E&OE

INTRODUCTION

Thank you James. Thank you to Stutch and David for your opening remarks.

I want to thank the Australian Financial Review for organising this event and extend my apologies for not being there in person. With a busy sitting week that was not possible but I hope to join you in person at a future event.

I wanted to begin my remarks today by commenting on the state of the economy and its implications for monetary policy and fiscal policy.

As we heard from David a moment ago, we face an uncertain economic outlook and policy ultimately needs to respond to that uncertainty.

We’re just over a month away from the budget, so I want to focus on some of the economic challenges that have been highlighted in recent weeks and the issues the Coalition will focus on in the coming weeks and months.

These include driving greater fiscal responsibility, restoring our standard of living and returning labour productivity and growth per person back to where it should be.

Our financial services sector and banks will play an absolutely crucial role in solutions to these challenges.

MACROECONOMIC OUTLOOK AND FISCAL SUSTAINABILITY

As the AFR has pointed out in great work by John Kehoe and others, the latest National Accounts paint a bleak picture.

Labour productivity remains down 5.4% over the past 18 months. This is not the long term productivity challenge faced across the world - it is a much larger, more immediate collapse which is very specific to Australia - it is Australian made.

Real net disposable income per capita has fallen 7.5% and Michael Read has done some wonderful work on that at the AFR.

Personal income taxes are 23% higher than before the election – an extraordinary number.

We are now in an entrenched GDP per capita recession. GDP per capita has not grown for a year and it’s gone backwards for three quarters.

Consumer confidence is entrenched at lows not seen since the worst of the pandemic.

And whilst we mightn’t technically be in recession, many Australians are feeling like it is a recession.

It is a family and household recession in all practical terms.

And whilst the continued strength of the labour market is welcome – we must remember that when labour productivity collapses, businesses need more people to do the same work.

Australians are taking on extra jobs and extra hours of work to combat climbing costs of living and rental and mortgage payments they’re having to make.

It is clear in the labour account data that Australians are stretched.

Almost one million Australians are now working second or third jobs.

Small business owners are paying themselves last, with labour income from self-employment falling by 8.4% over the year. Small business owners are just not able to pay themselves a normal income.

And youth unemployment has jumped to higher levels than we saw a couple of years ago.

While the RBA Financial Stability Review has highlighted the stability of our financial system, it is clear there are risks – in non-bank lending in particular, in the global outlook, and in the commercial real estate market.

As the RBA has acknowledged, the path ahead is uncertain.

RBA REVIEW

All of this builds the case for certainty in our approach to monetary policy, and the Coalition has drawn a line in the sand on this one.

Our response to the RBA Review has been clear: now is not the time to stack the Board that sets interest rates with political appointments.

We all recognise that the RBA has made errors. But it is essential that we have continuity, independence, and accountability in our approach to Monetary Policy.

It is disappointing the government has rejected our good faith offer of bipartisanship on these issues.

But we will fight for stability of the Board through legislative amendments to carry over the current board to the proposed Monetary Policy Committee.

At the same time, we have to remember that the RBA has essentially a single tool to address inflation, and no tools to address our home grown productivity collapse.

The government can and should have done more to address inflation through fiscal policy.

And it can do more to solve the productivity challenge that, if not resolved, will mean interest rates and inflation remain higher for longer.

THE BUDGET MUST ADDRESS THIS & STRUCTURAL REFORM

So, the starting point lies in the budget.

Labor’s first two budgets have increased spending by $209 billion. The net impact of policy decisions across these two budgets has worsened the structural budget deficit.

COMMODITIES

So it’s with some amusement that I noted the Treasurer’s comments about commodity prices in recent weeks.

When the Treasurer complains about iron ore being down, let us be clear: the iron ore price quoted by the Treasurer in recent weeks was still $34 a tonne higher than his forecast assumes, and today is more than $50 higher than the budget estimates for the end of the March quarter.

The reason the Treasurer is pre-empting this is because he has been guilty of using commodity windfalls as a substitute for budget management.

Conservative commodity forecasts have been a convention since 2013. And in some respects, this is a very good thing.

But in recent years the extremely conservative assumptions have become a hollow log for governments.

This is bad budget practice, and reduces accountability for governments to manage their spending.

The consequence is that temporary revenue gains are being used for structural expenditure.

And that must change.

As the AFR’s economics editor John Kehoe has pointed out, the saving of revenue upgrades has been overstated by the government. The Coalition’s estimates put this at just around half across two budgets.

Whichever way you slice it, the 90% claimed by the government in its budget speeches is not even close to being credible.

The budget papers show us that policy decisions alone have made the structural deficit worse – despite Labor’s half dozen of higher taxes.

The Coalition called on the government to deliver a surplus, and we’re glad they did. But it is important they deliver another one and it is important they make the structural policy decisions to return the budget to structural balance.

Instead, we have seen a shuffling of funds, a lionising of parameter variations as budget decisions from government.

And this has been exposed by the fact that after almost two years, and two budgets after the election, gross and net debt is higher than when the Coalition left office and in the 2021-22 Final Budget Outcome.

In an uncertain economic environment – this is alarming.

We have failed to make serious fiscal headroom for the next crisis.

And it leaves us dangerously unprepared for a future shock.

TAX HONESTY

Meanwhile, income tax receipts to January remain higher than their MYEFO forecast. Similarly, indirect tax revenue is also higher.

National Accounts data makes it clear that income tax receipts are 23% higher than they were 18 months ago.

The Coalition support lower taxes, but Labor’s repeal of the stage 3 tax cuts unambiguously entrench bracket creep in our system and will affect work incentives.

Jim Chalmers and Anthony Albanese are the first Treasurer and Prime Minister to add a tax bracket into the law since 1993 – and the first to lower the top tax threshold since 1984.

And above all else, it was one of half a dozen new taxes that weren’t taken to the election.

We are seeing a tax system that is adding complexity, not removing it.

Simplicity and certainty are fundamental elements of our tax system and are undermined when politicians don’t keep their promises on tax.

The Coalition is committed to a tax reform process that delivers lower, simpler, fairer taxes.

In addition to addressing bracket creep and driving investment, it is crucial that we examine not just how much tax we collect, but how we collect it.

FISCAL RULES

All of this highlights the need for stricter fiscal strategy and stricter budget rules.

Treasury officials have confirmed that the first pillar of Labor’s fiscal strategy is to allow so called ‘automatic stabilisers’ to run.

In practice, that means allowing bracket creep to steal from hard working Australians.

That means higher taxes, and higher spending – baked into the budget strategy.

Labor’s current fiscal rule is taking from family budgets to improve their budget.

The Coalition created the Charter of Budget Honesty under Peter Costello and there is a growing argument it needs a refresh.

Keating’s creative accounting prompted its creation. As a keen student of Paul Keating, the Treasurer may well prompt a renaissance of the Charter of Budget Honesty.

We will have more to say on this but at a minimum Australia needs to return to tighter fiscal rules as a constraint on government.

Restoring the tax to GDP cap.

Ensuring the economy grows faster than spending.

Targeting a budget surplus.

And a commitment, above all, to private sector growth as the basis for a strong economy and strong budget.

All of these were dropped from Labor’s fiscal strategy. We will restore them.

GROWTH CAN’T JUST BE SPIN

Now, growth can’t just be spun. We need a whole of government strategy.

That’s not just the right thing to do to manage the budget.

We need to make sure governments have the incentive to drive productivity enhancing reforms

Reviving labour productivity growth is essential to sustainably bring down inflation and increasing real wages.

We have heard a lot of talk about productivity in recent weeks, yet we are not seeing that matched with action.

Labor’s policies in financial services – particularly on regulation, on approvals, and Industrial Relations are at odds with boosting Australia’s living standards.

Productivity is how we improve our quality of life and our national prosperity.

It is about growing the pie, so that all Australians benefit, and it should be a core aim of any government.

When we talk about productivity we are not talking about Australians working harder.

We are talking about working smarter to make Australia an easier place to work, an easier place to do business, and an easier place to invest.

That's absolutely essential for our quality of life, to be a prosperous and innovative country, and a leading economy in our region.

Productivity reform requires hard work from politicians, and hard decisions, but all Australians will benefit.

Peter Dutton has been clear it will be a priority for the Coalition.

FINANCIAL SERVICES ROLE IN PRODUCTIVITY

Central to that is an innovative and well-regulated financial system.

Financial services reform has played as critical a role in driving productivity. We saw that in the 90s and 2000s in industrial relations and many other areas, including floating the dollar, establishing CHESS, centralising the Corporations Act, privatizing the CBA, and incentivising retirement savings. All of those things were central to the period of stronger productivity we saw following that reform era.

Presently, it's critical to implement the Quality of Advice review swiftly, simplifying regulations for financial advisers, and promoting digital advice.

This should be the first of a broader suite of reforms to support our financial services sector to thrive.

And I thought Stutch laid out very clearly the context for the need for some of the regulatory changes and deregulation.

Critical to this project is never forgetting the lessons of the Royal Commission that the consumer has to be at the heart of our financial services sector, and all of our private sectors.

But that’s a lesson that ought to be heeded by policy makers and regulators as much as it should be by banks and others in the private sector.

The scale of the challenge is increasingly clear.

Research by McKinsey shows a quarter of Gen Z don’t expect to be able to retire and we know many expect never to own a home.

We are at risk of many Australians being under-banked, under-insured and under advised.

As the quality of advice review told us, excessive regulation is now hurting customers.

REGULATION

In keeping with the need to reduce the regulatory burden, the Coalition has long called for the establishment of a regulatory grid for financial services.. We welcome its introduction.

But it’s now incumbent on the government to ensure that it is implemented properly.

The grid is pointless if it doesn’t drive a change in regulatory culture.

Under a Coalition government, the regulatory grid will be a beachhead for an agenda of deregulation and better regulation.

One that reduces overlap and prioritises changes, forcing agencies and policy makers to assess regulatory impact as more than just a box ticking exercise.

We will look very closely at extending the concept to other regulated industries, including energy and telecommunications.

Jane Hume, Michaelia Cash and I are all passionate about driving deregulation and better regulation across our portfolios.

But it is essential that we put in place the right economy wide policy settings to allow our economy to grow.

APPROVALS

Now, critical to this regulatory piece is providing certainty and timeliness on approvals across government.

The Coalition has lobbied for urgent improvements to environmental approvals as part of our demands and the negotiations on the petroleum resource rent tax (PRRT),

But the reality is environmental approvals are just the beginning of a larger body of government roadblocks to a more productive economy.

Across governments, uncertainty over approval timelines drive business and investment uncertainty.

Over the past two years, we have seen escalating concerns about the timeliness of FIRB approvals despite the fact that the number of approvals or the number of applications, has fallen in volume and value.

This has been particularly pronounced in finance and insurance.

Australia’s number one sources of foreign investment are our allies: the United States, Canada, Japan, the United Kingdom, and Singapore. Yet more than 68% of FIRB proposals take longer than 30 days to process.

The Department of Industry’s Major Project Facilitation Agency has granted just two projects major project status since Labor came to office, compared to 17 in the last two years of the Coalition Government.

While RADIs have been a welcome innovation from APRA, there remains no legislated time frame for licence applications under the Banking Act, Insurance Act or the Life Insurance Act.

And Australia remains behind the rest of the world in regulating digital assets.

Getting our regulatory approvals right, so government is an enabler rather than a roadblock to investment is essential to reversing our productivity slump.

INDUSTRIAL RELATIONS

There is no greater example of the complacency on productivity than the IR agenda we’re seeing from the government.

IR impacts every business, every workplace, and every Australian.

It is critical to every business seeking to grow, or expand in Australia.

IR reform is without a doubt one of the most important of all the economic reforms required to make Australia more productive and competitive.

Our IR framework should not add cost, confusion and complexity at a time when people are struggling to pay their bills.

We want to make it easier for businesses to employ Australians, to invest, innovate, to take risks and run successful business.

Yet, the BCA has warned Labor’s industrial relations agenda “threatens” any progress on productivity.

And independent research shows that abolishing the ABCC would add $47 billion in costs across the economy.

The e61 Institute found Labor’s multi-employer bargaining laws stifling firm growth and reducing competition.

And Treasury’s Employment White Paper didn’t even consider the productivity and jobs impact of Labor’s policies.

Already, we are seeing the beginnings of the new and aggressive union business model under these laws.

There have been more industrial disputes since June 22, than in the entirety of the 46^th Parliament.

A genuinely fair workplace relations system must be pro-employment, it must be small-business friendly, and it must be flexible to respond to both the needs of employers and employees.

We will continue to champion the right side of getting to a strong economy and a productive economy through good Industrial Relations and competitive workplaces.

CONCLUSION

Over the past two years, Australians' quality of life has fallen dramatically due to higher taxes, high inflation, and falling labour productivity.

For the first time in generations, young Australians face the real prospect of a lower standard of living than their parents, with less access to housing and less opportunities to build wealth, start families and fulfill their dreams.

We need to restore our standard of living and build the foundations for continued prosperity.

This requires better fiscal management and real action on productivity that addresses regulation, approvals and Industrial Relations.

We will deliver policies that take pressure off small businesses and households, increase home ownership, reward aspiration and hard work.

And we understand the important role our financial sector and our banks play in supporting that agenda.

We know there is a better way.

ENDS.