The 2011-12 Budget - A Stronger Economy For All Australians

The 2011-12 Budget - A Stronger Economy For All Australians

The Hon Wayne Swan MP
Deputy Prime Minister and Treasurer

The 2011-12 Budget will get Australia back in the black, get more people in jobs and spread the opportunities of the mining boom to more Australians.

Australia's economy is in transition. We are moving from a period of short-term softness caused by natural disasters and a patchwork economy to a period of longer-term strength as the mining investment boom gathers pace.

The Government will return the budget to surplus in 2012-13 to ensure we are not adding to the inflation and cost-of-living pressures that this investment boom will bring.
The Budget will build a bigger workforce through better and more targeted investments in skills and training, and measures to encourage participation.

We'll also deliver substantial new investments in mental health services, and build on our achievements in providing better education and health services for the Australian people.
Importantly, the Budget will recognise cost-of-living pressures by delivering on a range of commitments to help with family budgets, and will provide tax relief to help small businesses.

The Budget delivers an unprecedented series of investments in regional Australia, including $1.8 billion for health and $500 million for education.

We will deliver on these priorities while supporting communities affected by the recent natural disasters, meeting our election commitments and returning the Budget to surplus as planned.

In these ways, among many others, the 2011-12 Budget will build a stronger economy for all Australians.

Short-term challenges

In the short-term, recent natural disasters have taken a heavy toll on communities, businesses and the economy.

The floods and Cyclone Yasi will cost our economy $9 billion in lost output and reduce real GDP growth by ½ of a percentage point in 2010-11. The impact of disasters in New Zealand and Japan will increase this impact to ¾ of a percentage point this year.

The economy and the budget are also still feeling the after-effects of the global financial crisis, with losses that accumulated during that period larger and lingering longer than previously anticipated. Tax receipts have been revised down by $16 billion over the first two budget years, taking the total estimated revenue loss from the GFC to around $130 billion over five years.

Caution among Australian consumers, as well as a high Australian dollar, are also contributing to a patchwork economy in which some sectors and geographic areas are doing well and others are struggling.

This softness in some parts of the economy, together with the recent natural disasters and legacy effects of the GFC have also dramatically cut government revenues, contributing to an underlying cash deficit of $22.6 billion (1.5 per cent of GDP) in 2011-12.

However our community and our economy are resilient, and we are already bouncing back.

Longer-term strength

The outlook for our economy and our nation in the years ahead is very bright and Australians have good cause to be optimistic.

The economy is forecast to grow at an above-trend rate over the next two years, driven by an investment surge in the resources sector as the weight of global economic activity moves to our region.

Following 2¼ per cent growth in 2010-11, real GDP growth is forecast to increase to 4 per cent in 2011-12 and 3¾ per cent in 2012 13.

High prices for Australia’s key commodity exports underpin a record investment pipeline in the resources sector. The mining industry is planning to invest $76 billion in 2011 12 - around 8 times the annual level preceding the boom.

Unemployment is expected to fall further from its current level around 5 per cent to 4.5 per cent during the next two years, with half a million new jobs created.

This historic investment boom will stretch our economy's capacity over the coming years - it will test the capacity of our workforce and put added pressure on wages and prices.

The 2011-12 Budget puts in place strict spending discipline and builds surpluses in the years ahead so we do not compound these pressures on the economy.

It was right to step in and support the economy when the private sector was in retreat, and this Budget recognises that it is right to step back when private activity is gearing up.

Returning the budget to surplus in 2012-13

Having fought off the global recession, Australia faces the opportunities and challenges that lie ahead from a position of strength.

This means the Government can return the budget to surplus in 2012-13, despite recent natural disaster, ahead of any other advanced economy.

Our strict fiscal discipline means that the budget is on track for a a surplus of $3.5 billion (0.2 per cent of GDP) in 2012-13, growing to $5.8 billion (0.3 per cent of GDP) in 2014-15.

This represents a record fiscal consolidation and has been achieved by restraining real growth in spending and making $22 billion in savings over the budget estimates.

This strict discipline means that real growth in spending averages 1 per cent a year over the forward estimates, the lowest average rate for a five-year period since the 1980s, well under the Government's own strict 2 per cent spending cap.

Building these surpluses will mean the Government is not adding to the inflation and cost of living pressures that will accompany the mining investment boom in the years ahead.

Building Australia's future workforce

The 2011-12 Budget is designed to harness the great opportunities that will flow to our nation as we move into the Asian Century.

Our strong economy is boosting incomes and creating jobs. But with unemployment heading down to 4.5 per cent, capacity constraints are emerging and some groups are at risk of being left behind.

So the Budget will boost the employment prospects of more Australians - particularly those who may be on the margins or outside of the workforce - and provide businesses with the skilled workers they need to compete and prosper.

The Government will invest $3 billion over six years in skilling Australia's workforce, and will deliver a package of participation reforms to make sure that more Australians have the opportunity to engage in the workforce and experience the benefits and dignity of work.

We will place industry at the heart of our training agenda, with a $558 million Workforce Development Fund that will deliver 130,000 training places over four years.

The Budget also delivers a $101 million national mentoring program to help 40,000 apprentices finish training and better meet the needs of industries and regions. The Government is also investing $100 million in more flexible training models, allowing apprenticeships to be fast-tracked as they acquire critical trade skills.

The Government will provide up to $1.75 billion over five years from 2012-13 to states and territories under a national partnership, on top of our existing $7 billion investment, to drive ambitious reforms of the vocational education and training system.

The Budget also funds 30,000 more places in the Language, Literacy and Numeracy Program to provide the basic skills essential for a job.

We're also reaching out to disadvantaged and marginalised groups who risk missing out on the benefits of the strong economy with a combination of rewards, opportunities and requirements.

This Budget will cut effective tax rates for 50,000 single parents who work part-time by up to 20 cents in the dollar, invest $80 million in their skills, and move more parents with high-school kids onto job search payments.

To remove tax breaks that can encourage people without children to stay at home, the Budget will phase out of the Dependent Spouse Tax Offset for people born on or after 1 July 1971.

To make sure young people face the right incentives, the Government will extend Earn or Learn requirements to 21-year olds and create new pathways to full-time employment for early school leavers.

To get the very long-term unemployed into work, the Budget will invest $233 million in 35,000 targeted wage subsidies and extended work experience programs.

The Budget will allow people with a disability to work more without jeopardising their benefits and introduce new requirements for younger people aged 35 and under on the disability pension with some capacity to work to develop participation plans with Centrelink.

Better health

The Budget also delivers major new investments in health along with an historic package of mental health reform.

The Government is investing $2.2 billion over five years to deliver additional services, a greater focus on prevention and early intervention, and a more targeted and better coordinated mental health care system as a step towards long-term reform.

As well as guaranteeing $16.4 billion in extra growth funding for public hospitals over six years under our new health deal with the States and Territories, the Budget brings to $1.8 billion, new investment in hospitals and health care for our regions through the Regional Priority Round of the Health and Hospitals Fund.

The Budget will provide $717 million of new funding over five years to expand access to diagnostic imaging services and make new medicines and immunisations more affordable.

An extra $53 million will improve access to public dental services, particularly for those on low incomes, and build a bigger dental workforce in preparation for significant reform in 2012-13.

Better schools

The Budget builds on the Government's strong record of lifting education standards as we pursue our goal of creating the best educated and trained workforce in the world.

We'll provide $125 million each semester, from the start of 2014, in reward payments for the best teachers. Around 25,000 of the country's best teachers each year will receive a reward payment worth up to 10 per cent of their salary.

We will also invest $200 million over three years for the More Support for Students with Disabilities initiative. This will support students with disability in their classrooms and improve learning outcomes.

Helping families, regions and businesses

This Budget includes new measures to provide help with cost of living pressures particularly for Australians on low incomes and families with kids at school.

From 1 July this year, the Government will bring forward up to $300 per year of the Low Income Tax Offset into pay packets, rather than being delivered at the end of the year.

Family Tax Benefit Part A payments for families with teenagers will be increased by up to $4,208 per year to support families to keep their teenagers in school or vocational training.

The Education Tax Refund will also be extended to school uniforms to help with education costs, increasing the Government's investment by $460 million.

Payment advances of up to 7.5 per cent of their entitlement (capped at $1,000) will be provided to meet unexpected family expenses, and giving parents the choice to receive child care support at the time they incur their child care costs.

This Budget includes $4.3 billion of investments in regional infrastructure including hospitals, health care, universities and roads.

These investments, along with the National Broadband Network, will help lift living standards outside the big cities, provide the best health services and educational opportunities, and help regional communities reach their potential.

The Budget also includes a proposal for a rigorous COAG process that asks state and territories to partner with the Commonwealth on sustainability reforms.

We recognise that many Australian businesses - especially small businesses - are doing it tough because of consumer caution, natural disasters and the high Australian dollar.

This Budget will expand tax relief that provides cash-flow benefits available to all 2.7 million Australian small businesses, replacing the Entrepreneurs Tax Offset which was only available to around 400,000 businesses.

In particular, the Government will build on the $5,000 instant asset write-off announced last year by allowing small businesses to claim $5,000 as an immediate deduction for motor vehicles purchased from 2012-13. This measure will provide a $350 million cash flow benefit to small business.

To make sure local enterprises can seize the manufacturing opportunities presented by the boom, the Budget includes a $34 million package to help Australian suppliers win more contracts to supply resource sector projects.

In these ways and many others the 2011-12 Budget will spread the opportunities of the boom and build a stronger economy for all Australians.

CANBERRA
10 May 2011

ENDS

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