LAUNCH OF CEDA’S 2018 ECONOMIC AND POLITICAL OVERVIEW

 

Thanks Kyl, to David for his earlier introduction, and to you all for the opportunity to join you today on traditional Bindal and Wilgurukaba lands for the Townsville launch of CEDA’s Economic and Political Overview.

 

I enjoyed last Friday’s event in Brisbane and I’m pleased to be here today. It gives me the opportunity to supplement some of the points I made there about the national economic and political scene with some other specific observations about North Queensland gleaned from:

 

Meeting with Townsville Enterprise yesterday alongside  the indefatigable Cathy O’Toole;

Mayor Jenny Hill and my friend Stephen Beckett, who I had breakfast with on Palmer Street this morning;

Conversations with the AWU about Queensland Nickel and with the CPSU about the local human services workforce;

The editor of the Townsville Bulletin I met with just before; and

The troops I farewelled from Lavarack Barracks yesterday on their way to the Middle East, and their families.

 

 

Today I’ll go from the national to the local; and from the economic to the political, focusing on jobs and economic growth and picking up some of the themes of Kristina’s presentation and other contributions to the EPO.

 

Let me start with some observations on the economy:

 

The global economy is in the best nick it has been in for a decade;

 

The RBA was very upbeat about international conditions from the very first paragraphs and pages of their most recent Statement;

 

Even the recent stock market volatility is more about strong conditions mismatched with low interest rates;

 

The buoyancy of the global economy is helping Australia’s headline economic conditions, including our growth in GDP, which at 2.8 per cent annual growth is hardly remarkable, but brings us close to what would be considered average economic expansion;

 

But other countries are capitalising on improving global conditions better than we are and we’ve gone from leader during the GFC to laggard in the years since then, on one comparison falling from fourth in the OECD to 20th in GDP growth;

 

There’s a tension between a very strong global economy, some reasonable but unspectacular headline indicators here, and the economy that people actually experience in Middle Australia, principally through their incomes;

 

Wages are the most important intersection of economics and politics in this country today;

 

This is why the data and reflections that Michael and Kristina have contributed to the EPO is so important;

 

Especially when you consider that over the past year, company profits have grown 20 per cent but wages just over two per cent, only having slightly improved in the latest figures out this week;

 

And the latest National Accounts show that in just two years, the wages share of income fell 1.5 percentage points, while the profits share has grown 2.3 percentage points over the same period;

 

This combined with less secure and more precarious work means household consumption grew just 0.1 per cent in the September quarter – the worst quarterly reading since the GFC;

 

The household debt to income ratio is the highest it’s ever been, and the household savings ratio is around the worst in a decade;

 

[if !supportLists]·         [endif]All of this means people don’t have money to spend in the shops or save for bigger purchases, and are bogged down by debt; all of which has repercussions for businesses and the wider economy and for the politics of the nation.

 

Facing these circumstances, both major parties agree we need job-creating growth, a stronger budget, and prosperous businesses.

 

But we have very different ways of going about it.

 

Labor believes strong and sustainable growth comes from the bottom-up, from investing in human capital and the productivity of our people, and boosting demand in the economy by ensuring people are properly paid.  Not from a combination of a big tax cut for foreign multinationals paid for by an income tax hike on Australian workers.

 

We think we are a better chance of addressing record and growing debt by dealing with generous tax concessions for those who need them least and winding back spending in a way that doesn’t ask the most vulnerable Australians to carry the heaviest burden.

 

And we want to support businesses by ensuring you can rely on the best productivity-enhancing infrastructure, that can find the skilled workers you need, that people have the disposable incomes to spend here and invest in the future of the city.

 

We are guided here by the recent Australian Industry Group survey of SMEs which nominated skills shortages and lack of demand as bigger threats to their businesses than the headline rate of tax.

 

This approach to growth, budget repair, and support for business drives so many of the policies we have already released, on skills and tax and nation building projects, and right across the country.

 

 

It also drives our economic policies here in North Queensland.

 

I’m a Queenslander, born and bred, and I know our state is as diverse as it is vast. And that if you live in Aitkenvale or Home Hill, your needs, concerns and experiences are different from those living in Auchenflower or Highgate Hill in inner-Brisbane.

 

I know the big challenges here are water security and energy, and these issues impact differently than in Brisbane, or even CQ or the Far North.

 

This is something Bill Shorten understands as well. He’s been up here quite often and already made several announcements to address these issues, which I’ll get to shortly.

 

I think it’s important to point out that both major parties’ leaders get to Brisbane, but Bill has been to North Queensland more than twice as often as Malcolm Turnbull since the last election.

 

And I could be wrong but, apart from a visit to Cloncurry from Scott Morrison last year, I don’t think the Government’s economic team has even ventured north of the Sunshine Coast. Chris Bowen and I get up here as often as we can.

 

So we know the North is unique in many ways, but still depends heavily on investment in skills and infrastructure, and encouraging demand.

 

That brings me to the main point I want to make today:

 

North Queensland’s economy will get far more benefit from our targeted investments in energy, water and transport infrastructure than from a $65 billion tax cut, which will flow largely to southern capitals and foreign multinationals.

 

Our highest priority is to get more bang for our buck.

 

At a time when the Budget’s a mess – when the deficit for this year is eight times higher than predicted in 2014, gross debt has crashed through half-a-trillion dollars for the first time ever with no peak in sight, and net debt is hitting new record highs over the next three years – we need to prioritise spending where it can do the most good.

 

You’d already be aware that the Gross Regional Product of Townsville and surrounds is about $16 billion – or nearly one per cent of the entire country’s output.

 

You may also recall that Treasury’s own figures estimate the tax cut will boost national GDP by one per cent in 20 years’ time.

 

Using that as a very rough rule of thumb, the tax cut’s benefit to North Queensland’s regional economy will be, at best, $160 million – in the late 2030s.

 

I say at best because the actual impact will be far less, given any benefit of a tax cut won’t be uniform and will likely be concentrated in corporate hubs like Sydney and Melbourne as well as overseas.

 

Now consider just a single announcement out of the several that Bill made with this week – here with Cathy and Jason Clare in Townsville. They announced that Labor would contribute $75 million to widen the city’s port. That one project alone, according to the Port’s business case, will deliver more than $580 million in benefits to the regional economy.

 

The commitment is just one of many we have made for the region, including $100 million for Townsville’s water security and $200 million for a hydro-electro power station at Burdekin Falls Dam.

 

Further afield, we’ve committed $100 million for the second stage of the Mackay Ring Road, $47.5 million to improve the Rockhampton-Yeppoon Road, $100 million for the next stage of the Gladstone Port Access Road and $176 million to build the Rookwood Weir in Central Queensland.

 

All are projects with obvious tangible economic benefits, securing water and energy supply, easing traffic congestion and boosting regional import and export capabilities.

 

The point I’m making is that the benefits from these projects will be bigger and quicker than what could be offered by a company tax cut.

 

They will provide much more support to jobs and the economies of regional Queensland sooner.

 

And that’s before you even get to the $1 billion Northern Australia Tourism Infrastructure Fund we’ve announced.

 

The Townsville Lagoon project championed by the Council, the Townsville Bulletin and the community is the sort of high-quality project we want all communities to be advocating for.

 

And I know you’ll probably ask me about Adani in the discussion, so I’ll just say this for now: our view on Adani has always been that it needs to stack up financially and environmentally. Bill’s said he’s not convinced it will, but in any case we shouldn’t put all of our eggs into one basket.

 

We need a broader focus on investment which applies to people too.

 

North Queensland stands to benefit far more from our approach to investing in apprentices, schools, skills, and universities than it does from a company tax cut combined with the funding cuts in other areas that are paying for it.

 

Consider that $14.8 million will be cut from schools in this electorate of Herbert alone over the next two years. Estimates based on the Government’s mid-year Budget update put the cuts to James Cook University and Central Queensland University at a combined $74 million over the next four years. And since September 2013, 4852 apprenticeships – about two-fifths – have been lost in Herbert, Dawson and Kennedy.

 

If we want to grow the economy it makes no sense to hollow out skills.

 

We’ve already announced that we’ll restore cuts to schools and universities. We’ve also committed to establishing an independent Australian Skills Authority to advise on skills shortages and prioritise investment in those areas, reversing TAFE and training cuts, ensuring 1 in 10 jobs on Commonwealth priority projects are filled by Australian apprentices, and setting up a pre-apprenticeship program to smooth the transition for 10,000 young job seekers into work.

 

Just as we won’t get the growth we need in regions like this through a tax cut for big business and multinationals, we won’t get it either by pulling money out of people’s pay checks through income tax hikes and weekend work; both of which have implications for demand and spending power in the local economy.

 

The McKell Institute estimates that the cut to Sunday penalty rates will see workers in Herbert lose about $8.1 million a year in disposable income. The economic impact is far worse in Dawson and Kennedy – at $18.7 million and $15 million respectively.

 

All up, it’s a $41.8 million hit to demand and spending power for the wider region.

 

That isn’t helped by the fact that the average Townsville worker, on $56,400 a year, will have to fork out an extra $282 a year in extra income taxes if the Government’s legislation passes.

 

The cuts to human capital, the lack of infrastructure investment, and the hits to people’s hip pockets in the North will hurt a regional economy that’s already dealing with an unemployment level three per centage points above the national average, and a youth unemployment rate of 19.4 per cent –  well above the 12.3 per cent national level.

 

A local economy and community still suffering from the collapse of Queensland Nickel and the ongoing cuts to public sector jobs in Townsville, including the relocation of the Royal Australian Airforce’s 38 Squadron King Air fleet; defence staff job cuts; 19 jobs gone from CSIRO; and the loss of 110 jobs from the Australian Taxation Office.

 

So the choice for North Queensland is between a tax cut that favours interstate and overseas capitals or genuine investments in the local area, its infrastructure and its people.

 

 

This region will have a big say in what model prevails.

 

A big say in what kind of growth Australia can look forward to – whether it’s broad and people powered, or unequal and driven out of a handful of boardrooms in Sydney and Melbourne.

 

I can’t see us having a successful national economy without a successful and prosperous North.

 

And standing here in the most marginal federal seat in Australia, I don’t need to remind you how crucial regional Queensland will be to the election we expect in the next 12 months or so.

 

It will be decided here, and in Capricornia and Dawson and Flynn and Leichhardt.  And that’s a good thing if it focuses the political system on regional economies and the outer metro growth corridors outside cities.

 

These contests will be most important but least predictable in a compulsory preferential voting system which pits us versus the Liberals, Nationals, Katters, One Nation and others.

 

But amidst the uncertainty, I assure you Labor won’t fall into the trap of complacency warned against by Narelle Miragliotta in her contribution to the Economic and Political Outlook we are launching today.

 

We will do the work up here and everywhere, making our policies and positions known well in advance, for you to judge us on.

 

Thanks for the opportunity to do a bit of that today and I look forward to the discussion.