Speech Summary Economic Conditions and Prospects
Speech to the American Chamber of Commerce (Qld) AmCham iiNet Business Luncheon
The speech considers Australia's recent economic performance in the context of its presidency of the G20. Much is made of the G20's focus on economic growth and how its growth target can be achieved. Such growth challenges are then considered from an Australian perspective, with discussion focusing on potential fiscal sustainability and demographic issues. And in light of the launch of the Financial System Inquiry, the speech discusses the role of the finance sector in supporting economic growth.
The speech examines the objectives of the Australian G20 presidency, and its focus on improving global growth through enabling investment and enacting structural reforms. The G20's goal of achieving an additional 2 per cent growth over five years is discussed in detail. It underlines that this target should not be met by ‘fiscal adventurism’ but by focusing on actions which spur growth potential.
The speech then turns to the question of where Australia's growth will come from after the mining investment boom ends. It suggests that there are early signs that Australia is managing the downward phase without a slump but acknowledges that it is ‘far too soon to think about counting any chickens yet’. The speech then examines some of major long-run challenges that will need to be addressed, even if the mining investment handover is managed well. On fiscal sustainability, the speech suggests that the debate has been overly focused on budget outcomes and that the real issues that need to be addressed are medium-term. Particular emphasis is given to discussion of how to fund some of the measures that society would like implemented in the medium term. In discussing demographics, the speech notes that in the medium term the issue will not be one of a lack of jobs, but a shortage of people to fill such roles. It also notes that trends point to a smaller proportion of the population working, and a larger proportion needing support in their later years, even as other demands on public finances increase. To address such challenges, the speech posits that ‘the only answer is growth’ and that this will require higher productivity of those working.
The speech concludes by discussing the role of finance in supporting growth. It highlights that the financial system is capable of providing support for the economy and helping to absorb shocks, but that it is also capable of being a source of shocks itself. And it notes that a financial sector that reliably and efficiently offers the services the community needs can play an important role in achieving growth.