Keynote Address to the Australian Local Government Association 2014 Annual General Assembly

Speech

WTS016/2014

18 June 2014

Great Hall, Parliament House,
Canberra

Thank you very much, Felicity-anne, for the welcome. Mayors and councillors, and ladies and gentlemen, it's certainly a pleasure to be with you for your conference, even if it is now getting towards the end.

I think that this is about my seventh local government conference—national local government, and I'm particularly pleased to be back for the second time as the Local Government Minister as well as, of course, with my other hats on, including Deputy Prime Minister and Minister for Infrastructure and Regional Development.

Last night it was a real pleasure to be given the honour of presenting the National Award for Excellence in Local Government to the Latrobe City Council for their initiatives to increase employment opportunities to young indigenous community members.

In presenting that award, I was reminded again of the pivotal role that local government plays in bringing communities together and bringing local solutions to local problems.

As one who had 14 years in local government before coming into the Parliament, the importance of local government is certainly not lost on me or the new Australian government.

You play a vital role in delivering services and building community infrastructure. For the Government, with a Prime Minister who wants to be remembered as the infrastructure Prime Minister, you have a particularly important role in helping us to deliver on that objective.

I notice that your theme for this year's conference is getting down to business, and that sounds to me a little bit like a phrase that the Prime Minister and the Government has been using lately as we introduce ourselves to the Australian people as a new government when we say we want Australia to be open for business.

We want to do the kinds of things that make Australia a better place for people to invest, a country where the economy is strong, where people feel confident about their future.

We want to encourage the development of an economy that's efficient and competitive, and to do that sort of thing, we are making significant changes in the way in which government administers its own affairs.

We've been signing off on free trade agreements with our biggest trading partners.

We're cutting red and green tape to free business from regulation and compliance costs.

We want to encourage self-reliance and flexibility for industries and community organisations and, of course, also councils.

Parliament has already had its first day dedicated entirely to repealing legislation and getting rid of regulations.

We're committed to saving business in Australia $1 billion a year by getting rid of regulation, and in our first day in Parliament repealing regulations and unnecessary legislation, we achieved three-quarters of that task for this year. So we've got a lot more to do.

Every government is burdened by legislation and regulation, but most importantly, this regulation places a burden on people wanting to get about their business, wanting to do the sort of things that are necessary to make our country grow.

So, if we're going to be successful in delivering our objectives in this regard, if we're going to be successful on the world stage, then we must be more resilient, we must be prepared to cut through, look at new ways to do things and encourage a spirit in Australia of getting on with the job and looking for ways in which we can build a stronger economy.

If we're going to be successful on the world stage, then we will have to shift the ledger in our balance sheets away from recurrent expenditure to investment in infrastructure and schools and the things that will drive the productive growth that we're going to need in the future.

In order to meet this goal, our government first had to tackle the pressing issue of the Federal Budget.

We were elected to get the Budget back into balance and to bring debt under control, and as you're aware, we haven't shirked.

This government has made hard decisions at the beginning of our term, and it is imperative that we restructure the national economy to make sure that our country is able to grow sustainably into the future.

We cannot sustain the kind of government and the kind of government spending that took the Federal Government from having $70 billion in the bank in 2007 to a gross debt heading for $667 billion in a few short years.

Australia is in this mess because over the last few years the government couldn't stop spending. What's worse, though, is borrowing to spend, and so much of it, unfortunately, was wasted.

But there's a bigger and more enduring problem.

The previous government had pledged billions of dollars of new spending earmarked for budgets after they had left office: things like Gonski and the National Disability Insurance Scheme, foreign aid, expenditure on defence and hospitals et cetera.

They are all important things that the government would like to do. They were promised. The people were promised these programs, but they had never been funded.

The ramp-up in the funding in all of those areas only starts from 2017–18, so there was never any money provided in the forward estimates of the previous government because they were beyond four years, and the government, in bringing down its budget, presents numbers covering a four-year period.

So, while these numbers were outside of the previous government's last budget because they were more than four years out, Labor's fifth year is our fourth year, and so we have had to bring into account in this year's Budget.

Once more, our predecessors had still budgeted on the illusion that their mining tax would pay for the infrastructure expenditure even though it was collecting next to nothing.

The International Monetary Fund recently confirmed that for the six years from 2012 to 2018, Australia is forecast to have the largest percentage increase in spending of the seventeen IMF advanced economies profiled.

The previous government promised to limit spending growth to two per cent a year.

Instead, during their time in office, they actually delivered real spending growth of three and a half per cent.

For us, 2017–18 is now coming into the forward estimates for the first time. The medium-term projections from MYEFO shows real spending growth between 2016–17 and 2017–18 will be nearly six per cent.

That's three times the target the previous government had aimed to achieve.

And our ageing population locks in an expenditure profile which just increases necessarily without introducing any new programs.   

The cost of aged care for the Federal Budget is scheduled to more than double over the next decade from $13 billion to over $26 billion.

Hospital costs will grow from 14 billion to 38 billion.

The Federal Government will spend 146 billion next financial year on welfare. That's 35 per cent of the Budget.

By 2050, there will be twice as many people in our population above 65 years of age and four times as many people older than 85.  

One in three children born today can expect to live to 100. Now, that means that there are going to be substantial changes in the expenditure pattern and the demography of our nation.

Bill Shorten said in his Budget reply that by 2050, there will only be two and a half people in the workforce for every one living in retirement.

So these are significant issues which will have to be addressed in the future.  

Our Budget is very much about setting parameters for the years ahead, trimming expenditure growth rather than making significant cuts now.

We believe that it's important to have sustainability built into the Budget projections so that there can be confidence that we've got our financial affairs in order and that we can plan confidently for the future.

And let me emphasise, because I know there has been a lot of scaremongering about the Budget, it's important to note that we haven't cut funding for hospitals— it's going to go up by nine per cent per annum for each of the next three years—or on schools, which will go up by eight per cent per annum for all of the next three years.

We haven't cut pensions; they will continue to go up in March and September in exactly the same way as has happened over recent years.

Our funding model, though, is sustainable and achievable to ensure that we don't go on spending all that we make, because our forward profile seeks to trim that growth.

So those are just some of the challenges that we faced when the government changed, and I'm dismayed that there are commentators around, people who call themselves experts, who are criticising the Government because of the decisions that we made on the basis that the debt doesn't really matter; it doesn't matter that we've got rapidly growing debt; somehow or other, something will come along in the future that will fix it all. Well, we know that that doesn't happen.

In the meantime, right now, we are paying $1 billion every month in interest on the Federal Government's debt—$1 billion every month. If we do nothing, it will be $3 billion per month when our debt reaches its projected peak.

You know what you could do with $1 billion.

It would only take two months, and we could double FAGs grants.

It's a new hospital—a big hospital in every capital city every month.

The Snowy Mountains Scheme cost $1 billion to build in that time's dollars, and yet we have to pay that $1 billion every month.

It's the first thing that has to eat up the tax that's collected for that month. The bankers expect to be paid. And that's just the interest. We're not even talking about redemption. You don't even get to pay off the debt until you've got your budget in balance and you've got spare money that can be used to retire that debt.

So it does hurt now.

Paying this interest means there are so many things we can't do that we would otherwise like to do.

The Budget aims to put in place a plan to help Australia become more productive, especially through a massive new infrastructure program.

We're committed to $50 billion to deliver vital productivity-enhancing transport infrastructure across Australia on a scale that has never previously been undertaken.

The work will deliver benefits, both direct and indirect, to communities across the nation, be they regional or urban.

We all stand to benefit from safe and efficient transport networks that untangle the gridlocks in the cities, builds the inter-mobile hubs to speed up the supply chain, improves access to our ports and boosts our productivity and international competiveness.

Against that backdrop, we could not bring down a soft or universally popular budget.

While we sought to protect vital services and welfare programs, there are significant cuts in the expenditure.

We didn't create the economic problems, but we have been entrusted with the task of fixing them.

We've asked all sectors of the community, all departments, state and, yes, local government, to share in the burden of getting our nation's budget back on track.

I know that many of you here are not happy and do not welcome our decision to pause the annual indexation applied to the financial assistance program for three years until 2016–17.

It's what the Budget is asking of local government to help us to repair the Budget.

Australia's economic fundamentals are strong and will remain so if they're managed well. But, sadly, all Australians must play a part now in repairing our nation's financial woes so that we can be confident about our prosperity and future.

And let me say that we have no delight in these measures, and we don't wish to prolong stringent measures, and as soon as we can relax them, we will.

The Financial Assistance Grants program I know is important to local government, and we will still provide $9.3 billion in funding over the four years from 2014 to 2018.

I know that this will mean that some councils will have to reshape their budgets over the short term, and show some greater level of financial constraint, and we know that expenditure reductions are not the sole answer.

We must invest in things to make our country strong, and will drive economic growth, and that's where regions and local communities come into their own.

That's why, in this Budget, we've included $2.5 billion for local roads under the Roads to Recovery programme, including an extra $350 million under the Infrastructure Growth Package providing double the amount of funding in 2015-16.

Let me repeat that.

Councils will receive a double payment of Roads to Recovery money in 2015–16.

That's assuming we can get the legislation through the Parliament.

It's before the Senate over the next few days and, unfortunately, the Opposition parties voted against it in the House of Representatives. So I hope we will have the numbers to get the legislation through the Parliament, because the funding for Roads to Recovery legislatively expired on 30 June this year. We need a new parliamentary approval to be able to continue to fund the program.

We are also providing $565 million, which includes an extra $200 million, for the Black Spots programme, which will assist councils to fix dangerous and accident-prone sections of local roads and streets.

Our Budget includes $229 million for a new National Highway Upgrade Program.

There's $300 million for our new Bridges Renewal Program, to develop, repair and replace local bridges.

In addition, we are partnering with the states to fund big, game-changing projects across the nation—projects like WestConnex, a transport network to support Sydney's western suburbs, including the second airport; and Victoria's East West Link.

We're putting billions of dollars into projects like the Bruce Highway, the Pacific Highway, the Princes and Western Highways, the Midland Highway in Tasmania, and the Swan Valley Bypass.

We're focused on delivering a strategic plan that generates economic growth and supports thousands of jobs in key regional communities and across the nation.

But we're also funding roads at a local level, like the $33 million upgrade to the Outback Way, which crosses Western Australia, the Northern Territory and Queensland, billed as Australia's longest short-cut. We will end up eventually with a sealed road from Cairns to Perth, right across the middle.

Now, at this morning's breakfast I think some of you were present to hear Assistant Minister Jamie Briggs talk about some changes that we're announcing to the Black Spots program.

In 2015–16 and 16–17 the Government will almost triple the investment in the Black Spots programme to a $160 million a year. At least 50 per cent of this funding will be dedicated to fixing sites in regional Australia.

The changes ensure program eligibility is extended to more dangerous road sites. The cost benefit ratio required has been halved, meaning that there will only have to be a $1 benefit for every dollar invested.

The crash history has been relaxed, so that there will only have to be—and this is bad enough—two crashes in the five year period to qualify a project.

Consultative panels will also be able to allocate up to 40 per cent of the funding to sites that do not meet the crash history criteria, but are identified as dangerous through road safety audits.

This means that more regional black spot projects will be eligible to meet the funding criteria. I would encourage applications from your communities to make the most of this boost in Australian Government investment by nominating your known black spots for funding consideration.

The Government is not only, however, investing in roads.

We've announced substantial contributions towards rail upgrades around our capital cities and in connections to ports.

Our national rail freight investment also includes $300 million to fast-track the development of the iconic Melbourne to Brisbane inland rail route.

We've established a high-level implementation group, chaired by former Deputy Prime Minister ,John Anderson, to ensure that construction starts as soon as possible in our first term.

We know that the inland rail will bring enormous opportunities, particularly through regional New South Wales, Victoria, and Queensland, and take literally thousands of trucks away from the growth that was inevitably going to occur on the road network.

There's $100 million in the Budget also to try and fill in some of the mobile phone black spots.

There's a new university scholarships program, a Green Army, $2 billion for environmental actions, and an extra $100 million for rural research funding to ensure Australians have access to fast and affordable broadband internet.

All of these are initiatives that will particularly interest and assist those living outside the capital cities.

I trust by now all of the mayors have received from me a letter outlining a summary of the Budget measures as they affect local government.

When we get changes through the Parliament, there will also be significant benefits to council through the abolition of the carbon tax.

The carbon tax is already costing local government hundreds of millions of dollars, and in just two weeks' time, if the legislation is not repealed, the carbon tax goes up, and so your costs will also go up.

It adds to the cost of your electricity, your waste management and landfill charges, your road building, even mowing the grass.

The carbon tax is hurting councils and, therefore, you inevitably have to pass rate rises on to your constituents right across the nation.

I referred in Parliament yesterday to the example of the Wyong Council, but it's repeated everywhere.

Treasury modelling shows that Wyong Council's electricity costs are between 3.4 million and 4.2 million higher as a result of the carbon tax.

Of course, the current tax legislation means that the price keeps going up every year, and that's why it's so important that this legislation is repealed. Now, I don't think it is going to be repealed before the end of June, and so that does mean that this increase is automatic on 1 July.

But, hopefully—hopefully—the new senators will recognise that the Government has a mandate to get rid of this tax, and will vote for its repeal, and that the benefits then will quickly flow through the local government and the whole economy.

I have also mentioned the Government's commitment to community projects.

We said that we would not leave regional projects in limbo, and we haven't.

The Budget includes and confirms $314 million for around 300 projects under our Community Development Grants Program right across the nation.

That picks up some of the uncompleted projects from the Regional Development Fund of the previous government, and also honours our own election commitments to local communities.

And there's the $1 billion National Stronger Regions Fund which will be up and running by this time next year. Organisations, including councils and community groups, will be able to apply for grants between $20,000 and $10  million for community infrastructure.

We will invest in priority projects in local communities across Australia's regions. The funding will help build the social and community infrastructure that's so important to modern life, including community facilities and local services.

Now, Madam President, as you are probably aware, the Williams case before the high court is expected to be ruled upon tomorrow.

I notice they've waited until local government leaves town before making the announcement.

This could have significant implications for funding of a large number of Federal Government programmes.

There are at least 400 Commonwealth programmes that we regard as being at risk from this particular decision.

Of course, if the court goes further than some observers expect, the impact could be far more wide-ranging.

Some of those programmes have involved payments by the Federal Government to local government.

The Government is in the process of preparing a white paper on reform of the Federation, and the responsibilities of different governments, to ensure that, as far as possible, the states are sovereign in their own sphere, and we would like also local government to be able to be more self-reliant, to be able to have the revenue sources that it needs to undertake the activities that are entrusted to it.

I appreciate that this is an ambitious part of the reform agenda.

Very, very difficult to get agreement between states, even if most of them are from the same political party.

Very, very difficult to get agreement on radical reform and change.

We know that it's very difficult, almost impossible, to get a referendum passed, and so this task of taking on structural reform, reform of the Federation, is perhaps the most challenging that the Government has on its agenda.

The Williams case could make that all the more important. I can't comment on how we will respond to the judgment because, naturally, like you, I don't know what's in it.

The Commonwealth is obviously preparing for the possibility that we may have an unfavourable judgment. We will be working to respond as quickly as we possibly can to give local government and other sections of the community the confidence to know that funding will be provided as best we can in ways that are considered to be constitutionally legal.

It will be our objective to have as little disruption as possible.

But, in the longer term, I would encourage local government to participate in the white paper process as we look to reforming the Federation.

This is a unique opportunity to adjust our constitutional practise to reflect the realities of the current century.

Now, that will be a challenge, and it can only be achieved with a high level of goodwill, but I think it's an important task.

Finally, I think it's a good idea to always end a speech with some good news.

I'm very pleased this morning to launch round one of our new $300 million Bridges Renewal Programme.

This fulfils an election commitment that we made not just at the last election, but also the previous election, and will help to renew and replace bridges across the nation.

We're calling for proposals from 1 July 2014 from councils and states and territories. Round One will focus on projects that are sufficiently advanced that construction can begin in the 2014–15 financial year.

If you have proposals that are not yet construction-ready, I would encourage you to consult with industry and your communities in the development of proposals for Round Two, which I expect to announce later next year.

And in further good news,  proposals are now also being sought at the same time for the next round of the Heavy Vehicle Safety and Productivity Program.

The Budget honours our election commitment to provide $248 million to continue this important program through to 2019, to fund a range of projects to increase productivity and improve safety.

Projects for both programs will be selected as a part of a competitive, merit-based process, and details of that process are available on my department's website, and there's also a press release announcing these measures available somewhere in the room.

Ladies and gentlemen, this year's assembly is drawing to a close, and I know it has been a particularly energetic and forthright event. I wish you well for the remainder of the conference, and I thank you for the opportunity to provide an overview of the Government's investment in building a better future for all Australians.

We regard local government as important partners in this process, and look forward to working with you to help build a stronger nation in the years ahead.

Thank you.