Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

My question is to the Treasurer. Given the current issues created by the resource sector by the Australian dollar and its impact on manufacturing, tourism and agriculture, would the Treasurer investigate the possibility of a portion of the minerals rent resource tax being allocated to a sovereign wealth fund not only to enhance the long-term savings of the nation from the benefits of the mining boom but also to create downward pressure on the Australian dollar? Does the Treasurer share the view of Australian Coal Association CEO, Ralph Hillman, that a carbon tax will cause downward pressure on the Australian dollar?

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

I thank the member for New England for that very important question about the value of the dollar, because there is a changing of the guard going on in the global economy and there is a move of economic power from West to East. What that movement of economic power means is that our terms of trade are going to be much higher for much longer than anybody had anticipated only a few short years ago. The strength of the Australian economy compared to other developed economies is one of the reasons our dollar is so strong. The second reason the dollar is so strong is that our terms of trade are at 140-year highs. They certainly will not stay there forever—over time they will come down—but those are the two principal reasons our dollar is strong.

In this country for the last quarter of a century we have been committed to a market based exchange rate—a freely floating dollar—and we think that is important. We want to see other countries move to a market based exchange rate. That is the point of the discussions at the G20 on the framework for strong and balanced growth. There need to be structural reforms in other developed and developing economies and one of those structural reforms that is required if we are to get rid of global financial imbalances is that those developing countries that do not have a market based exchange rate should get one. The health of the global economy depends on that in the long term.

When it comes to the strength of the dollar we do, as I said before, believe in a freely floating exchange rate. There is nothing that will change if in the next short period or even medium-term period we were to put in place some sort of sovereign wealth fund, such as the member mentioned before. It would not be a solution to where the dollar is going to go. The most important thing to understand about what we need to do in this economy, given the terms of trade and the pressure that the dollar puts on our exporters, is to make sure that in our economy we are as competitive as we possibly can be to give those businesses that are not in the fast lane of the resources boom the best possible chance to make a profit and to invest. That is why 18 months ago the government put in place a policy of getting a stream of revenue from a resource rent tax so we could give significant tax cuts over time to those companies that are not in the fast lane of the resources boom. That is why we have this commitment: to give a significant tax cut to small businesses, all 2.7 million of them. They are crying out for this sort of assistance.

The instant asset tax write-off is terribly important to the cash flow of small business. That is why we put that policy in place and that is why we have been committed to bringing the corporate rate of tax down as well. All of these will be funded by revenue from a resource rent tax. In some ways the most important thing of all is building up the superannuation accounts of Australian workers with the revenue stream, as the Assistant Treasurer has been talking about. Effectively, what we have got in those superannuation accounts is eight million sovereign wealth funds. Building up those savings is so important to the future of a capital-hungry country that needs capital to invest. We have in place a process we started 18 months ago when we went out and said to Australians that we were going to go through a resources boom, our terms of trade would be high and would put pressure on the dollar and we needed to make some structural changes in our economy. That is precisely what we are doing, given the circumstances that most people did not fully appreciate 18 months ago when we made these announcements.

I do not agree with the chairman of the Coal Association at all. He has made so many inaccurate statements in the last couple of weeks that I do not think I would ever believe anything he said.