A Resilient Australia - Address to the Sydney Institute - 19 February 2009

AUSTRALIANS PULLING TOGETHER IN CRISIS

Thank you to Gerard and Anne for once again providing the important forum of the Sydney Institute to progress debate about the public policy issues of our time.

When I accepted your invitation it certainly wasn’t my intention to discuss the recent tragedy in Victoria, or indeed the floods in Queensland, New South Wales and Western Australia.

But as a Victorian it would be remiss of me not to reflect on the impact of the bushfire disaster, the toll of death, the breadth of human suffering and the degree to which the tragedy has touched the Australian people.

It didn’t matter where Australians were when we first heard about the inferno in Victoria, we were shocked. As the disaster unfolded, shock turned to horror.

In every country, tragedies like these bring out the best in people and cause them to pull together and look after each other.

But I think it is possible to point to something fundamentally Australian coming out of this terrible experience.

In his public addresses for this year’s Australia Day, the Prime Minister identified three fundamentally Australian values: courage, resilience and compassion.

Of course, no one could have known that these values would be called upon so soon after or that they would be tested by the most traumatic and distressing circumstances.

Nonetheless, we have seen courage, resilience and compassion amply displayed by Australians over the last two weeks. They will continue to be evident in the processes of aid, of recovery and of rebuilding over the weeks and months to come.

These are values that enable Australians to rise to new challenges, however demanding.

They are located in our history, our culture and our sense of who we are as a nation.

They not only help us in times of devastation, but I believe they are values that Australia needs in hard economic times, as we adapt again to a rapidly changing world.

RESILIENCE IN TIMES OF CRISIS

When I last spoke here in July 2007, I spoke of our plans to build a more productive, inclusive society.

Our argument in Opposition was that we could not rely solely on a mining boom to deliver Australia’s prosperity in perpetuity.

Our aim was to unleash the energy and creativity of all of Australia’s people through a revolution in knowledge and skills. In the process, I argued, we must address the needs of Australians experiencing severe disadvantage even during boom times. That aim remains.

When I last spoke here in 2007 no-one could have predicted how swiftly and dramatically circumstances would change.

We now face a Global Financial Crisis and emerging global recession, with the IMF predicting world economic growth over the coming period to be the lowest since World War Two.

The economies of the US, Japan and the Euro-Zone contracted severely in the last quarter of 2008. Demand from China, our second largest export destination, has also slowed significantly.

The signs of change are already visible around us.

Tonight I want to set out the actions the Australian Government is taking to support Australian jobs and our approach to helping Australians adapt to economic change.

These conditions are unprecedented – created by a shock to the world’s globalised financial systems and delivering a shock to neo-liberalism.

But while this crisis is like no other, we can learn a lesson from history. No matter how unwelcome, crises can make us stronger if we use them as opportunities to build. The right response can make us more resilient and better prepared for the next crisis, whenever it may come.

Both the Great Depression and the Second World War produced public institutions and assets that made us more resilient for the future including:

• A truly national taxation system.
• Central banking powers – vested first with the Commonwealth Bank, then the Reserve Bank.
• The early development of our social welfare and health systems.
• Postwar immigration.
• Nation-building projects like the Snowy Mountains Hydro Scheme.
• The expansion of higher education and the development of world class research institutions.

The challenge today is to address the immediate situation swiftly and responsibly and over time, to strengthen Australia’s resilience.

ADDRESSING A NEW ECONOMIC REALITY

For most of the last century we had an insular, heavily regulated and largely industrial economy.

Since the early 1980s we have shifted to a more open, globalised and deregulated economy based on services, construction and mining.

In each of those periods the Labor party has faced the same challenge –adapting to a changing economic reality by increasing the nation’s productive capacity while embracing the values of fairness and opportunity.

In every period of change, Labor has said to the nation we can harness the reform energies of this period and emerge stronger and fairer.

Indeed, we have said to the nation that we can only maximise our strength by affording our fellow Australians fairness. We have said:

• Strength comes by giving every Australian a fair opportunity to work; and
• Strength comes by giving a great education to every child, including those whose family and personal circumstances mean they need that great education the most.

In these new days of challenge, we are saying it to the nation again – stronger and fairer, stronger because we are fairer.

After an extraordinary period of growth, we are now entering a new and challenging period, caused by international events from which Australia cannot be immune. As a result the Australian outlook for jobs has changed dramatically.

While the current level of unemployment is still relatively low by international standards, it has increased from 4.3 per cent in July last year to 4.8 per cent in January this year.

Even more worrying, the Updated Economic and Financial Outlook published earlier this month predicts that unemployment will rise to 7 per cent by June 2010, meaning an additional 300,000 Australians out of work with 100,000 actually losing jobs and 200,000 being new labour market entrants who cannot find work.

Obviously, the prospect of losing their job or not getting the work they need is a source of anxiety and anguish for many Australians.

As a Government, we believe in action in the face of this grim outlook.

We should not abandon the aspirations and the life-chances of hundreds of thousands of Australians to the short term vagaries of the labour market. To me that just seems inhuman and immoral.

But neither should we pretend that unemployment, disadvantage and financial insecurity are entirely new. Even during the years of growth, as economic participation rose to record levels, disadvantage and social exclusion remained far too prevalent in Australian society.

Many Australians face stark and long term disadvantage as the result of unemployment, poor health and disability, low basic skills and lack of social support. For many these disadvantages combined and analysis suggests that around 5 per cent of Australians experience three or more of these disadvantages.

We should also never forget that even in the strong labour market of the resources boom, one in seven Australian children were growing up in a household where no-one worked.

Unemployment and economic inactivity are deeply connected to the other challenges of poverty and social dysfunction that we face. An increase in unemployment therefore will tip more people into a situation where multiple disadvantage threatens and real opportunities become harder to access.

To be true to our aim of being stronger and fairer, we must ensure that the divide between those who participate successfully and those on the margins does not grow bigger and that our determination to address the circumstances of those already at the margins does not diminish.

To deliver this aim our approach to the Global Financial Crisis is as follows.

1. First, we have acted to maintain confidence in the Australian financial system and stimulate overall demand in the Australian economy.
2. Second, we will continue to invest in the human capital and productive capacity of Australians.
3. Third, as Australians adapt to new conditions, we will act to ensure as close a match between labour supply and demand, between the availability of people and that of job opportunities, as possible.

1. DECISIVE EARLY ACTION: BUILDING CONFIDENCE AND STIMULATING DEMAND

Our actions since September, when the full extent of the financial meltdown in the US became apparent, have been designed to maximize Australia’s strengths and maintain confidence in our economy.

The Government’s decisions to guarantee deposits and wholesale funding by banking institutions and to address credit problems in our commercial property and wholesale car financing systems have underpinned our financial system at a time when those elsewhere have come under enormous pressure.

On 14 October we announced a fast-acting stimulus package worth around one per cent of GDP. This Economic Security Strategy, containing immediate investments in infrastructure, housing, help for lower income households and new training investments, has already been shown to have helped maintain retail sales and consequently broader economic activity through December and January.

In November and December we announced significant infrastructure investments in tertiary education, local government and transport worth $5 billion.

The $42 billion Nation Building and Jobs plan, passed last week by the Senate without the support of the Liberal and National Parties, brings unprecedented further action to stimulate demand for jobs in Australia.

It invests in infrastructure that will help to make Australia more resilient and competitive by modernising our school system, improving our energy efficiency and expanding affordable social housing.

These measures will stimulate vital economic activity in every local community around Australia over the next two years.

They will support an estimated 90,000 jobs.

And they will strengthen the longer term foundations of our society and economy.

2. INVESTING IN HUMAN CAPITAL

Well before the onset of the Global Financial Crisis, the Government had embarked on its Education Revolution.

When I spoke here, in July 2007, I argued that only such a long term approach to building the skills and productivity of our workforce would create the basis for an inclusive and prosperous nation.

Perhaps the most shameful legacy of the previous Government was that despite continuous economic growth, it failed to invest properly in education, allowing real spending on tertiary education to decline and our national investment in the early years to lag far behind our OECD peers.

That is why an Education Revolution is at the centre of our policy agenda, including the ambitious COAG reform agenda agreed last November.

Our policies for early years education, for school reform and improvement, for vocational education and training and for universities will all improve the long term skills and productivity of our population. Many, including our expansion of early years services, will also provide immediate employment growth.

These policies have been controversial, especially our commitment to transparency, major changes to improve the quality of teaching, national curriculum and a relentless focus on combating disadvantage.

But we are passionately committed to their delivery as the key to driving excellence and equity.

As times get tougher, the core economic proposition that drove our commitment to the education revolution continues to be valid. People with higher skills and qualifications are still more likely to find good jobs, more likely to earn good wages and more likely to adapt successfully to economic change.

What has changed is that the challenge of upskilling is more urgent.

It is more urgent because, in the short term there will be fewer new job opportunities in the economy and as demand weakens, we risk a downturn in skills investment just at the point when we need it most.

For many people, in recent years, a decision about whether to enroll in education or training has been set against the plentiful availability of well-paid jobs in fast-growing sectors.

Now those decisions are changing – and the long term value of recognized qualifications will become even clearer.

History suggests that Australians recognise this – enrolments in education and training increased during the last recession of 1990-92, as people stayed in education rather to avoid unemployment.

But people can only take up these opportunities to learn if governments and employers are prepared to invest in them. For skilling opportunities that are dependent on employer investment, history is not comforting.

As employers come under pressure as demand and cashflows fall, spending on training can be the first to go. During the downturn of the early 1990s, the number of Australian Apprentices reduced sharply, by as much as 20,000.

Even at the height of the boom, in the mid-years of this decade, we struggled to achieve the numbers of apprentices hired before 1990. In other words, the temporary downturn in skilling contributed directly to the long term skill shortages that we know constrained the Australian economy in recent years.

We must avoid this boom and bust cycle in human capital investment. Just as we are acting through stimulus to counter the cycle of contraction in general demand, we must counter the downturn in skills investment that will otherwise hurt individual life-chances and national resilience.

Australia cannot afford to stop investing in our people.

That is why, in the building projects funded by our Nation Building and Jobs Plan, we will give preference to employers who can demonstrate their commitment to taking on apprentices.

And it is why tonight I can announce that the Australian Government will fund new measures – Securing Apprenticeships - to help ensure the completion of apprenticeships that may be otherwise terminated as a result of the downturn.

We are already receiving reports that some apprenticeships are being handed back by employers.

These measures will provide an incentive to employers and Group Training Organisations who take on apprentices who have been laid off by their original employer. They will be eligible to receive up to an additional $2,800. $1,000 of this sum will be available after completion of the apprenticeship. These payments will be on top of existing incentives.

The program will be targeted at apprentices or trainees at the Certificate III and IV levels in skills needs areas and at selected Diploma and Advanced Diploma qualifications.

We will also fund alternative pathways for trainees and apprentices to complete their training in non-workplace setting. Taken together, these measures will cost $155 million over the next three financial years.

This is one example of the action we are ready to take to counter a downturn in skills investment.

Across the wider economy and education system, we are also ready to act.

3. MATCHING PEOPLE WITH OPPORTUNITIES

The third prong of our approach is to help match opportunities to people, labour supply to ongoing demand, as the economy adjusts.

People need quick, personalised assistance when their circumstances change. Sectors and regions are better-served when they have high-performing, responsive institutions that can help to connect people with new opportunities.

Ensuring that these matching mechanisms work well is an important role for government.

Of course, many people who have been working in well-paid sectors like financial services are at risk of losing their jobs in the current disturbing shakeout. They need our help.

But we also know that the people who are most at risk to economic downturn are those who have the fewest resources.

In Australia, that means workers with few qualifications or recognised skills.

It means communities where jobs are already few and far between, who may be reliant on a smaller number of employers and not well-positioned to compete for new investment and opportunities.

Don’t get me wrong: I am not suggesting that long run market forces should be impeded or that unviable enterprises should be propped up solely to maintain jobs. I am arguing that the ability to compete for new opportunities rests on a platform of public investment and social partnership which combines agility with fairness.

We have already put strong foundations in place for this overall approach.

Our Fair Work Bill, currently in the Parliament, provides for a flexible and fair workplace based on enterprise bargaining and underpinned by a strong safety net.

My Ministerial colleague Brendan O’Connor has led a complete overhaul of the Commonwealth Job Network, introducing a new model of Employment Services which is demand-driven, flexible and focused on addressing the real barriers to employment that jobseekers face.

It gives more help to those who are disadvantaged. And for every individual, it creates significant new flexibility to work with service providers, and access learning opportunities that fit individual circumstances.

The changing outlook will bring into focus three groups that are particularly susceptible to unemployment and disadvantage.

The first is workers made redundant. Last week we announced a relaxation of the Liquid Assets Waiting Period, doubling the allowable amounts to $5,000 for single people and $10,000 for those with dependent children, to ensure that people can gain access to income support while retaining modest assets.

Second, some regions and local communities are especially at risk. There are some local areas where unemployment has remained above 10 per cent and where further increases in joblessness will have deeply negative effects. There are other regions which rely on specific industries that are particularly exposed to the effects of global recession.

Arising from our negotiations in last week’s Nation Building and Jobs Plan, we are ready to invest $500 million in programs that will create jobs and opportunities in these local areas, harnessing the innovative potential of partnerships between community organizations, social entrepreneurs, local governments and employers.

If we take the opportunity, this period of adversity could unleash a new generation of social innovations that will also contribute to Australia’s future resilience.

Third and finally there is one group who deserve a concentrated focus: young Australians.

Without strong attachments to the workplace and long experience of work, young people are clearly at risk in a downturn. They rely on a flow of new opportunities to get a start to their careers – precisely the opportunities that are drying up.

Those with limited or no qualifications are especially exposed – and let’s face it, there are still too many of these in Australia.

History suggests that youth unemployment will spike fastest in the early months of a downturn. While we would expect participation in education and training also to increase, there are still many young people at risk. Spending long periods of time disengaged from both work and study diminishes people’s chances in life. People without post-school qualifications are more than twice as likely to be unemployed as those who have them. Among those who leave school early, a third are only marginally attached to the labour force seven years later. By age 19, close to one quarter of young people are no longer studying and are in part-time work, unemployment or not in the labour force.

As the downturn bites, this situation will get worse. Estimates suggest that, even with the expected increase in educational enrolments, there could be an additional ten per cent or 50,000 15-24 year-olds not fully engaged in education or work by July 2010.

We must address this increase, but we must also address the underlying challenge that Australia has ignored for the last decade.

Responding to the recession of the early 1990s, Australia’s Year 12 retention rate peaked at 77 per cent in 1992. Since then it has fallen again, recently wavering around 75 per cent.

This is not high enough for a nation aspiring to succeed as an advanced industrial economy in the 21st century.

That is why we have already agreed, through COAG, a national target of 90 per cent of young people achieving Year 12 or its equivalent by 2020. But the onset of the downturn makes this challenge more urgent too.

Responsibility for young people’s educational and work transitions is shared. It is shared between Governments, with the Commonwealth and States maintaining many overlapping services from vocational training and income support to youth and careers services.

Young people’s educational outcomes are also the shared responsibility of families, communities and employers.

Lifting achievement in this area will take major national reform – a fundamental restructuring of what is offered to young people, creating high quality pathways for every individual so that they are supported to focus on where the real long term opportunities in Australia’s economy will lie.

That is why, at the next COAG meeting, the Australian Government will continue to discuss with the States and Territories the need for far-reaching reform. Reform that will engage more young people in education and training for longer, to help prevent them from drifting into unemployment in the next two years and to permanently lift our achievement rates.

CONCLUSION: A COMMITMENT TO ACTION

Unemployment is not just an economic loss, it is a human tragedy. Behind the statistics and the business reports are ordinary people who have had their lives turned upside down. Think of the travel agent who has her hours cut and can’t meet her mortgage payments; the apprentice who has lost his job and can’t continue his training; the young person who has just finished school or university but can’t find a full time job.

The Government recognises the reality and gravity of the situation facing Australia.

We cannot guarantee everyone a job, just as we cannot change the course of the global economy.

But we can accept our responsibility to do everything possible now and seize new opportunities to invest in the future.

The current crisis will redefine the role of governments in the modern world.

Working in partnership with the wider community, we are taking action to stimulate demand, to improve people’s skills and to help them find real opportunities as the economy changes.

There is no avoiding the period of painful dislocation and transition that we have now entered. But we are determined to make a tangible difference to the prospects of ordinary Australians.

Even in turbulent times, our economy remains full of promise and long term opportunity. As a Government, we will remain focused on how best to realize that opportunity, by supporting every Australian to gain access to it.

If we as a nation remain anchored by the values of courage, resilience and compassion, I am confident that we can emerge from this crisis stronger, fairer and more optimistic than ever.

Thank you.