The Federal Treasurer, Joe Hockey, says his first Budget changes the country for the better.
Delivering the traditional post-Budget Address to the National Press Club, Hockey said: “We now have a fire in the kitchen – we have to put it out.”
Hockey claimed there is significant structural change in the Budget that “takes us back to surplus”.
Hockey stressed that the Budget makes welfare more sustainable over time. He said much of the criticism of the Budget “is based on politics, not economics”.
- Listen to Hockey’s speech (27m)
- Listen to Hockey’s Q & A (33m)
- Watch Hockey (59m)
Transcript of Treasurer Joe Hockey’s Address to the National Press Club.
Thank you, Laurie. To all my colleagues and so many friends, thank you so much for coming along today to the National Press Club. Last night we did deliver a blue print for the future of the Budget, the future of the economy and perhaps even the future of the nation.
There have been many inputs into that Budget. We had the very detailed Commission of Audit, we had the wise advice of Treasury officials led by Dr Parkinson and Finance officials led by Dr Tune. At the end of the day what brings a Budget together is not just the information that is provided to us but the values that we bring to the table. As a Member of Parliament, you develop those values most often through your interaction with individuals in the community.
Now, in front of about six hundred of my closest friends here, I’ll make a little confession to my wife. Over the last few months, there’s been another woman in my life. She’s 72 years of age. Her name is Margaret from Langwarrin in Victoria. As a Member of Parliament, you get lots of mail, you get lots of emails, you get lots of people making pleadings. She told me her story, sent some photos and I was captured. I rang her and had a chat. Margaret raised four children, she describes herself as a self-funded retiree, but she told me how much her income is and it would hardly suggest that she’s totally self-funded, but she grows her own vegetables. Her husband lost his job in 1991, he was made redundant. People around her have been made redundant in more recent times from factories. Her message to me throughout the entire development process of the Budget was, “be brave, be true, remember that we have to forge our destiny”. She told me her story about raising four children, trying to develop a business, losing businesses during the recession and she said, “be true to yourself, put in place the things that are going to grow the nation because I am ready to do more.” It’s what she said. The more I talk to her and the more I engage with her the more I came to understand what we have to do is build for tomorrow, and whether you are 72 or whether you are four years of age, like my youngest boy, or whether you’re a little girl born today who is likely to live to 100. We have an obligation now to shape the future. The Budget, even though it is about numbers, and I’m sure I’ll be quizzed, and appropriately so, on that, it is about people, about the sort of country that we want to be in the years and decades ahead. It is about the values that we impart, it is about the aspirations we have and last night’s Budget was not forged out of the ashes of a terrible predecessor, even though that was obviously a key input. The fact is last night’s Budget was forged on the values that modern Australia embodies. The values of enterprise, of hard work, of self-reliance, of control of your destiny, and the fact that we’ve got to move away from the culture of entitlement in some areas to a culture of opportunity and hope. Last night’s Budget is forged for tomorrow and we are asking Australians now to contribute. We’re asking them to contribute. We can’t force them, we don’t control the Senate, we are asking them to contribute because if we contribute now, we will build great things for our nation and you can see that out of last night’s Budget.
One of the astounding comments I saw this morning was that there was no structural reform in the budget. My Lord. No structural reform! Let’s talk a bit about it.
In education, we are deregulating the higher education system in Australia. It’s long overdue. How could we possibly be in a country that does not have one university in the top 20 in the world? That’s unacceptable to me, it must be unacceptable to you. We should aspire to be the best, to have the best, and clearly the system is not delivering that. We should have more in the top one hundred, we’ve got a massive emergence of competition out of Asia. Well resourced, well-funded universities that are attracting the best and brightest in the world. Like honey pots. We’ve got to compete with Asia. We take advantage of Asia and its massive growth but we have to compete with Asia. Therefore, we’ve got to have institutions that can be even better so young Australians that go through those universities, they can travel the world, and they can shake their degree and say, this is from one of the leading universities in the world. You know what, that’ll improve their income, it’ll improve their job prospects, and it improves our skill set in Australia. Of course, more people have got to have the opportunity to go to university, have an education. 20% of the funding from deregulation is going to help those most disadvantaged to get to university. Students don’t have to pay a dollar upfront; not a dollar. When they earn more than $50,000 that’s when they start paying back for the university degree, and by the way, they are likely to earn a million dollars more over their career than someone that didn’t go to university. So it’s a pretty good investment, it’s a magnificent return on investment.
Of course there are others who are a great bulk of the community that wants to improve themselves, prove their capacity, undertake a diploma, or a sub-bachelor degree, while we’re going to extend the concessional loan system that applies to universities to them for the first time. So there’s an equality of opportunity, not equality of outcome, but equality of opportunity, which is a core value of our side of politics.
We’re going to go further for people involved in trades; $20,000 trade loans. We’re going to give them the same sort of opportunity as someone going to university. Because ultimately it’s often their hands that help to build the infrastructure of the nation; that’s structural reform. Everyone talks about reform, that’s structural outcomes and structural opportunity, how important that is.
But as I said, there are people who have inputs. Whether they be a 72 year old from Langwarrin or in my case, my own children. I look at them and think, what are they going to do with the rest of their lives? What are their hopes? What are their dreams? That’s what I’m focused on as a parent, or grandparent. That’s what they’re focused on. So we want to have the best education system we possibly can have. That’s structural reform.
In health, like many Members of Parliament, you attend a lot of charity functions, you meet a lot of people that are doing it really tough. People who have had children that have been born with a disability. We’ve all got a member of our family that has been struck by cancer, or dementia, or Alzheimer’s, or heart disease. Whatever it may be, there’s an affliction in every family and probably it’s going to affect you. So, we can constantly increase funding for hospitals, and we are going to keep increasing the funding for hospitals, despite some of the commentary, we are increasing the funding for hospitals, but we’ve got to find the cure. We’ve got to engage in one of Australia’s great strengths and that is to build a health system that is the envy of the world, not just today, but in 20, 30, 40 years’ time, and the best way to do that is to invest in one of our great strengths, which is medical research.
The Medical Research Future Fund is not an option, if we haven’t got the money to fund it. This is where we are asking people again to contribute, to build something that is going to shape the destiny of our nation. We’re asking them to pay seven dollars when they visit a doctor. Two of the seven dollars goes to the doctor, the other five ends up going to the Medical Research Future Fund, an endowment fund, the largest of its type in the world. Hang on, this is Australia, we can be the best in the world at things. Sure, other countries may spend more money, but look at what we achieve in medical research and the pound for pound blows with Ian Fraser and Fiona Stanley, or Gus Nozzle or Howard Florey, who himself saved over 80 million lives with his engagement in the development of penicillin. We could do that in Australia, because we have done that, but imagine if we give our people the opportunity to do even more, it could be an Australian that invents the cure that saves your life, or your child’s life, or your parent’s life. Or many other lives around the world. We’ve got to build something, and Australians are wise, they want to see that if they contribute something they’re building something, well here it is.
If you want to have a better health system, if you want to have a health system that is going to make a difference, now is an opportunity to do it. By asking Australians to make a co-payment, by asking Australians to pay a little bit more for pharmaceutical benefits – that’s the sort of thing that makes a difference. Because every dollar of savings in health over the next six years is going into a $20 billion fund, but the money starts flowing out of that fund in just 18 months to two years. So we start building now. We start building now. That is structural reform. A focus on cure, a focus on discovery, a focus on finding a way to make sure that our quality of life is sustainable.
When it comes to welfare, the fact that we are spending more, as a federal Government, on welfare than we spend on health, more than we spend on education, more than we spend on defence. That is arguably the case it should be so. But the fact is, we need the nation to help us in every area. If you exclude 35% of the Budget from making a contribution you will never fix the Budget. Not when you have so many programs that are growing much faster than even the size of the economy over the next few years. So, we are making changes in welfare and you know why? Because one of our core beliefs in the Government is to help those most vulnerable in the community through our own personal endeavours, but also through our policy. And if we want to have a sustainable pension system in Australia, if we want to have a sustainable family payment system in Australia, or a sustainable childcare system, or a sustainable carer system or a sustainable unemployment system we need to make adjustments that ensure that the system meets the needs of the population; the changing demographics of the population. Because we’re not 1910 anymore, we have got to build the infrastructure of Government, not just for 2014 and the next four years, we have got to build it for the next 50 years. And if we all make a contribution in one form or another that is going to make a difference. It means that our quality of life will not deteriorate. And that is the great risk, that it could deteriorate. Particularly as we face emerging competition coming from our region. The welfare system was always intended to be a safety net, not a cargo net. It has always been the case that we have wanted Australians, and Australians have wanted for themselves, the opportunity to control their own destiny. It is one of our strengths. So I say to you, the changes we’re making in the welfare space are focussed on the sustainability of the welfare system.
And when it comes to the economy, there are many things we need to focus on. Quite obviously, this year, next, perhaps even the year after, Australia is growing at less than what is normal pace, around 3.25% GDP growth. But are left with rising unemployment going to 6.25%, are left with falling terms of trade. Fact is, I never disputed it, the previous Government said it, the economy is in transition. We had a massive amount of money going to the construction phase of the mining and resources boom. 80% of it came from overseas. And mining and resources represent 10% of the economy, just 2% of employment. But gee, they helped us out over the last few years. With magnificent levels of exports and great returns. But now they’ve gone into the production phase. So all that investment is now coming on stream and we are exporting our stocks off to the world, that’s great. But the thing is all those engineers, and all those architects, and all those brickies and logistics companies and everyone else who was involved in building the mining boom, they’ve no longer got that steady stream of work.
So now we have got to move our effort over to the other 90% of the economy. We have got to start building the infrastructure that is going to lift the speed of that part of the economy that has been finding it tough at various points over the last few years. That’s why we are rolling out, not just a significant infrastructure package, but a smart infrastructure package. That’s the difference. It is going to lead to over $120 billion of new infrastructure investment over the next few years, and it is starting now. The East-West program, the East-West tunnel in Melbourne is starting before the end of this year. The WestConnex project in Sydney is starting before the end of next year. And we’ve increased the funding for black spots and we’ve increased the funding for roads to recovery. We need to have cranes going all over the country. That’s what the Prime Minister said to me and we have to deliver. Because if we do not, in two to three years’ time there is going to be a growth gap and unemployment will rise. So we need to start building things now. We need to get on with it now. And so much of what we have done is reorganise the interaction with the states and the private sector in relation to that infrastructure. We’ve been smart about it. We’ve recognised that we cannot have lazy capital, as you call it in the private sector, many of you would probably be familiar with the term. We cannot have lazy capital in existing assets. When if we took that money out of those assets and then put it into new productive infrastructure we will create new jobs, we will build a more productive economy. And the assets that we’re selling, they’re not going overseas.
In fact, the big change over the last 20 years has been the emergence of superannuation. I give credit to the Labor Party who started it; the superannuation scheme in its most recent form in Australia. But now we have got a tremendous amount of private sector money that is desperate to get into those sorts of assets. The mums and dads in Australia really do want to own those sorts of assets. In many cases it is like an annuity investment. So they’re ready to roll. They want to buy more product. And the irony is, super funds are now investing overseas because they say there is not enough product in Australia. Well, we want to give it to them. We’ll give them the opportunity to go after those assets. We’ll take the money, put it in a pot with the states – $5 billion – and say to the states: ‘look we’re not allocating it on the basis of per-capita or where you come from, we’re all Australians, first in first served guys. If you take your money and invest it in new productive infrastructure and move quickly, and we have to approve the projects, if you do that, you will get the bonus pool. But you have to move quickly’. That $5 billion is going to turn into $38 billion of new productive infrastructure. And then the states, that’s the states, and then you have got the private sector on top of that.
So you look at a WestConnex project where you have got seed funding from the Commonwealth Government. And you’ve got the Commonwealth Government being innovative, offering concessional loans to get WestConnex stage two over the line, as I did, three weeks ago. We are being innovative because we have to be, because we have to create jobs, we have to get the economy moving, we are absolutely determined to do that. As I said, we could have, if we were encouraged or we believed what some commentators said, ‘we should go harder on the Budget in the first few years’, but if we had have there would have been a price to pay, and we were not prepared to do that.
But, we have had to fix the Budget. There is a fire in the kitchen and we can’t stand idly by and not put it out. The tsunami of expenditure increases left to us by our political opponents was outrageous. The Budget was never getting to surplus, the debt was going to $667 billion. Unsustainable. In my view, unsustainable because Australia is a net importer of money and people compare our debt to that of Japan. Japan funds itself and exports money. Australia imports money and has effectively done that since 1788. So we are hugely exposed to volatility in the rest of the world and more so because we don’t fund ourselves every year. We don’t have the huge pools of domestic savings of the United States or Japan. So we’re more vulnerable, that’s why. When you compare our debt to that of other nations you need to think about the vulnerabilities associated with that debt.
So out of this, out of our Budget last night, we do reduce that debt burden. We do get the Budget back to surplus. Most importantly for me, when I was in opposition I addressed the National Press Club, I said to you I am always looking at the structural balance. What really happens under the figures. You will see from the Budget Papers, the structural change in the Budget is significant. It takes us back to surplus.
You know why we do this? Why we want to pay down debt? Why we want to live within our means? Comes back to the values, because, you know, Margaret from Langwarrin says to me, “I have to live within my means all my life, I want you to do the same”. And I look at my children and I say there is no way on God’s earth I am going to leave you with a debt, the money of which was used to fund my lifestyle. To fund my quality of life, and I am not giving that to you. I will not do that. The Government will not do that. It is not our way to do that.
So I say to you, if individuals are saying ‘what’s in the Budget for me?’ As I said before and I say again today, you may well be disappointed when you look at the benefit, the reduced benefit you might be getting, the entitlement that may not be there, the contribution you may have to make. Whether it be through the tax system or be it through the payment system. But you know what? As Margaret said, you never get anything if you don’t put in the hard work. You are never able to get there and make a change unless you make a contribution. So we are asking the Australian people to make a contribution. And there will be lots of political discussions, and lots of talk about this and that, the bottom line is if we do not move now, to fix the Budget and to strengthen the economy, it is only going to get much harder. And you can kick the can down the road but sooner or later someone is going to have to pick up the bill. I would much rather, much rather be in the position where we do the things now that are going to build a stronger Australia, than pass the buck to another generation.
So ladies and gentlemen, this Budget is based as much on values as it is based on the economic need. The values have been a key input. Very few of us hang around in politics for a long time just to spend so much time in Canberra. Not that I’m down on Canberra, but that’s not a meaningful contribution. We actually come to this place to change the country for the better. That’s what the Budget does, it changes the country for the better. Thank you very much.
