Melinda Cilento: (03:59)
Well good morning ladies and gentlemen. I’m Melinda Cilento, I’m the Chief Executive of the Committee for Economic Development of Australia. And I would like to welcome all of you in the room today as well as the viewers on our livestream. This is of course the opening session of CEDA’s annual State of the Nation forum and it is really fantastic to be here. Can I also welcome and acknowledge the Honorable Michael McCormack, Deputy Prime Minister, Minister for Infrastructure, Transport and Regional Development, the Honorable Josh Frydenberg, Treasurer. Can I start of course by acknowledging that we meet in the land of the Ngunnawal and the Ngambri people and pay my respects to elders past, present and future in the spirit of reconciliation.
Melinda Cilento: (04:45)
Now of course to lead off State of the Nation, it is my great pleasure to welcome the Honorable Scott Morrison, Prime Minister of Australia who’s- Thank you. Who’s going to speak and then we’ll do some questions, both from some of our members here in the audience but also some of the two and a half thousand viewers who have joined on livestream. Thank you, Prime Minister.
Scott Morrison: (05:12)
Thank you. Well, thank you very much for the introduction and it’s very good to be here today. It’s a pleasure to speak on CEDA’s 60th anniversary and can I acknowledge and pay my respects to the Ngunnawal people, to their elders past, present, and always importantly emerging. And can I acknowledge any serving members of our defense forces or any veterans who are here with us, which is my custom and to simply say on behalf of a very grateful nation, thank you for your service. I of course acknowledge the Deputy Prime Minister, Michael McCormack, the Treasurer, Josh Frydenberg, and my Assistant Minister, Ben Morton who is also with us today.
Scott Morrison: (05:54)
For 60 years, the Committee for Economic Development Australia has been part of the debates that have shaped the Australian economy. And now in 2020 facing the greatest economic challenge and shock our nation has seen since The Great Depression, CEDA is again well-placed to inform the policies needed for Australia’s recovery. CEDA’s founder, Sir Douglas Copland spoke of chasing what he called the adventure of growth. It is a quest that I think aligns precisely with today’s challenge, as we look to recover from the health and economic crisis created by the COVID-19 pandemic.
Scott Morrison: (06:43)
Today I want to share with you some further thoughts on where as a government we see the economy at this point in the COVID-19 crisis, and the implications for the many decisions we will need to make in the months ahead. I also want to take the opportunity to focus on the role that infrastructure investment and due regulation will play in our Job Maker plan. Building on my recent Job Maker announcements made here at the National Press Club some weeks ago, on skills, on industrial relations, but also since on housing and construction and reform of federal decision making and the Federation, Australia has shown incredible resilience in the face of our twin crisis.
Scott Morrison: (07:27)
We are saving lives and we are saving livelihoods. We’ve managed to do better than our fears and even our hopes. In Australia, our actions have limited COVID-19 infections to just over 7,000, fewer than 500 active cases today. And if we’ve reduced our daily infection rate to less than 0.2% and even lower, from a peak of more than 25%. Sadly of course, 102 Australians have died. Mercifully, this is a long way short of the predictions of hundreds of thousands of Australians contracting the virus, tens of thousands of deaths, and a health system in crisis. Our health response has been undoubtedly world-class working together between states and territories in the Commonwealth, bettering those of similar developed and sophisticated economies around the world as you can see from the chart, looking at the comparison of COVID cases. But not just those large developed economies. We are one of a handful of countries that have achieved this level of success on the health front.
Scott Morrison: (08:47)
And as you can see from this chart, it was not a foregone conclusion. As you can see in the early days of the epidemic as it hit Australia, you can see the line they’re sitting with all the other countries. All heading in one direction to catastrophe. And then you’ve seen what Australia has been able to achieve. Bettering not just a few countries but frankly most of the countries around the world. This has saved lives. Our death rate of just four people per million of our population is a fraction of other developed economies around the world. And in some cases, their death rate is more than 100 times what Australia’s is. Our response has followed a uniquely Australian path as we promised it would, getting the balance right between our health and our economic objectives, as this new global stringency index demonstrates by comparison, closing the borders, quarantining, building our health system capacity, social distancing, sensible restrictions, measured restrictions and strong testing, tracing, and local health response capabilities.
Scott Morrison: (10:14)
And whereas other countries impose strict lockdowns, we have been able to keep large sectors of our economy open and functioning, including construction, manufacturing, agriculture, mining, as well as large parts of the retail sector which were not closed. Now, this has not just yielded enviable health outcomes as I’ve pointed out, but it has limited the economic impact of the COVID crisis and put us in a position to emerge more quickly and more strongly. The recent national accounts showed that the Australian economy shrunk by 9.3% in the March quarter. Now, while the damage to the economy is heartbreaking at that level, it has been far less than so many other countries as you can see by the comparative performance on international growth across major developed economies.
Scott Morrison: (11:10)
Looking forward, Australia is expected to have the third lowest fall in GDP in 2020 of all economies served by the OECD. But the hit to our economy we must understand is significant despite our relatively stronger performance, and the road ahead will be very hard. There is a mountain yet to climb. Compared with the midyear update, it is expected that over a hundred billion dollars of economic activity has been lost in this year and that it will take us an estimated two years at least just to get back to the level we were at prior to the fall from COVID-19. And that’s why we have a plan to lift that growth, not just for the next few months, just not for now, but the next five years.
Scott Morrison: (12:09)
We need to lift our economic growth rate by more than one percentage point above trend to beat the expected pre-COVID-19 GDP position by 2025. To catch back up to where we were before COVID hit. Now, the restoration of growth is also critical to our public finances. We are looking at a record deficit this year and next, and not just because of record COVID-19 expenditures. Revenues have taken an equally large hit. And while our expenditure measures have been designed to be targeted and time-limited in accordance with the principles we set out as we [inaudible 00:12:56] the crisis, the impacts on revenue will be longer lived as the economy makes its way back.
Scott Morrison: (13:03)
… [inaudible 00:13:00] will be longer lived as the economy makes its way back. This will require us to recalibrate our fiscal strategy. This does not mean stepping back from our commitment to essential services and addressing the further needs in aged and disability care. We remain committed to those essential services and supports within the Australian community. Such expenditure where carefully planned and controlled will support growth and it will boost confidence, but we must be extremely cautious about our expenditure, especially as we navigate our way back from the record fiscal supports now in place. There will always be a case made for spending more and spending for longer. And there are plenty of people who are happy to make that case, but it is not a wise or responsible course. Such a path is dangerous and will prejudice medium and longer term capacity to deliver on core essential services like health, hospitals, schools, education, the pharmaceutical benefits scheme, our social security supports. Overextending on the fiscal supports puts those longer term and medium term supportive services at risk.
Scott Morrison: (14:33)
Our budget will be balanced again by keeping expenses under control while boosting revenues through pro growth policies that lift investment and get Australians back into jobs just like we did it last time. Neither excessive austerity nor higher taxes are the path that our government will pursue. We will pursue growth and responsible budget management that ensure that governments live within their means and guarantee the essentials that Australians rely on as ever.
Scott Morrison: (15:11)
Now growing economy all comes back to getting people back into jobs. This is where we must start. And having created more than 1.5 million jobs before COVID-19 hit, we have done it before and as a government, we will do it again, working together with Australians right across this country. In April, we lost the equivalent of 30 months, 30 months of average jobs growth, devastating. May’s jobs numbers on Thursday I’m sure will show just how large this challenge remains. There is still worse news ahead of us. The impacts are across all states and territories, and so far worst in Victoria. Our jobs challenge is a truly national task and it is now the primary focus of the National Cabinet, which we have agreed to now make permanent. Recognizing the threat to jobs and businesses, we announced Job Keeper and the Job Seeker COVID-19 supplement early designed for Australia when uncertainty I should say was at its highest.
Scott Morrison: (16:26)
Once again, getting the balance right for Australia’s circumstances, not cutting and pasting from other jurisdictions. Along with other measures, the government injected some $260 billion into the economy over three tranches in the space of just three weeks. For now, businesses have rightly called on this emergency support and has proved to be an invaluable economic lifeline, buying them time to come to terms with the impact of COVID-19 and plan their way back. Those plans are now starting to be put in place by Australian businesses, small and large.
Scott Morrison: (17:11)
The [inaudible 00:17:11] via businesses found more than half of all small and medium sized businesses accessing wage subsidies. They have also benefited from cashflow supports and the deferral of loan and lease repayments, keeping these businesses alive and keeping jobs in place. Without these measures, businesses would have simply fallen over, fallen victim, never to open again. This still may ultimately be the experience for some, but for many more, these measures will have provided the bridge that those businesses and their employees needed. And that is why these supports have been put in place. But it’s also why they’re only temporary. Left in place for too long, not only will that damage the capacity of the budget to deal with important essential services, but it will also dull the dynamism of the economy and prevent the adjustments that must necessarily take place to enable new jobs to be created and our economy to move forward.
Scott Morrison: (18:19)
Similarly, individuals who have sadly not been able to retain their jobs have been supported by an enhanced safety net through the effective doubling of Job Seeker through the COVID-19 supplement and the relaxation of eligibility criteria. Around 1.6 million Australians are now on Job Seeker and around half accessing those payments over the past few months, and many have done it for the first time in their lives. And as you can see, it has been young people who have had the greatest increase in the demand for Job Seeker.
Scott Morrison: (18:56)
Now, this is also when you include those still employed, but working zero hours. We know there is a disproportionate impact on women and younger Australians and those with lower skills attainment, which identify key parts of the labor force, key parts of the Australian community we need to focus on as we prepare and plan our way out and make our way out. These workers are of course in the worst hit sectors in particular accommodation, hospitality and retail where more than 600,000 Australians have either lost their job or are working zero hours.
Scott Morrison: (19:36)
As can be seen also from the most recent national accounts, household consumption of services was what plummeted in the March quarter. Those services are in those sectors that have been most effected that I just pointed to. And there is worst expected in the June quarter when so many businesses had to shut down or obviously couldn’t remain open. And as you can see, nondiscretionary spending took an absolute hammering, even though spending on essentials actually increased during the quarter.
Scott Morrison: (20:10)
Now the good news, and there is because we’re an aspirational and we’re a positive people. Good news is we are now coming back. Australia is opening up again. Australians are once again, as this chart demonstrates, on the move as states and territories work together to implement our National Cabinet three-step plan to open up the economy. And this is boosting consumer confidence. Job Keeper and Job Seeker put a floor under the fall in consumer confidence back in March. And we have now recovered that lost ground in consumer confidence, both on both the Westpac and on the ANZ indices. High frequency spending data shows that this is being increasingly translated into increased retail sales. Now that’s good news for those young people and women working in hospitality and retail, who will be the first to benefit from the reopening. And this especially means those people. Now while trailing, the improvement in consumer sentiment, business confidence and conditions are also clawing their way back. The easing of restrictions and Australians emerging from isolation, confident in the health measures taken by governments will continue to drive up demand and indicate to businesses that they can once again open their doors and make a go of it. See it’s not just enough for the businesses to be able to be open. They’ve got to have confidence to open, to bring the staff back, to get the orders in for their inventories. We have to put the investments in, including through the instant asset write off which the treasury is extended out until the end of the year. That requires confidence that people are coming back.
Scott Morrison: (22:11)
We will be supported by the efforts we have made in that task to boost that confidence through the connections we’ve had with supply chains that better aid our growth. Now while global growth forecasts are weak and bleak, those of our major trading partners are much stronger, which is important for the outlook. And our mining sector has also been able to keep on running. Export volumes and prices are encouraging, as you can see from these charts and will provide much needed income for the country. And the same is true for many other export sectors. And with plans to reengage international education and our tourist industry opening up again, at least for domestic travelers, many more can see the road ahead.
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