I acknowledge the traditional owners of the land on which we gather, the Turrbal people and pay my respects to elders, past present emerging.

I also acknowledge the presence of two valued Federal Labor colleagues from Queensland, Shayne Neumann and Anthony Chisholm.

In 1887, a young coal miner named Daniel Bowen left the mining village of Llannelli in Southern Wales with his wife Elizabeth and embarked on the long sea journey to another mining town, on the other side of the world.

Presumably allured by the promise of a better life and booming frontier economy, Daniel and Elizabeth set sail for Mt Morgan in Central Queensland and worked on what was then the world’s richest gold mine.

I’ve been back to Mount Morgan twice.  I call in at my Great Great Grandfather’s grave and thank him for the brave decision to come to a place that was about as different to Southern Wales as you can imagine. 

I also talk to the locals.  They are very warm and welcoming. But it’s fair to say that the Mount Morgan economy has seen better days.  The mine closed in 1982 and there hasn’t been much economic growth there since.

But Mount Morgan isn’t alone, with many Queensland towns asking where the economic growth will come from in the post mining boom world.

As alternative Treasurer, I’ve made a point of making sure I am in touch with what’s happening in the Queensland economy, and in particular of the challenges and opportunities in regional Queensland.  And there are plenty of both: challenges and opportunities.

This is my ninth visit to Queensland since the Federal election fifteen months ago.  In particular, I’ve engaged with the people of Gladstone (twice), Bowen, Mackay and Rockhampton as well as the Gold Coast on those visits.

Bill Shorten has a similar focus, having spent 36 days in Queensland over the last fifteen months.

Of course, Queensland, will have a very senior voice in the economic team of the Shorten Labor Government, with my friend Jim Chalmers serving as my partner in economic policy making as Minister for Finance. 

Jim is an accomplished economic thinker and a strong Queensland voice.  But I think Bill can fairly claim to have a pretty good understanding of what we need to do for the Queensland economy as well. 

So it feels to me appropriate on a number of levels to make the speech “The Case for Growth” here at the Queensland Media Club. 

Queensland

But before I go on to address the broader issue of our approach to economic growth across the country, it’s appropriate that I address some issues close to home here in Queensland, given of course the Queensland state election has been called since this speech was arranged and given this is my first visit to Queensland since the election was called.

It’s a pleasure to work with the Palaszczuk Government on important issues of reform, and I’m particularly pleased to have worked so closely with my friend the Treasurer, Curtis Pitt.

Despite the considerable headwinds associated with a retreating mining boom, the current Labor Government is putting the Queensland economy on the right track.

While high underemployment and record low wages growth remain a serious problem around the country:

  • 122,000 jobs have been created in QLD since Labor was elected.
  • QLD’s unemployment rate has fallen from 6.5% when it was elected to 5.9% today.
  • Over the year to March 2017, gross state product rose by 3.9%.

But there is more at stake here than is normally the case for a state election.

With the LNP playing electoral footsies with One Nation, the choice appears to be between a majority Labor Government and minority LNP Government, governing with One Nation support with all the instability and potential economically damaging policies that that entails.

One of the reasons we need an economic growth plan that ensures growth in our cities and our regions is that One Nation is capitalising on people’s genuine and valid concerns about the state of regional economies in Queensland and elsewhere with simplistic and counter-productive policy prescriptions.

And importantly, and frankly, this election is also an opportunity for political parties, state and federal to make their intentions clear on the issue of GST distribution.

In Federal Labor, we have made our position clear.

I am happy to say to you here in Brisbane as clearly as I would in Perth, we in Federal Labor believe Western Australia has a legitimate concern that their GST distribution has fallen to just 34 cents in the dollar. And we’ve announced a plan to deal with it that makes no other state worse off.

But I will also say just as clearly that taking money off Queensland or any other jurisdiction is not the answer.

We’ve made it clear we do not support changes to the GST distribution formula.

The Turnbull Government is still considering a draft Productivity Commission report which would see Queensland worse off by between $ 730 million and $1.6 billion in GST distribution.

In fact, no less a person than the acting Prime Minister Julie Bishop this week called for other states including Queensland to lose money in a change to GST distribution.

This would mean fewer roads built and less hospital beds for Queenslanders. 

If it’s good enough for the Shorten Opposition to declare a definitive position on the GST distribution before the people of Queensland vote, surely it’s good enough for the Turnbull Government to do so as well.

I suspect Queenslanders won’t see much of the Prime Minister and Treasurer during this election campaign.

But on what rare visits you do get, Queenslanders should demand that the Federal Government rule out GST formula changes which would make Queenslanders worse off.

Malcolm Turnbull should stand up with Tim Nicholls and guarantee this to the Queensland people.

If they don’t, Queenslanders should be sceptical of a future Liberal Queensland government and indeed the Turnbull Government when it comes to GST distribution.

Now back to the broader issue of economic growth.

Over the past year I’ve been outlining Labor’s approach through a series of speeches to number of areas that are central to a future Labor Government.

“The Case for Openness” “The Case for the Middle Class”, “The Case for Action on Inequality”, “The Case for Engagement with Asia” and many others.

And today I make the “The Case for Growth” and talk about the principles that will underpin our approach to engendering economic growth.

Generating economic growth is an important part of the Labor mission.  It’s a key performance indicator for every Labor treasurer.

We understand that economic growth is the most effective poverty alleviation program yet invented.  It turns aspiration into reality.

Labor sees economic growth as an important and equal half of our modern governing agenda. 

That is, ensure the policy settings exist for growth and engineer improvements to the social contract to ensure improved equity in our society.

Generating economic growth was at the heart of the Hawke-Keating program of reform.

The suite of economic reforms of the 1980s and 1990s – the floating of the dollar, overhauling competition policy, slashing tariff barriers and the introduction of enterprise bargaining were all focused on opening up our economy, and all have played a vital role in the economic growth we’ve enjoyed over the last few decades. 

Australia’s economy was transformed from a sclerotic machine to a well-oiled one.

And it paved the way for Australia becoming an open, confident, flexible, and dynamic economy.

Treasurer Morrison said recently these reforms were low hanging fruit.

Well, with due respect. They were not low hanging fruit. They were very hard, as all reforms are. These reforms required courage, something that has been missing as the government enters its fifth year.

Economic growth was the reason behind the Rudd-Swan agenda of keeping Australia out of recession in the face of the worst economic circumstances in seventy years.

And it will be an important part of the agenda of a Shorten Labor Government.

The modern story of economic growth is one of Australian exceptionalism.

The twenty six years of uninterrupted growth we have experienced is unprecedented in our history and almost unprecedented for developed countries around the world.

And maintaining that exceptionalism will be a challenge for the next government.  

It will be an important part of the agenda of the Shorten Labor Government.

Economic growth has been below trend for the last few years.

After all the talk of growth from the current government, 2016-17 turned out the slowest annual growth since the global financial crisis. 

Australia outperformed the world during the GFC when it comes to growth and unemployment.

Now, the world leads us.

Between 2007 and 2013, Australia’s GDP per capita grew faster than New Zealand, the UK, the US and the OECD as a whole.

Since then, Australia’s GDP per capita has grown at a slower pace than all these economies and has lagged behind the OECD.

I now want to turn to the approach a Shorten Labor Government will take to economic growth and national productivity in a more detailed fashion.

We have an approach which contrasts to the current Government.

The current Government has a one point plan when it comes to economic growth.

A corporate tax cut.

I’ll deal with that approach in more detail towards the end of this speech.  Suffice it to say, we have a different, much more holistic and comprehensive approach to growth.

Three strands of our approach that I would like to address today are:

  1. Human capital, investing in our people in a time of rapid technological change
  2. FutureAsia
  3. Making our Federation work better.

Human Capital

There is no shortage of clichés and homilies that politicians can provide about our people being our most important resource and the importance of investment in future generations.

But these sentiments have to be backed with bold policy.

As Reserve Bank Governor Philip Lowe has pointed out, how we prosper in the future “depends increasingly on investment not in physical capital, but in human capital” and “The quality of our human capital is critical to our ability: to solve complex problems; to develop and use technology; to deliver premium quality goods and services; and to respond quickly and well to an ever-changing world”.

Or, as the BCA has said: “It has never been more important for all Australians to have the opportunity to develop the knowledge and skills that will allow them to be effective and productive in the jobs and workplaces of the future”. 

And investment in education, including keeping higher education affordable and accessible and continued skills formation has been at the forefront of Labor’s policies in our time in Opposition and will be fundamental to our reforming approach in Government.

Last week, the Federal Government launched the Productivity Commission’s first five yearly productivity review.

Now it’s normal for Oppositions to criticize government reports or demand that Governments rule out particular recommendations.

We haven’t done that.

On the contrary, we see the Commission’s report as a serious contribution and one that is in keeping with our general approach to growth; indeed a strong endorsement of our philosophy that investment in human capital is the key to better productivity and growth.

We agree with the Commission when it says in the report’s opening pages that “Health inequalities and educational underperformance present big opportunities for Australia” and we also fundamentally agree with the Commission when it says in relation to education: “if we had to pick one thing to improve…it must be skills formation”.

In fact the Rudd Government ensured investment in human capital was at the centrepiece of the COAG agenda in 2008. By contrast, the last 5 years have been wasted years when it comes to human capital policy reform. 

That’s why both schools and vocational education policy have been prominent in our policy development.

We believe that our school systems are chronically underfunded and, more than that, that we need a model which is genuinely needs based.

Lifting the educational results of children from lower socio-economic backgrounds drive us as matter of social justice but it is also an important piece of economic policy.

The most recent PISA readings confirm that Australia’s performance across maths, science and reading ability has gone backwards over the last 10 years.

Making matters worse, disadvantaged kids remain a full 3 years behind wealthier cohorts. [1]

As you know, our schools funding policy will see $17 billion more invested in schools over the next decade and a genuine needs based funding model to tackle this problem.

In addition, we have outlined comprehensive policies to improve outcomes in VET.

Bill Shorten has said Labor’s approach to skills will be a centrepiece.

We will:

  • Invest an additional $637.6 million into TAFE and vocational education – reversing the government’s 2017 budget cuts in full;
  • Guarantee at least two thirds of public vocational education funding for TAFE; and
  • Establish the “Building TAFE for the Future Fund”, to revitalise TAFE campuses and facilities in regional and outer metropolitan areas.

Of course, one of the reasons we see revolutionising our school funding model and improving life-long learning and vocational education and training as so important is that we need to equip the workforce, both now and in the future with the skills they need to be masters, not victims in the most rapidly changing economic and technical environment that is imaginable.

Contrary to the 5 minutes of innovation sunshine we saw under the Turnbull Government, Labor has been championing innovation unashamedly, because it’s a critical enabler of productivity and future economic growth.

In my Shadow Treasurer’s reply to the 2014 Budget at the National Press Club, I used half the speech to outline the importance of innovation in the economy.

I reprised the same theme in my 2015 Budget reply.

This is about innovation that works for all in our economy, including regional economies like Central and North Queensland which has been a major priority for us as we prepare for government.

It’s why last term Labor committed to establishing a Regional Innovation Fund to kickstart initiatives to expand the role of Australia’s regions in contributing to the national innovation effort.

But this is exactly why we so desperately need an education and skills system where workers from all over the country, cities and regions, can access learning that matches the jobs of the future that will be on offer.

If people don’t have the skills in the new economy, they won’t be able to participate which would have devastating implications for economic growth, not to mention inequality.

For example, recent work by PwC estimates that if Australia’s employment rate for workers aged over 55 was to increase to Swedish levels the potential gains could be 4.7 per cent of GDP.

So getting this area of policy right is essential. And the current Government is not getting it right.

This is also why Labor set out to build a proper national broadband network.

This was an investment to dramatically bridge the tyranny of distance that often hinders the free flow of services, information, capital and labour — particularly in regional centre’s seeking to diversify their economies towards a greater mix of services.

Malcolm Turnbull abandoned the fibre NBN on the false pretence that he would deliver a copper alternative for $29.5 billion, and provide every Australian with access by the end of 2016.

That was his promise — faster and cheaper.

The NBN is now expected to cost $49 billion and be completed by 2020.

This is an opportunity that was squandered for all the wrong reasons.

FutureAsia

Now turning to engagement with our region.

A few weeks ago I outlined the Case for Engaging with Asia and Labor’s FutureAsia policy.

I cannot emphasise enough how important this deeper engagement is to our economic growth strategy.

In 1989 – nearly 30 years ago – Ross Garnaut argued rightly for a significant step-up in our engagement through his report on the North Asian ascendancy.

Five years ago the former Labor government released the Australia in the Asian Century White Paper.

And yet, we continue as a nation to pay the Asian Century lip-service.

This must change.

We need a step-change in our economic engagement with Asia, and a fundamental re-thinking of engagement with South-East Asia in particular.

I announced “FutureAsia” as a framework of policies designed to lift our levels of economic engagement in our region through lifting our capability, literacy and collaboration.

We’ve announced some of the policies to that and we have more to announce between now and the election.

Earlier this week, my colleague Jason Clare announced an important tranche of our policies under the FutureAsia framework when it comes to trade.

Contrary to popular myth, Australia is not actually a particularly export intensive nation. And in recent years in a worrying sign the economic contribution to our GDP from exports has actually gone backwards.

2016 experienced another fall in the ratio of our exports to GDP, which fell to below 19 per cent for the first time since 2005.

This comes at a time when domestic consumption is already constrained due to record household debt, and economies to our north continue to transition to more consumption led growth.

The opportunity cost of not dramatically deepening our engagement with Asia is growing.

It’s in this vein that a Shorten led government will, as Jason has announced:

  • Make the elimination of non-tariff barriers a high priority and develop a non-tariff barrier strike team that would report to a Committee of Cabinet;
  • Make “Australia Week” an annual event in China, instead of the current bi-annual approach which already lifts exports by $1 billion every time it’s held; and
  • Pursue an agreement with the Chinese Government to allow young Australian professionals to gain commercial experience in the Chinese Market by undertaking internships in China for up to 6 months.

These are important announcements, which build on what Penny Wong and I have already said and announced in this space. 

We’ll have more to say about tourism, agriculture, the arts and a range of other opportunities which are important to our economic future.

A Federation which works

I mentioned at the outset the importance we place on a productive relationship with the Queensland state government.

But in fairness, the Commonwealth needs to be working with state governments across the board on the important task of engendering economic growth.

The States and Territories are responsible for much service delivery like in health and education.

If the Commonwealth is not engendering an environment of cooperative federalism, then we lose a key area of productivity improvement and avenue for growth.

Again, the Productivity Commission had an important contribution to make in its report last week, highlighting the importance of states to effective reform and recommending a formal joint Commonwealth/State reform agenda be agreed, with progress monitored on and reported by an independent body.

In many senses an incoming Labor Government will be dealing with five wasted years of missed opportunities when it comes to reforming the Federation and working co-operatively with the states.

Tony Abbott was elected with the promise of a Federation White Paper. Like the Tax Reform Whitepaper, it was scrapped by Malcolm Turnbull.

The first Liberal budget in 2014 contained $80 billion of cuts to health and education that the state premiers and treasurers heard about for the first time when they tuned into the budget speech.

And things have hardly improved. 

Malcolm Turnbull announced a change in the national energy policy drafted by a body appointed by COAG, requiring changes to state, not federal legislation.

But he didn’t bother to inform the premiers.

And in the last sitting week Scott Morrison introduced final legislation without any consultation which fundamentally changed the Federal-state housing agreements.

Is it any wonder that last week the state and territory treasurers last week decided to adopt the recommendation of the NSW Liberal Treasurer and set up their own reform body, the Board of Treasurers, which rather pointedly excludes the Federal Treasurer.

There is a better way.

Whether it be tax reform, housing affordability, working co-operatively with the states on identifying vital nation building infrastructure, or working to lift Asian literacy through our school system there is much to do.

We’ll be looking at the Productivity Commission report in greater detail in the coming months, and the recommendation on the joint Commonwealth-state co-operative approach will be receiving favourable consideration from us.

Corporate Tax Cut?

As I have said, Labor will go to the next election with a comprehensive and holistic plan for economic growth. I’ve outlined some key elements of it to you today – human capital and skills, FutureAsia and a better cooperative federalism – and we’ll have plenty more to add before the election.

The LNP Government, however, has a one point plan.

They would have you believe that if you don’t support a corporate tax cut, you don’t support economic growth.

This is of course nonsense.

I’ve talked today about the Productivity Commission’s report on productivity which is a blue-print for growth.

953 pages of analysis.  Twenty-eight recommendations.  And not one of them on cutting company tax. 

Having been given a broad terms of reference, the PC barely even mentioned company tax, let alone recommending a cut as the best way to boost productivity and growth.

This might be because the historical evidence doesn’t actually stack up when it comes to the argument that a corporate tax cut is the only game in town.

The Reserve Bank recently made a useful contribution, with Assistant Governor Luci Ellis stating “When businesses make decisions about where to locate – the tax rate does presumably matter but so does the business environment, the institutional framework, the rule of law, the macro-economic outlook and where the resources are”.

Ellis rightly points out that dividend imputation renders a corporate tax cut “irrelevant” to domestic investors.

Because of this a cut in the company tax rate actually reduces national income over the medium term.

As the Grattan Institute states “committing to the plan now, before the budget is on a clear path to recovery, risks reducing future living standards”.

At best, gambling your entire economic growth strategy on a corporate tax cut is an expensive gambit.

At a cost of $65 billion over the next decade, it is the single biggest hit to the budget bottom-line that either side has or will propose.

And it is largely paid for by increasing the tax burden on middle income earners, which is hardly a strategy for growth. 

Independent Parliamentary Budget office analysis shows that because of bracket creep and the Government’s proposed Medicare Levy impost, the largest increase in average tax rates are expected for people in the middle income quintile earning just $46,000.

Our Opposition to the corporate tax cut is not ideological, it is about priorities. 

And there are better ways to engender economic growth at the moment than taking $65 billion out of the federal budget and hoping some of it trickles through to growth.

Conclusion

Today, I’ve outlined to you why promoting economic growth is important to us as we go about the task of preparing for Government.

I’ve spoken of three themes which will underpin our approach to growth.

There are other elements I haven’t had time to address, including those that have been the focus of other speeches I have made, like:

  • lifting women’s participation in the workforce;
  • boosting competition;
  • increasing the supply of housing;
  • increasing the provision of good quality infrastructure; or
  • getting stability and certainty in our energy policy to engender the investment we need.

And of course that growth is inclusive and sustainable. These are all important as well.

But I have outlined the way in which we think about our policies when it comes to growth.

And importantly, the way we see continuing Australia’s remarkable track-record of growth as an important part of our continuing mission as political party.

And one I look forward to implementing as Treasurer in a reforming Shorten Labor Government.

ENDS

 

[1] http://www.smh.com.au/national/education/australian-school-students-two-years-behind-worlds-best-performing-systems-20161206-gt4w8p.html