Speech to the Committee for Economic Development of Australia 2018 State of the Nation conference and Q&A session
Well, thank you very much, (MC Lyndal Curtis), and acknowledging (CEDA Chair Paul McClintock) and what (CEDA CEO Melinda Cilento) said about making sure you get some good Tweets out—M_McCormackMP. I reached my 8800th follower this morning, and that puts me I think 985,000 behind Malcolm (Turnbull). So, with your help maybe we can surpass the Prime Minister this morning, if you put out enough good Tweets.
But look, my thanks to the Committee for Economic Development of Australia for this opportunity, to be with you and to share a few thoughts—not only on the state of our nation today, but particularly where we are tracking, where we are heading, where we plan to go—our vision to the 2050s and indeed beyond. I say 2050s because we need to have a long term vision. Of course, it's 2018 and we need to look at the next decade, and that's why we've got a 10 year pipeline of investment—$75 billion. But that will indeed set us up so that we can look decades down the track. Balancing social and economic priorities as well as the national and local priorities—because at the end of the day, all politics is local—is a constant challenge. It is.
And it's an even greater challenge in the present global economic situation. We've managed to broker free trade agreements with South Korea, with China, with Japan, with Peru—who were meeting, the Socceroos are meeting in the World Cup, and hopefully that won't sort of affect the bi-laterals, the relationship there. But CEDA's research report Community pulse 2018: the economic disconnect, being released today provides a wealth of information and I commend CEDA's efforts in bringing these valuable insights into the public debate. That's important. The Government's 2018 Budget carefully reflects our vision for the nation into the 2020s and up until 2050—and as I said before—and beyond. At the centre of this vision is delivering tax relief, and of course last week with the personal income tax measures that we made sure we got through the Parliament. And of course this week we're hoping that the full suite of company tax measures are also similarly passed; making sure that cost of living is affordable; making sure that we continue to put downward pressure on energy costs; making sure that, for our infrastructure spend, we're getting Australians home sooner and safer, is significant.
On the latter point of government living within its means, that's important, making sure that we do balance the books as soon as we can, and valuing precious tax payer dollars. We are making real progress. $41 billion of budget savings have been legislated since the last election. We're no longer borrowing to pay everyday expenditure such as welfare. Net debt is now at 18.6 per cent of GDP and will fall to 3.8 per cent by 2028. We can be absolutely confident that recovery back to 3.8 per cent of GDP will happen under our budget strategy, because we've delivered on our budget forecasts for each and every one of the past six years. Real spending growth in the Budget remains below 2 per cent—that's the best performance by any government in the past 50 years, dating back to the Menzies-Blackjack McEwan era.
Tax relief is essential and I can assure you that our Government is firm in its resolve, in its commitment that income tax relief must be shared by all working Australians and that means implementing in full—in full—our seven year, $144 billion plan. We've stayed on the course. The income tax relief legislation passed both the chambers of the Parliament last Thursday at lunchtime. It was a significant day and under our plan, 94 per cent of Australian workers will end up with a marginal tax rate of no more than 32.5 cents in the dollar—that's compared with 63 per cent if it's left unchanged. Workers will benefit from tax relief up to $530 in 2018/19, and that's significant.
Income tax cuts are a part of the Government's tax relief agenda. Corporate tax relief for businesses with a turnover of up to $50 million from 30 cents down to 25 is already legislated, and a progressive cutting of these taxes down to 25 per cent is well underway. The Government sees that fresh rounds of economic growth will come by extending the corporate tax relief to all businesses and we are equally serious about this task. That's how you build a better and a stronger economy. That's how you make it fairer for all. It's how you encourage more business investment and how we will help create even more jobs. It's not government that creates jobs, it's business; it's small family enterprises, medium businesses, and big business. They're the ones, they're the job creators.
The Liberal and National parties were elected to government in 2013 with an agenda, with a commitment to work in partnership with business to deliver a million jobs and we did that five months early, but we need to do more. In partnership, we stuck to it. In partnership, we delivered. An efficient, growing economy is also delivered by making sure that we've got the productivity gains through better infrastructure, connecting regional communities, connecting regional cities and towns and villages, to ports, and then of course to markets, and making sure that we ease the congestion in our capital cities.
In my own portfolio there's an intense focus on delivering new transport efficiencies and quality infrastructure as we move into the 2020s. Efficient movement of people, and especially efficient movement of freight, is an absolute key to, as your conference theme puts it, building Australia's economic and social resistance. Now, Australians are the most resilient people in the world and certainly I'd even argue that regional people are the most resilient Australians. And they need to be, with weather and everything else, tyranny of distance being factors. But we're trying to make sure that we give them the best possible start if they're making out, starting up a new business, if they're starting their first job, connecting them to, as I say, ports and markets if they're producing goods, but also making sure that they get the best possible start if they're starting a job or going to university with better telecommunications.
We know that the national freight task will double—double—over the next 20 years. Last month, I was pleased to publicly release a report from the independent panel inquiry into the National Freight and Supply Chain Priorities. Let me quote you the approach taken by that independent panel from the outset, and it says that:
‘Whether you live in a city or a regional or remote setting, all Australians rely on efficient and reliable freight movement. Globalisation, international competition and fast-paced technological change mean Australia cannot afford to be complacent in relation to freight and the physical and social infrastructure that delivers it. Failure to act will lead to a loss of international competitiveness, loss of market share, and higher cost of goods. Businesses and governments will need to embrace new thinking and adopt new technologies to capture the opportunities and meet the challenges’.
Yes, that is true. The Government sees the challenges and I say to you today that we are tackling these challenges, but seeing them also as opportunities and we're taking this task on, head on.
Change we must, if Australia is to seize the opportunities that have been made available through globalisation, international competition and fast-paced technological change. Failure to recognise this will lead to a loss of market opportunities, an increase to the cost of goods, and none of us want to see that. Governments and businesses must embrace new thinking and the Turnbull Government is doing just that.
It's no accident that in my portfolio, the Government has laid down a firm, clear, pipeline of investment and a commitment to making sure that the $75 billion that we've put down over the next decade—you've probably heard the Treasurer talking about that this morning—is on track, but it is making sure that we get value for tax payers' dollars. It includes $24.5 billion of new money, new projects in this 2018 Budget. This commitment is central to our vision for a strong and growing Australia. We're putting the money on the table. We're saying to business: come on the journey with us. Together we can, and more importantly we will, achieve this vision. We're aiming to build social and economic reliance, the right infrastructure in the right place at the right time now and over the next ten years to make Australians get home sooner and safer, to make it one of the great enablers of taking advantage of the new technology, taking advantage of those new free trade agreements.
New export businesses will be enabled by the construction or expansion of duplicated freeways, of the $9.3 billion Melbourne to Brisbane Inland Rail. Our Government understands to deliver the infrastructure this nation needs, wants, and moreover deserves to make sure that its future is assured, has to be done in a fiscally responsible way. And we need a different approach to infrastructure financing and management of risks.
The most important innovations for infrastructure relate to policy. By this I mean changes for the better in infrastructure governance, planning, and cooperation with states—and indeed local governments—project execution, and in investment arrangements. Such innovation will allow for the better use of infrastructure, existing or new, that is needed to boost productivity. And I acknowledge there has been a tendency to focus on expenditure in projects, which certainly does need scrutiny, but keeping in mind that what we're working towards is good policy.
The problem we're trying to solve in the Australian context includes catering for growing populations—and any of you who have traversed our capital cities know that we do need to bust congestion, and we're endeavouring to do that. Ensuring the performance of our freight enhances rather than detracts from the productivity of Australian businesses, better connecting our regional centres, and moving towards a more sustainable system to fund new infrastructure and to maintain existing assets. We mustn't fall into the trap of thinking that good policy and good politics don't mix; they do. If it's worth fighting for, we'll certainly be in there fighting.
Demands for and the delivery of change across Australia's transport network—across road and rail and across our cities and our regions—shows the Government is listening and it's acting. Through the 2018/19 Budget, the Government has not only committed to the $75 billion, decade-long pipeline of investment and in more transport infrastructure over the next decade, but also identified the priority projects. Industry and the community have long called for the Commonwealth to take a more holistic view on infrastructure. They want long-term certainty and we think, we know, that we are delivering it.
This Government from the Prime Minister down believes very strongly in these principles and we're acting on them. The $75 billion infrastructure pipeline is already driving new investment, new economic activity, and making sure that it also creates, most importantly, new employment opportunities. We're building on existing record levels of investment, recognising that in order for the Australian economy to continue to grow and be competitive, that infrastructure investment is vital. It's an area, of course, where the finish line is always moving. No sooner have you got one project done than, of course, you've got communities putting up their hand for new, better, bigger, and more expedient duplication of highways to make sure that we continue to get people home safer and sooner and to make sure that we have more and better infrastructure that is going to enable more export opportunities.
Where appropriate, this Government is delivering a larger proportion of our infrastructure funding through innovative financing. The Prime Minister loves that sort of stuff. And the Equity Investment, which helps manage risks more appropriately and ensures that the tax payer gets a better deal over the longer term. And the Treasurer loves that sort of stuff.
The key message is that we are thinking carefully about the most efficient funding and financing mechanism on a project by project basis. We will be actively engaging with state and territory governments and the private sector to determine the optimal timing, delivery models, and funding structures to achieve value for money.
Every tax payer dollar is precious. Your organisation knows that. You're all tax payers. You all recognise and appreciate that. No tax payer dollar should be wantonly wasted and under the Liberals and Nationals, it won't. An example of leadership in Australia, driving strong processes for quality infrastructure planning and delivery, is the strengthening of Infrastructure Australia in 2015.
IA's independent assessment of business cases is central to the Government's investment decision-making framework. I'm pleased that we now have a refreshed 2018 infrastructure priority list, or IPL, in March. This commits to funding for 10 of the 13 projects now on the list, including through the 2018 Budget announcement on the infrastructure investment pipeline. The March update of the IPL included 96 potential initiatives at various stages of maturity. These will be assessed by IA as well as my department, as they are further developed to a full business case.
Here, I acknowledge Mr Phillip Davies, Infrastructure Australia's inaugural CEO, for the work that he has done. He's invested his considerable expertise in infrastructure reform, helping to bed down the government's strength and arrangements for infrastructure decision-making. The Government wishes Phil all the very best for his future endeavours following the completion of his term on 31 August. And I warmly welcome the appointment recently of Julieanne Alroe as IA Chair.
Earlier I used the words building the right infrastructure for the right place at the right time. If ever there was a right project for the right time and the right place, it's the Western Sydney Airport. With demand for aviation services in Sydney forecast to increase to 87 million passenger trips by 2035, and then double that again in 2060, Sydney Airport, that's Kingsford Smith, cannot meet this demand along. Opening in 2026, Western Sydney Airport will help meet this growing demand as well as providing a major catalyst for job creation, as well as investment in the region. The jobs deficit in Western Sydney is a significant social problem. The daily commute outside the region impacts on the quality of life and household budgets. The airport will be a major generator of jobs, as well as business growth in the regions, supporting more than 11,000 jobs during construction and almost 28,000 full time jobs within five years of opening, delivering real, long term benefits for Western Sydney and beyond.
The Inland Rail is the nation building project; often referred to as the Corridor of Commerce. They started talking about it—I think it was about 1890, I wasn't around at the time—but certainly it's something that we're looking to making sure that it does become truly a Corridor of Commerce.
We're investing $9.3 billion to deliver the Inland Rail through equity financing and grant funding to the Australian Rail Track Corporation. I recently welcomed Warren Truss, the former Deputy Prime Minister, and Infrastructure and Transport Minister, to Chair that organisation and to make sure that the project is delivered on time and to help us with stakeholder engagement along the way. Inland Rail will better connect our farms and our mines and our cities and our ports to global markets, global opportunities as well as obviously Australia's coastal network.
Australia's Inland Rail will connect two major cities, Melbourne and Brisbane, via regional Victoria. New South Wales and Queensland are delighted that bilateral arrangements have been signed with both the New South Wales and Victoria having negotiations with Queensland as we speak. The 2018–19 Budget contains many things to do the right infrastructure out to the 2020s and forward. In New South Wales we've commitment up to $971 million towards the bypass of Coffs Harbour. Approximately 15,000 vehicles a day, including heavy vehicles, travel through the Coffs Harbour CBD along a route that includes 12 sets of traffic lights and the Big Banana. Now I appreciate that the Big Banana is something pretty special but you'll have to divert eventually to see the Big Banana but it is so important that we get this Pacific Highway area built. We've been talking about the Coffs Bypass for years, we're getting on with the job of doing just that.
In Victoria, we're investing $5 billion towards the Melbourne Airport Rail Link. I can't understand why the Prime Minister puts the word rail in that thing. If I were him I'd just call it the Melbourne Airport Link. Same diff anyway, but then he gets his actual initials as an acronym, MAL, what better way to make sure that that's a great legacy of his great Prime Minister years. I'm sure that's going to get Tweeted.
In Queensland we've committed $390 million to the Beerburrum to Nambour rail upgrade. The north coast line between Beerburrum to Nambour is currently a single track line, servicing both passenger and freight transport and a conflict between the two is constraining growth. The upgrade will support population growth and make sure again, that we get people home sooner and safer. The reduction in time for people to get to and from work is enormous. They're the sort of savings—and it's all well and good to talk about the fact that we're actually building roads and they cost this many hundred millions of dollars but the real things are so important when it comes to infrastructure is the fact that we're getting people home for better rail projects by you know, 40 minutes. We're reducing the road toll. They're the sorts of things that are so prevalent and so important.
And I know my colleague, the Member for Wide Bay Llew O'Brien entered parliament replacing, succeeding Warren Truss on the back of being a police officer for many, many years where he had to go and do the death knock all too often for that section of the Bruce Highway. Section D, it is one of the last remaining places in that particular area and he fought so hard for it. We've committed $800 million to making sure that the project becomes a reality and he was so emotional at the press conference because he knew, he knew in his heart of hearts that it was actually going to save lives. And when you're a former police officer, who's seen all too often the tragedy of single lane roads, where people have just, for one reason or another, come to a calamity and then you have to go and tell their relatives, that's what makes the infrastructure so important, as well as obviously freeing up congestion and making sure that we're able to get trucks to their places sooner, safer and our goods to port.
On the matter of ensuring our infrastructure works well, I've just announced a Productivity Commission inquiry into the Economic Regulation of Airport Services. The inquiry is reviewing the efficiency and effectiveness of the economic regulation of airport services where scheduled airline services are provided. It's also a review of major provisions of passenger and freight transport services, at the main passenger airports in major cities. That's important. We want to improve the supply chain. We are doing it. We're making sure that we do it in a way where equity financing and the like is part of the strategy. We're getting on with building the infrastructure. I thank your organisation for its interest in what we're doing as a government, what we're doing as far as infrastructure is concerned and I guess on that note Lyndal, I'll be happy to take any questions if there are any.
Thank you very much.
Lyndal Curtis: Hope you all have your questions ready. Before you ask a question, I'd like you to say your name and the name of your organisation which you represent because that will be a help to us. After years of being a journalist I have the—I don't know if you'd call it a right or a privilege to ask the first question and I have a couple [inaudible]. Minister, you talked a lot about road congestion, about the importance of dealing with road congestion, you talked a lot about building roads. Apart from mentioning the Malcolm Turnbull Memorial Melbourne Airport link…
Michael McCormack: I don't think I used the word memorial.
Lyndal Curtis: I did hear you talk a lot about another way of easing road congestion and that's improved public transport and something you were asked about this morning on the ABC that is the quesiton of road user charges which are possible if you increase the public transport system. Where abouts do you sit on this issue?
Michael McCormack: We are conducting some stakeholder engagement with road user charges at the moment. Obviously with the number of automated vehicles, electronic electric cars coming onto the market I think as (ABC Radio host) Sabra Lane mentioned, 12,000 in the next 12 months, in our interview this morning. That's obviously got to be a consideration because when you've got automated vehicles, electric vehicles on the roads, they're not paying fuel exercise and then of course; who is going to actually pay for the roads of the future? That's got to be a consideration but also, it's got to be a consideration in context with the cost of living. So, there's no point in introducing road user charges, some call them a carbon tax on cars, etc, etc, if it's going to push the price of actually trying to get from A to B through the roof. And it's particularly prevalent for regional commuters who travel more, who travel further, for whom getting to see a doctor and getting from one town to the next for sporting or business commitments or whatever the case might be. You don't want to punish them unfairly because they just need to use their petrol-based cars. So, all these things need to be taken into consideration in the context of road user charges. We're looking at it at the moment, as a responsible government would, and of course we'll be having more to say on that in the future.
Question: And public transport?
Michael McCormack: Well public transport is something that is largely the domain as well of state governments and so we'll work in conjunction with state governments. I love the front page of The Daily Telegraph just the other day where Gladys Berejiklian was there and she was going to be the new congestion buster and she certainly has in conjunction with Belinda Pavey and Andrew Constance, her transport, road etc ministers. They've certainly done some good things working in conjunction with the federal government but there's more to do in that regard as well.
Question: Just on the congestion, there's a few dollars in the budget for a congestion-busting fund. It's interesting having a chat, I guess I thought straight away that it's going to fund more curb and gutter and roads but actually there's opportunities to use it to reform policy I think is what I'm hearing, so you did touch on that in your presentation. So just interested in your ideas about how you may change policy to change congestion.
Michael McCormack: What we're trying to do is to build more and better roads, duplicate existing highways and byways to make sure that we get people in and out of the suburbs into the cities and back home again. And that just doesn't include road, it also includes rail. I loved recently when we went to Darwin and we were building Barneson Boulevard which is basically a replica (road) running parallel to the Tiger Brennan Drive and the journalist just couldn't get, couldn't the fact that were actually building this, as she put it, earlier than what was perhaps needed. And yes, Darwin, is was probably not anywhere near as congested as our other capital cities. That's actually well known. It probably doesn't also have the public transport that other capital cities has and for good reason. But the fact is we're putting in those sorts of roads to ensure that we do look to the future to ensure that we are building the infrastructure now that might not be needed right at this very point in time but people will be able to take advantage of in years to come and that's an example of it. And whether it's Hobart, Adelaide, wherever—where we're making sure that we get that sort of infrastructure down but doing it in conjunction with the state governments and the planning departments there of, because there's no point us just saying ‘look, this is just politically expedient for us to do so’ because at the end of the day, better road, better rail, advantages everybody. Whatever safe or marginal electorate you live in, everybody benefits and that's what responsible governments do.
Question: Damien Graham from First State Super. Minister, I was just going to ask you about how you think about productivity gains, for different types of infrastructure. So clearly infrastructure seems to be a great enabler of additional productivity gains. We're living in an environment where productivity gains are pretty hard to come by, so how do you calibrate productivity gains for different types of projects?
Michael McCormack: Thanks Damian. You look at the Inland Rail project. Now that is going to benefit the state product, the state domestic product, by $2.6 billion. Now, that's a productivity gain that is enormous. That can only great more jobs in the regions, indeed more jobs in the capital cities and that's just one example.
Now if you build better roads connecting regional communities, you ease congestion, that's got to bring about productivity gains because people feel happier and healthier going to and from work. That's got to lead to better productivity while they're at work. But also taking advantage of the free trade agreements we've got with those countries that I mentioned, and also the Trans Pacific Partnership 11. That is a $13 trillion opportunity for Australian businesses—small business and farmers. Now I go around my electorate in the Riverina in New South Wales and indeed the Murrumbidgee Irrigation Area and there are so many wineries and so many companies, little companies that are producing food, value adding and they're now tapping into those market arrangements that we've got using financing arrangements such as Efic (Australian government's export credit agency) and others. Using opportunities that they've got to grow their businesses, that's leading to productivity and the only thing that's holding them back at the moment is drought. The only thing that's holding them back is a dry spell. Everything else is put into place, we're opening up the opportunity and when it rains it's also going to benefit them enormously.
Question: In the 2017–18 Budget there was a substantial contribution towards infrastructure through grants, direct equity injections and direct capital spend by the Commonwealth itself and then in this year's budget we saw not much else, on top of what was announced last year. I'm just wondering was 2017–18 the big plan? Is that really, we're only going to see see dribs and drabs from there, or can we expect another big injection into that in the future?
Michael McCormack: Well the 2017–18 budget was an important one. It was an important budget because it was making sure that we re-calibrated what we were doing as far as infrastructure is concerned. We built on that in this year's budget; $24.5 billion worth of new projects and new money. Laying down that 10-year pipeline of investment. Laying down exactly what we wanted to do and how we wanted to do it. And as one project finishes, more are coming online. Of course…sometimes in some areas where we are building so that Beef Roads, Northern Australian Roads Project and the new Roads for Strategic Importance, $3.5 billion; $1.5 billion of which is dedicated to Northern Australia. Sometimes the weather doesn't always play that kindly in all of Australia and nor is it possible to always get the people to actually construct the roads.
So, we need to also take those sorts of measures in mind but we're guaranteeing that we're building on year on year, our budgets are making sure that we continue to have that pipeline of investment and rolling out the projects. And wherever you go in this nation, whether it's a capital city or indeed a remote or regional part of the country, there are witches hats and people with lollipop signs which have stop and go on either side of them. There's work happening. There's cranes in the air. There's track being laid down as far as steel…that's going to be the equivalent of five Sydney Harbour Bridges from Brisbane to Melbourne. We're getting on with the job of building the infrastructure that we need, want, demand, expect and deserve.
Question: You spoke about innovative financing mechanism and Consult Australia is a great fan of using the [indistinct] and the full gamut of innovative financing, mechanisms. One of the great success stories of your government has been the asset recycling scheme that unleased significant financing into the infrastructure sector. Without obviously asking for any pre-emptive response to the [indistinct] report written by Infrastructure Australian only a couple of weeks ago, is there any thought process with regards to reinvigorating a similar type scheme to incentivise the states to really reuse that productive asset capital, back into their market?
Michael McCormack: Yeah well look, that's a good question. I'm not quite sure all the states came on board as enthusiastically as some other states did, in that regard and that money was put on the table by whichever states wanted to do it. There's always going to be those opportunities and I know speaking to the new South Australia Premier, Steven Marshall and his vision for not just Adelaide but indeed the Hills and beyond. It's really exciting to see a premier who wants to reinvigorate the central business district of Adelaide and some of the things that he's got in mind using smarter financing, using smarter equity investments and the like and making sure that we do turn over assets that perhaps are in need of a bit of a sale or a refresh or whatever the case might be, is really good to see.
We've seen how Will Hodgman has turned around Tasmania. Four years ago went to Tasmania and it was the bottom of every economic league table in Australia. Not anymore. It's really revitalised, helped by the Museum of Old and New Art, but also helped by a real innovative way of approaching investment, in approaching infrastructure and getting on with the job of doing it.
Lyndal Curtis: And just before I let you go, one final question from me, I'm interested in your views the CEDA Community Pulse report and some of the messaging in his conference is about the economic disconnect, that people aren't necessarily feeling the gains of having such a long line of [indistinct]. What do you think is of that?
Michael McCormack: Well, social media gives everybody their licence to say what they think and there's often a cynicism in the air about politicians and politics generally. And not helped sometimes by out media. And perish the thought indeed. But when you do look at Australia and if you've been overseas for any given time and you fly back into Sydney, it's wonderful how clean and fresh that city looks and you see the Harbour Bridge and you see the Opera House and then you go out to the regions. We live in the best country in the world; there's no question about it. I just think we need to tell ourselves more often how lucky we are and we need to be a bit more positive in our thinking. And I suppose governments and politicians basically cop a lot of the blame for having that disconnect. There are some sobering truths in the report. I look forward to tucking myself up into bed about midnight tonight and getting my teeth right into it.