Julia Gillard (Lalor, Australian Labor Party, Prime Minister) Share this | Hansard source

I addressed this question about surplus and the government's budget position, indeed the nation's budget position, when I spoke at the National Press Club last Wednesday. The circumstance in which we find ourselves really has not been experienced for a long time in Australia's national life—that is, the amount of government revenue being generated per unit of GDP is at its lowest since the early 1990s and is far lower than was expected by Treasury. The difference before the days of the GFC is stark, but even since then the GFC revenue returns have been far lower than anticipated by Treasury. There are a number of factors, some of them domestic, some of the global, which are leading to this result, and it is important for anybody who seeks to be taken seriously in the economic debate to understand the factors that are pressing on the Australian revenue.

We continue to see weakness in the global economy and we continue to see remarkable strength in our currency—in the dollar. That remarkable strength in our currency is persisting, even though we have seen a reduction in our terms of trade and even though we have seen a reduction in interest rates. Orthodox economic models would tell you that a reduction in the terms of trade and a reduction in interest rates would likely see our currency lose some value; but it has persisted at a very high level. What that means is that for those industries that are competing, that are export oriented—whether it be manufacturing, whether it be tourism, whether it be services sectors like international education—there is a lot of pressure from the Australian dollar and that pressure is translating into pressure on profitability.

We are also at a phase of the resources boom where we are seeing widespread and large investment. We have not hit the peak of the investment yet. But it is not at this stage that we see the maximum return from resources; that obviously happens when you move from the peak investment phase to the peak production phase. So there is a set of factors—some them cyclical, some of them not anticipated—which are pressing on the amount of revenue being received by government. This is a challenge for everyone in our nation’s life and one that requires careful work and thinking through. It certainly means that we will be adhering to our medium-term fiscal strategy as the Treasurer has outlined it. That requires the offsetting of expenditure by saving in the forward estimates period, and I would recommend the same strategy to the Leader of the Opposition when and if he produces any costings. (Time expired)

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