Welcome to the latest edition of my economic note. On Tuesday I had the good fortune to visit Port Macquarie in New South Wales for one of our regular Community Cabinets. Many of the people I spoke to were age pensioners, and they mentioned how they are really looking forward to the pension increase which kicks off on 20 September. I'm proud to be Treasurer in a Government that, despite the global recession, has finally been able to find room to deliver a fair go for pensioners. The pension increase will see single age pensioners on the full rate get an extra $32.49 per week and pensioner couples on the full rate get an extra $10.14 per week. People have also been interested in the new work initiatives for older Australians. Under the new Work Bonus, only half of the first $500 of fortnightly employment income is included in the pension income test. This means age pensioners can earn more income before their pension is reduced. And if they are over the income threshold, they will lose only 25 cents of pension for every dollar of eligible employment income – a significant improvement on the 40 cents they currently lose.
On Wednesday I joined the Queensland Treasurer, Andrew Fraser, in Mt Isa to discuss energy security with the region's business community and launch the Sims report. The release of this report commences Queensland's competitive, customer-focused process to identify an energy solution within 12 months. Energy security is the issue in Mt Isa. The right decisions today to secure competitively priced energy will unlock Mt Isa's enormous economic potential in the future. In my discussions with local entrepreneurs and decision makers, I emphasised that renewable energy must be part of any solution now that our expanded Renewable Energy Target is in place. To make sure businesses in this important minerals rich province have a voice in Australia's economic and renewables policies, I will soon co-host a North Queensland Renewables Business Roundtable with the Minister for Energy and Resources, Martin Ferguson, and the Member for Kennedy, Bob Katter. These are massive issues and I'm looking forward to the discussion.
Last week's capital expenditure figures showed that the total amount of new capital expenditure by private businesses increased by 3.3 per cent in the June quarter. This week's Fact of the Week is that spending on equipment, plant and machinery rose by 5.3 per cent in the three months to June, on the back of a relatively strong increase in the small business sector. The Australian Bureau of Statistics said their "communication with businesses indicated that this increase was stimulated by the Federal Government's investment allowance scheme incentives." Treasury estimates that without the surge in motor vehicle investment associated with our Small Business and General Business Tax Break, spending on equipment, plant and machinery would have fallen in the June quarter, rather than rising by 5.3 per cent. And this is without even taking into account the effect of the investment allowance on equipment, plant and machinery other than motor vehicles.
While it is heartening to see further evidence that our stimulus is working to support business investment and the many thousands of jobs that depend on it, it is important to keep in mind that conditions for business investment remain tough. Even after this quarter's gains, spending on equipment, plant and machinery is still 7.1 per cent lower than what it was at this time last year, and businesses' capital expenditure intentions for 2009-10 is 10.4 per cent lower than the equivalent estimate for 2008-09.
Construction work figures released last week further highlighted the importance of our stimulus plan's infrastructure spending. Total work done fell by only 0.1 per cent in the June quarter, thanks to a 0.2 per cent decrease in private construction activity being partially offset by a 0.3 per cent increase in public construction activity. This data shows that public investment continues to provide vital support to economic activity.
The Commonwealth Coordinator-General last week released a comprehensive report on the roll-out of the Government's stimulus package. This progress report marks the first opportunity for the Government to recalibrate the stimulus plan in response to actual demand. Without changing the overall size of stimulus, we're recalibrating to focus more stimulus on those programs that have been a runaway success in supporting jobs – like the Primary Schools for the 21st Century school infrastructure program. Going forward, we will continue to monitor the stimulus package, to make sure it is providing support to the economy – when it is needed and where it is needed.
On Monday my colleague the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, and I announced that the Government will transfer supervisory responsibility for trading activities on Australia's financial markets to the Australian Securities and Investment Commission (ASIC). Chris explained that "it is more appropriate for an agency of the Government to perform this important function."
This week I will be meeting with my G20 colleagues in London, to ensure we are doing all we can to cushion our economies from the global recession. We will be working on reforms to the global financial system and international financial institutions, and ensuring that efforts to support growth and jobs over the year ahead are fully implemented. The G20 is also responding to the emerging challenges facing the global economy and laying the foundations for sustainable global growth into the future.
This week we will receive Australia's all-important national accounts for the June quarter. Recent GDP outcomes from abroad have shown that while a number of ASEAN economies returned to growth in the June quarter, the US, UK and Euro area economies have continued to contract. So while it's encouraging to see that government stimulus packages around the world have led to some tentative signs of stabilisation in the global economy, we're far from declaring victory over the global recession. So far Australia has outperformed virtually every major advanced economy – with stronger growth, lower debt and lower deficits. Whatever the result on Wednesday, there's no room for complacency. The road to economic recovery will be long and very bumpy as the global recession plays out – which is why you can rest assured the Government is 100 per cent determined to keep implementing our stimulus to support Australian businesses and jobs.
Treasurer of Australia
Sunday 30 August 2009