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Sydney Institute Speech: Gillard Warns of Tight Budget

The Prime Minister, Julia Gillard, says Australia is entering a period of “record fiscal consolidation”, and has warned of a tight budget next month.

Julia Gillard addresses The Sydney Institute


Addressing The Sydney Institute, Gillard said “the time for government to step back is in this Budget.” She said the government “will be making hard decisions in this Budget to prevent greater pain in the long term.”

As she has in a number of recent speeches, Gillard talked at length about the dignity of work and foreshadowed a tightening of social welfare in the Budget.

  • Listen to Gillard’s speech (28m)

This is the full text of Julia Gillard’s speech to The Sydney Institute.

The Dignity of Work

Thank you Joe for your kind introduction. Thank you Gerard and Anne and the Sydney Institute – for this unique Sydney opportunity at this unique Sydney venue.

I am delighted to be here tonight among so many of my Sydney friends.

And Luna Park is a very special place!

Now, I am just going to deal with this up front.

Yes, I came in through the front gate tonight.

Yes, I saw the teeth and the nose.

I know they say any resemblance to any living person is coincidental and I want to assure you that I’m confident that’s true.

While we gather in a place associated with fun, we are here for a serious purpose.

We are here to discuss the actions we need to take today to shape a better and fairer future.

Debating and determining the best steps forward is never easy.

And today’s highly contested and partisan political debate and increasingly complex communications context creates special challenges for reforming leadership governing in the centre.

This means the Sydney Institute’s empirical style and invitation to a community of reason has never been more important.

So the chance to discuss the issues and ideas that will influence not the next poll or the next panel show but the next decade is a very welcome one indeed.

So let’s talk tonight about the long view.

The long term story of the Australian economy is a story of strength. A story of twenty years of continuous growth.

Growth which has been nurtured by the policy reforms of successive Australian governments, from internationalisation to domestic competition to tax.

Wealth which has been created by the hard work of millions of Australian people, in our cities and suburbs, towns and bush.

And our economy is not just creating wealth, it is creating work as well.

More than thirty thousand jobs last month, more than 750 000 jobs since Labor took office.

Today, more Australians are working than ever before, in a period when advanced economies around the world have shed millions of jobs at a terrible human cost.

This growth in wealth and work has been so continuous in the last twenty years that we could easily lose sight of how different this is from the economy we have been used to in the past.

These are remarkable days.

Over coming years we will live through an historic boom in mining investment, one which is genuinely comparable to the Gold Rush of the 1850s.

The boom is a good thing for Australia now and it is a great opportunity for Australia’s future.

This great opportunity is also a complex economic policy challenge.

Good decisions now can nurture the boom so that it lasts, while making the most of the boom for our future.

The Government invested in jobs in the downturn and it was absolutely the right call. We see the economic and social benefits of this every day.

But as the Treasurer wrote on the weekend:

If we are going to be Keynesians in the downturn, we have to be Keynesians on the way up again.

That means hard decisions lie ahead.

We are entering a period of record fiscal consolidation.

We will keep a tight rein on spending to return the Budget to surplus.

Fiscal responsibility is something we have long been committed to. With every spending decision we make, I look from every angle, I hold these up to the light, I ask every question.

We have put in place cost offsets worth around $85 billion across three years to meet the cost of key reforms.

We have put in place a strict spending cap, which will limit average annual real spending growth to around ¾ of one per cent from 2010-11 to 2013-14.

This has been Labor’s approach in four years in office and it is our approach today.

Some have described our commitment to achieving a surplus as a political commitment.

Of course, this is true – my commitment to a surplus in 2012-13 was a promise made and it will be honoured.

But this political commitment was given and will be honoured because that’s what prudent economic management now demands.

When the private sector was in retreat, the government stepped forward to fill the gap and over coming years as the private sector recovers strongly, it is the right time for the government to step back.

If government doesn’t step back when the private sector employs more people, spends more money and builds more projects, we will be chasing the same scarce resources, driving up prices and adding to the inflationary pressures arising from the investment boom.

The time for government to step back is in this Budget.

If we defer these decisions, as the Howard Government did in the middle years of the last decade, we will make the inflationary pressures in our economy worse for millions of Australians.

Our Budget strategy reflects our best assessment of the course of the economy over the coming years.

And by not adding to inflationary pressures it reflects the best way of helping Australians manage cost of living pressures.

So we will be making hard decisions in this Budget: to prevent greater pain in the long term.

Friends, we have a fiscal framework aimed at making the boom last and not adding to the boom’s inflationary pressures.

And we have a policy framework aimed at ensuring all Australians benefit from the opportunities created by the boom.

To appreciate this policy framework, I think it is necessary to appreciate some of the contradictory elements of the economic context.

What I think of as “patchwork pressures” in our economy, where some parts of the economy are strained by growth while others risk being left behind.

Because mining is especially profitable at the moment, it rewards investors and pays workers well.

Investment, equipment and workers are drawn from other parts of the economy, like a magnet dragging iron filings towards it.

In mining areas, the boom has lifted housing costs, it forces non-miners to raise wages to keep workers and it puts pressure on infrastructure like roads, ports and rail.

The record high for the Australian dollar lowers prices for imports – which is good for consumers – but it does make it harder for our exporters to compete.

Mining’s hunger for equipment and workers can also raise costs and make it harder for these non-mining sectors to compete, compounding the high dollar’s effects.

All these pressures require careful management.

So to manage these pressures we have sought to bolster productivity and balance growth:

By improving vital economic infrastructure – roads, rail and ports so we better get goods to market and people to work – with the NBN providing the most vital infrastructure of the future.

Connecting regional Australia – regions of growth and regions needing more growth – to the economic capitals of this country, and the world.

By cutting company tax cut and increasing tax breaks for small businesses, all funded by the mineral resource rent tax, so the most profitable miners increase economic reward and opportunity in other parts of the economy.

By revolutionising our approach to human capital – the most important asset for dealing with structural economic shifts – with deep integrated reform policies to improve the quality of education in schools today.

By record skills investments and growth and reform of universities.

By developing a new, detailed regional agenda so that we understand each part of the nation and engage its local leadership.

By reviewing the GST carve up in order to marry up the “fair go” principle which informs federal financial relations with the realities of today’s economy and today’s reform needs.

By reforming our skilled migration 457 visas to end the rorts and get skilled labour to employers who need it.

Friends, these are economic reforms and responses to deal with the “patchwork economy”.

But “patchwork pressures” are not only felt by industry or something to be distilled in a set of statistics.

These patchwork pressures have a human face as well.

I see these faces and hear their voices in my travels across our country.

In Kwinana and in our North West.

Kwinana is a suburban Perth community where unemployment is twice the national average and one in six adults is on income support.

Yet when I last visited the Gorgon project at Karratha in the state’s north-west I met a worker on site who lives one block away from my home in Melbourne.

Gavan works on the project on a fly-in, fly-out basis. He’s a good bloke and a great example of the boom at its best. A skilled man doing rewarding work.

And of course a young unemployed person in Kwinana is not going to directly compete with Gavan for work. But if we don’t give that young person an entry level job he’ll never achieve what Gavan has.

In Cairns and Gladstone.

Cairns in Queensland has twice as many university graduates as Kwinana yet similar unemployment and reliance on income support. I have been there and met young kids struggling to get a chance or an apprenticeship.

At the same time, Gladstone’s employers will tell anyone who will listen they need more skilled labour.

And in New South Wales.

Where large areas of this city’s outer west have a double digit unemployment rate, higher than Kwinana or Cairns, nearly two and half times the national average.

Unemployment levels which approach those the country as a whole endured in the 1982 and 1991 recessions.

These are places where I want opportunity to grow.

And in these and many other places I meet people – the people I am thinking of as we develop our policies.

The Salisbury teenager who has drifted from education.

He could get a job if he got a trade.

The Blacktown twenty-something who left school at 16.

He needs to get his foundation skills right – to be able to read, write and do maths.

The girl in Woodridge, south of Brisbane, who didn’t fit in at school, now she’s alone with a baby of her own.

She needs more education and so will her child.

The mature aged man in Dandenong who lost his job and lost his way.

He can’t lift and carry like he’s twenty but it doesn’t mean he never wants to work again.

These are the human faces of the patchwork economy.

The faces of Australians who can work.

I believe the test of our approach is what we see in those Australian faces, what we say to those Australian people.

The old way saw a victim, the old way offered an excuse.

Some today see a problem, they offer blame.

I see a person, a person who can work.

I offer only opportunity, I ask only responsibility in return.

Give a chance, take a chance.

It’s the only way it can work.

Tonight, I want to explain the crucial links between these Australians, our economic needs and the Government’s participation agenda.

Of course the participation challenge did not begin this year and neither did our Government’s actions to increase participation.

Incentive to work and opportunity to work more draw together many of the Government’s policy reforms.

This is our record.

Extensive welfare reform.

Income management, improving school enrolment and attendance, tighter eligibility and smarter employment services for adults with some disability. Restructured employment services, investing more resources in those with more complex problems.

Ensuring income support is not a place where people are left and forgotten.

Paid Parental Leave, an increase in the Child Care Rebate and more frequent payment of the rebate as well.

Along with Child Care Benefit, this means that low income families have around 80 per cent of their child care costs met by the Australian Government.

Pledging to increase family support by thousands of dollars a year to encourage teenagers to remain in school or TAFE.

Our Learn or Earn compact, guaranteeing every young Australian under 25 a training place if they are not already in full-time education or work.

Tax cuts for low to middle income earners, including an increase in the effective tax free threshold for low income earners from $11,000 to $16,000.

Hundreds of thousands of training places, for Australians in and out of the work force.

Under our Language, Literacy and Numeracy Program and the Workplace English Language and Literacy Program we’re offering 140,000 places in adult literacy and foundation skills programs for existing workers and job seekers.

The cap on publicly funded university places will be lifted in 2012, stimulating further growth in professional skills and qualifications.

While our record is strong, I know there is more we can do to build participation and make work pay.

Precisely because participation is so high and unemployment is so low, I see a new opportunity to break persistent cycles of social and economic exclusion.

Our economy needs more workers, many Australians need work and our Labor values impel us to put the two together.

Welfare reform and workforce participation is an area where the facts of our economy, the demands of our society, new progressive policy and core Labor values can truly come together in a virtuous circle.

Friends, believing in the benefits and dignity of work is a deep Labor conviction.

Curtin’s creed as the Battle of the Coral Sea raged was simple:

Men are fighting for Australia today. Those who are not fighting have no excuse for not working.

Chifley’s Light on the Hill took the same straightforward view of Labor’s task. Not as … putting an extra sixpence into somebody’s pocket …

But to … give to some father or mother a greater feeling of security for their children … a feeling that if a depression comes there will be work.

The party I lead is – politically, spiritually, even literally – the party of work.

The party of work not welfare, the party of opportunity not exclusion, the party of responsibility not idleness.

That central purpose – work for all who seek it – stands, after all the transformation in our understanding of the economy in the decades since. And it stands for the future.

Throughout our history many Governments have faced economic circumstances which forced them to question long-held personal convictions or cherished party platforms.

In this sense, I am fortunate: the boom, the participation challenge and the opportunity to cut long term welfare dependency mean that some of my own firmest political convictions are in fact the most urgent practical necessities of our day.

The values I learnt in my parents’ home – hard work, a fair go through education, respect – find themselves at the centre of Australia’s economic debate, in the challenge to cut long term welfare dependency.

As Prime Minister, I see a real chance, driven by the economy, to achieve goals I have always held dear.

I want young people to have a fair go, to have an opportunity in life, never to be held back by economic circumstance or social expectation.

I’ve worked to ensure this in education.

Our reforms have been founded on high expectations.

That all children can learn.

That you don’t settle for failure or disguise failure with low expectations. That there is no one who cannot benefit from new skills.

I have fought the prejudice that said some kids can’t learn, that they are better off at the back of the room doing busy work and being passed on up to the next grade. That fight goes on.

And I am extending this campaign of high expectations to welfare as well.

Our reforms are founded on high expectations.

That everyone who can work should work.

I will fight the prejudice that says some people’s lot is drawing a fortnightly cheque, that we shouldn’t expect anything more of them and it doesn’t matter if they are forgotten by policy makers and the society around them.

The social and economic reality of our country is that there are people who can work who do not.

We know there are 230,000 people who have been unemployed for more than two years.

That there are 250,000 families where no adult has been working for at least one year.

And that the youth unemployment rate is still double the overall unemployment rate.

The Government’s approach to this is practical and realistic.

We know that not everyone on a welfare benefit can work.

Some bear disabilities or caring responsibilities that mean paid work is impossible. These Australians deserve our greatest respect and ongoing support.

Others on a benefit can work but not right away. Some need practical help to overcome ill-health or meet family responsibilities.

Some should take up obligations which may not involve working now but will prepare them for work in the future.

Things as simple as learning to read and write at a higher level.

The right mix of incentives is vital to all.

Relying on welfare to provide opportunity is no longer the right focus for our times.

Our strong economy gives us a real chance to create opportunity from the cradle to the grave.

The problem of long term welfare dependency has been long discussed but the new realities of our economy create quite a different policy environment from the recovery of the 1990s or the growth of the last decade.

Because we have unprecedented demand for skills and labour, this is possible.

Because the people I am talking about have been bypassed by the economy for so long, this is difficult.

I want to help individuals, families and communities whose worklessness has seen them excluded from society and the economy through decades of economic growth.

Understand – the people I am talking about include people whose lives present “hard cases”.

There will always be an argument to focus on someone else.

But I am firmly convinced that the economic and social policy arguments for getting these people into work are overwhelming.

People whose problems keep them out of work … and whose problems are made worse by the lack of work.

All of them people who will be better off with work.

In today’s economy, inclusion through participation must be our central focus.

It’s not right to leave people on welfare and deny them access to opportunity.

And every Australian should pull his or her own weight.

It’s not fair for taxpayers to pay for someone who can support themselves.

There is much the Government has already done.

The Budget will provide another way to extend greater opportunity and to put more responsibility into the system.

And beyond this Budget there will be more to do on the formidable participation policy challenge.

For instance at the tax forum later this year, the Government will put improving work incentives in our tax and transfer system at the centre of discussion and debate.

Our participation reforms will not only nurture the boom, they will ensure the opportunities the boom creates are felt across our country and for years to come.

We can genuinely entrench a new culture of work and opportunity in families and communities who have been denied this for so long.

I am determined not to let this chance go by.

Friends, for decades the Sydney Institute has offered a forum for reason and reflection in our national debate.

This was valuable in the 1980s, I must say it is invaluable now.

Fair comment in a democracy serves our people well.

But I’m increasingly sceptical of exaggerated and over determined claims about politics and public opinion from any quarter.

Remember when the NBN was going to break us?

Or the flood levy? Or health reforms?

Each of these overhyped claims, each overcome by perseverance and patience.

As with governing progress, so with public opinion: the measure is in the years.

At the same time, in the face of this culture of confrontation, I will not accept a false choice between listening to our people and persisting with reform.

I do have a responsibility to listen carefully to Australians.

Because behind the wall of sound made by the commentators I know Australians do have genuine concerns about politics and government.

And they always deserve a respectful ear.

But I will not go down a populist path, pursuing short term politics, lacking serious policy convictions, whipping up negativity, following the opinion cycle.

The Australian military scholar David Kilcullen has reminded us that Bernard Fall wrote fifty years ago:

A government that is losing to an insurgency is not being outfought it is being outgoverned.

I find the analogy with modern politics compelling.

Any government which tries to fight an opposition on its own ground of short term media pandering is doomed to policy and political failure.

My approach is quite the contrary.

Consensus and discipline, method and delivery, difficult decisions to meet the big challenges, my honest best judgement and leadership in the national interest.

As an optimist and an activist, I keep my faith that good policy and good politics converge in the long term.

The governing task for 2011 is clear.

To walk the reform road.

To govern well for the long term and to nurture the boom.

To take decisions in the national interest and to deliver for all Australians.

Ensuring a strong economy – and opportunity for all.

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Malcolm Farnsworth
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