2014 Federal Budget Address
14 May 2014
The Conservative Breakfast Club, Brisbane Room, Brisbane City Hall
Thank you for warm welcome John (Cotter, Director Flinders Hyder).
Before I begin I would also like to acknowledge
- Stan and Gloria Collard,
- Kerry Herron,
- Thomas Polume, former Consul General for Papua New Guinea
- Brisbane City councillors including our MC, Matthew Bourke, and
- fellow Liberal National Party colleagues.
I also want to acknowledge Scott Emerson, Queensland Roads Minister, and the many Brisbane City Councillors with us this morning.
Can I also note the passing of my friend and former colleague Warwick Parer in March of this year. Warwick was a regular at these post-Budget Conservative Club Breakfasts and I'm sure you all join me in missing him.
Stan and Kerry's forethought in establishing this breakfast club some 23 years ago has provided a terrific forum for those us from the conservative side of politics.
I have joined you for a post-Budget breakfast in a number of capacities over the years and I must say that it is particularly pleasing to be here as Deputy Prime Minister and Minister for Infrastructure and Regional Development.
The 2014 Budget last night—our first since coming to office just seven months ago—is about establishing the framework for a sustainable future for our country.
We needed to make decision at the beginning of our term that will restructure our economy—shifting the balance away from recurrent expenditure to investment in infrastructure, skills and the things that will drive the productive growth we need for the future.
There are hard decisions but many of them will not impact immediately—but are designed to trim expenditure growth by freeing indexation or tightening welfare eligibility.
Australia cannot sustain the kind of government spending that took the federal government from having $70 billion in the bank in 2007 to gross debt of $667 billion in just over 15 years.
Australia is in this mess after just six years of Labor Government because they couldn't stop spending and so much was wasted.
According to Labor debt does not matter—the interest bill alone on Labor's debt is costing us $1 billion a month. The first $1 billion in revenue raised goes to paying Labor's debt.
Labor has also promised billions of dollars of new spending earmarked for the budgets after they left office—Gonski, the National Disability Insurance Scheme, Foreign Aid, Defense, Hospitals—outside the forward estimates of Labor's last Budget but which we must account for in our first.
Labor had promised it—but never provided for it. They kept pushing it off until after the 2013 election—knowing it was unaffordable.
Labor still budgeted under the illusion that their mining tax would pay for their infrastructure expenditure even though it was collecting near to nothing.
The International Monetary Fund recently confirmed that for the six years from 2012 to 2018, Australia was forecast to have the largest percentage increase in spending of the 17 IMF Advanced Economies profiled.
Labor promised to limit real spending growth to 2 per cent a year. Instead, during their time in office they delivered real spending growth of 3.5 per cent.
Now 2017â€“18 is coming into the forward estimates for the first time. The medium term projections from MYEFO showed real spending growth between 2016â€“17 and 2017â€“18 would have been nearly 6 per cent—or nearly three times what Labor promised to deliver.
We are making the tough decisions—but the right decisions. We will reduce the Budget deficit from almost $50 billion in 2013–14 to $29 billion by next year and to just $2.8 billion in 2017–18.
We are doing it the hard way by reducing expenditure—not the Labor way of raising taxes.
Peak government debt will be reduced from $667 billion to $389 billion in 2023–24. Still a massive number but a substantial reduction on Labor's debt legacy.
You probably won't hear this from our critics in the coming days and weeks, but this Budget will actually reduce taxes by $5.7 billion in the coming financial year (2014–15).
Company tax has been cut by 1.5 per cent and we intend to honour our election mandate to get rid of the carbon tax and the mining tax.
In comparison, Labor had lumped an extra $107.3 billion in taxes on Australian families and businesses while they were in Government, introducing 944 new revenue measures over that time—90 of which were never legislated.
Around 80 per cent of those measures were increased taxes, or increased compliance costs on enterprises. 77 per cent of our Budget improvement comes from reduced expenditure and only 23 per cent from higher receipts.
Our ageing population locks in an expenditure profile which increases government liabilities without any new initiatives.
We live longer but aspire to retire earlier.
We spend longer at school and university so have less time in the workforce to save for retirement.
By 2050 there will only be three people in the workforce for every person over 65.
The cost of aged care to the federal Budget is scheduled to more than double over the next decade from $13 billion to more than $26 billion.
Hospital costs will increase from $14 billion to $38 billion.
Income support for carers and Medicare benefits will both double.
PBS costs will increase by around 70 per cent over the decade.
There has been a lot of talk about the Age Pension.
Spending on the Age Pension already takes up 10 per cent of all Commonwealth spending—$40 billion this year, but it will rise to $72 billion in a decade on current trends—and it will keep rising.
Demand for the age pension will continue to increase as the population ages. Despite all of the incentives for people to accumulate superannuation to fund their own retirement, the number of people seeking age pension increases by 1,100 people per week.
Increasingly, the lifestyle and savings from superannuation are seen as an opportunity to enjoy a few cruises and the luxuries of life for few years until it runs out and people can fall back on the age pension.
Unless we act soon the pension will become unaffordable.
In Australia, between 2010 and 2050 the number of people aged 65 to 84 is expected to double and the number of people 85 and older is expected to quadruple. One in three people born in Australia today can expect to live until they are 100.
People quite rightly work their entire lives with the expectation that the age pension is there at the end of their working lives as a safety net.
We have to make sure that safety net is secure, and capable in the future of catching the people who need it.
We were elected to fix Labor's mess, to deliver better management and to start to turnaround the Budget. We did not hide the fact that it would be tough.
As Joe Hockey said, this is a ‘contribute and grow’ Budget—we all need to make a contribution if we are going to avoid leaving our children and our grandchildren with a legacy of debt and a diminished quality of life.
So the Government is making a number of reforms to the Age Pension to make it sustainable.
That includes gradually increasing the age pension age to 70 by 2035 and linking pension indexation only to CPI movements from September 2017.
Young people with a work capacity will be required to be earning, learning or participating in Work for the Dole.
Businesses will receive up to $10,000 for employing workers older than 50, who have been on income support for 6 months or more meaning there will be stronger incentives to hire older workers.
The Budget takes steps to ensure the Government is living within its means, and to reign in the age of entitlement.
More than 30,000 Australians now receive the Disability Support Pension and the number is growing by 1,000 per week. Some recipients under 35 will have their entitlement reviewed as we want everyone who can to make a contribution to our society.
Family payments will also be targeted to those who need it most. Eligibility will be tightened on Family Tax Benefit Part B—for those with an income below $100,000 and children under 6. Low income single parents will be able to access new assistance of $750 per annum for each child aged 6 to 12.
All payment eligibility thresholds will be maintained at current levels for three years from 1 July 2014 for non-pension payments (including Family payments, and allowances like Newstart), from 1 July 2015 for Private Health Insurance Rebate and from 1 July 2017.
There will be a three-year Temporary Budget Repair Levy. It will, from July, be payable by individuals with taxable income above $180,000 at a rate of two per cent. The Levy will raise an estimated $3.1 billion over the forward estimates period and will ensure higher income Australians contribute to the Budget repair.
And MPs' salaries will be frozen for a year and the Gold Card phased out.
The Government will secure funding for additional road infrastructure by reintroducing twice-yearly indexation of fuel to CPI from 1 August 2014. In difficult budget circumstances, this is the responsible way to immediately start building the productivity-boosting roads Australia needs. The money raised from indexation will be dedicated to roads by legislation.
As a Government we will be investing over $50 billion to deliver vital transport infrastructure that will serve the nation well into the 21st Century.
That's a program of works never before undertaken in this country. It means more jobs… but jobs that are deployed on building our national capacity and productivity.
So, we are creating opportunities for the states to balance their books more effectively by privatising mature government-owned assets and reinvesting the proceeds into new, productivity—enhancing infrastructure.
If they do that, we will offer a 15 per cent incentive on the sale price with a $5 billion cap on the total funding available through the Asset Recycling Initiative. This programme will commence around mid-year and close in mid-2019.
This move will also encourage the private sector and the super funds to get on board to partner with governments in building and upgrading the transport infrastructure that will make a real difference to our nation for many, many years to come.
Our record Budget investment will support more than $125 billion of construction activity as part of the Government's Infrastructure Investment Programme.
The key message of this Budget—Australia must contribute and build.
This Budget calls on everyone and every business to contribute, to join or grow the workforce, to boost productivity and help build a stronger economy with more investment.
The states will help because expected major increases in federal grants from 2018 will be unaffordable—but they will get more help for productive infrastructure. Local government will help because there will be no indexation in their federal assistance grants for three years—but they will get an extra $350 million for their local roads and streets.
This Budget redirects taxpayers' dollars from unaffordable consumption today to productive investment for tomorrow. It will do this while supporting the most vulnerable, and taking significant steps towards ensuring that the Government can live within its means.
The government will also act to free up the tertiary education sector.
Full deregulation of the higher education sector will remove fee caps for universities and higher education providers, and expand the demand driven system to bachelor, sub-bachelor and diploma courses at all accredited higher education providers. Fee help will be available for a much broader range of training.
Australian universities will be able to compete with the best in the world by giving them the freedom to innovate, a greater ability to invest in world class research, and the capacity to respond to the needs of students and businesses. Some fees may go up and some fees may fall.
The Government will create the world's largest medical research endowment fund—the $20 billion Medical Research Future Fund. Contributions to the Fund will come from a new $7 patient contribution to health services and from other health savings from the Budget. Od the $7 co-payment for doctor visits, pathology and imaging services, $2 will go to the doctor and $5 to the new Fund.
This endowment fund, when mature, will double current direct medical research funding, with an additional $1 billion a year.
OK, so that is the big picture. What is in the bag for Queensland?
Of the government's $50 billion commitment to road and rail construction at least $14 billion will fund major projects in Queensland with a focus on economic growth and jobs.
For instance 45 new projects or programmes of works will go ahead along the Bruce Highway. These are in addition to the provision of funding to complete 16 on-going projects through the $6.7 billion 10 year Fix the Bruce Highway Policy, to improve safety and reliability.
Funding has also been provided for the Gateway Motorway North realigning, widening and upgrading the Motorway between Nudgee and Bracken Ridge to improve safety and ease congestion. The Australian Government is providing $930 million towards the $1.1 billion project.
We will fund 80 per cent of the cost to duplicate sections and more overtaking lanes will improve safety on the Warrego Highway between Toowoomba and Miles. The Australian Government is providing $508 million towards the $635 million package.
The Ipswich Motorway from Rocklea to Darra, will be upgraded and widened between Oxley Road and Suscatand Street, including construction of new bridges, service roads, access ramps and the installation of a managed motorways system. The Australian Government is providing $279 million towards the $558 million project.
In the far North, the Cape York Region Package, will deliver a range of road and community infrastructure projects in Cape York including upgrading and improving all weather access to sections of the main access road—the Peninsular Development Road. The Australian Government is providing $208.4 million towards the $260.5 million package.
We will also be upgrading and sealing sections of the Outback Way, which runs from Winton in Queensland to Laverton in WA via Alice Springs and the Uluru, to unlock the potential benefits for indigenous and remote communities and promote tourism. The Australian Government is providing $33 million towards the Outback Way.
More than 375,000 people call the Moreton bay region home, making it the third largest local government area in Australia. It is also one of the fastest growing with the population set to exceed 500,000 by 2013.
The Moreton Bay Rail Link—a 12.6 kilometre passenger rail line with six new rail stations—will significantly improve public transport and encourage people to leave their cars at home by connecting the existing network at Petrie Station on the main North Coast Rail Line.
And as part of the Infrastructure Growth Package we have committed to deliver the Toowoomba Second Range Crossing.
This is a vital new link on the national land freight network and we will provide further support up to 80 per cent of the government contribution to the construction cost of the project, following private sector engagement including a Public Private Partnership—up to $1.3 billion.
The new 41 kilometre link will allow heavy vehicles to avoid the Toowoomba town centre and the associated 16 sets of traffic lights.
A supplementary roads program will provide funding for national highway projects throughout the states.
And we are investing more in local roads. Funding will also continue over the next six years for road maintenance, $2.5 billion for Roads to Recovery—and extra $350 million in 2015–16—and $565 million for Black Spots, in addition to our new $300 million Bridges Renewal Programme.
Each of us will make a contribution towards rebuilding our nation, and this Federal Budget is our starting point.
This is the responsible Budget we were elected to deliver. It is a fair Budget, because all of us will do our bit.
It is a Budget not just for today, but for tomorrow and years to follow.
As we saw through the 90s when it was left to the Coalition to clean up Paul Keating's mess, the journey won't be easy—but it is necessary.
And this Government is determined to get the job done.