will have around $50 billion in assets and by 2020, as the population is ageing, the fund will enable taxpayers to save some $7 billion every year in pension payments to former public employees. And, of course, this year was the year we completed, finally, the sale of Telstra, having commenced that process 10 years ago.

This ongoing process of economic reform has continued to pay big dividends. The economy has now commenced its 16th year of continuous growth—the longest expansion in Australia’s history. Real GDP per capita is now $7,200 higher than it was 10 years ago. Household nominal net wealth is three times the level of 1996 and has risen from being 4½ times annual disposable income to 6¼ times bigger today. NATSEM has established that the distribution of income has become more equitable in this period.

This focused, disciplined and reformist approach to economic management is important because we do face economic challenges. We have seen record high oil prices this year. We have seen Cyclone Larry, which contributed to inflation in the June quarter. We are now experiencing a disastrous drought which of course, as we all know, is detracting substantially from GDP growth. We have seen volatility in commodity prices in global share markets and of course we have to deal with the consequences of increasing interest rates around the world. We have seen the friction created by dramatic movement in terms of trade. We now face the possibility of an end to that commodity boom. These are risks which pose great challenges for economic management.

In order to maintain our strong economy and the prosperity that we have achieved over this decade we do need a continuation of the stable, disciplined and experienced economic management of the last 10 years. With the new challenges we face next year, the Howard government will maintain that same focus, that same determination, to take hard decisions in the national interest in order to sustain economic prosperity and national security for the future.