A strong economy is important but not an end in itself. What matters most is what we do with our nation's prosperity. As I said during the week, it's not just about putting dollars in people's pockets, but providing opportunity to more people, and giving everyone a decent shot at a decent life. Over the past four-and-a-half years, the Labor Government has been focused on building both a stronger economy and a fairer society. These values have underpinned our last four Budgets, and they are guiding us again as we prepare for the Budget to be delivered in just under two months' time. With the right policies and decisions, we can continue to build an Australia where more people share in the opportunities that flow from the Asian Century, not just a fortunate few.
On Wednesday, we got a snapshot of how our economy performed in the final three months of last year in the National Accounts. It showed gross domestic product expanded 0.4 per cent in the December quarter – a solid result given Europe's sovereign debt crisis was at fever pitch at the time causing wild swings in international financial markets and dampening business and consumer confidence. The outcome was even more impressive when you consider that economies like Germany, Japan, the U.K. and Italy all contracted in the quarter. While the events in Europe have definitely had an impact on our region and our economy, Australia's fundamentals remain strong. Our low unemployment, sturdy public finances, very low debt, contained inflation, and huge pipeline of investment all provide a solid foundation that will help us withstand the global turbulence we're likely to see continue for some time to come.
Australia walks tall in the global economy. Unlike virtually every other advanced economy, we didn't fall into recession as a result of the global financial crisis. Our stimulus response kept the doors of businesses open and hundreds of thousands of workers in jobs. Today our economy has grown by 7.4 per cent on pre-GFC levels, putting us streets ahead of the seven major advanced economies. In fact, three of the seven haven't yet recovered the ground they lost during the GFC.
Cumulative growth on pre-GFC levels (%)
Many people don't realise that one of the lingering effects of the GFC has been a massive write-down of tax receipts – at MYEFO, government revenues were down by $140 billion over the five years to 2012-13 from the pre-GFC forecast. Since then we've seen further weakness in company tax receipts as highlighted in the National Accounts, which showed company profits down 2.7 per cent in the December quarter. This will inevitably flow through to the budget bottom line and obviously means we will have to find significant savings in the May Budget.
Despite the tough global conditions, we remain determined to return the budget to surplus in 2012-13, and we will get there. It's the right strategy for the economy, for confidence and for Australian jobs – particularly with growth on track to return to trend. You only have to look to events overseas to see why this is so important. Europe's sovereign debt crisis is the result of governments failing to set out and stick to credible paths back to surplus. Maintaining our fiscal rigour is absolutely essential at a time when markets are punishing those without discipline. It sends a message of confidence to the world in uncertain times and also provides the Reserve Bank with maximum flexibility to respond to any further deterioration in the global economy.
The complexity of the task is increased because we can't rely on the rivers of gold that flowed into government coffers during the last mining boom. As I've discussed before, we shouldn't expect a repeat of the massive $334 billion upward revision to tax revenues that occurred between 2004 and 2007. Because of the much higher level of investment today, mining companies are able to claim much larger tax deductions. And unlike last decade, commodity prices are already at high levels so mining companies aren't posting the same growth in profits that they once did. Australia's terms of trade is forecast to gradually decline in the years ahead as increased global commodity production comes on line. All this means that government revenues will not grow at the sorts of rates we saw during the previous boom, and we'll have to continue to find budget savings that balance fiscal discipline with fairness.
I've been overwhelmed by the positive response to my essay on inequality and vested interests in The Monthly – my office has received hundreds of calls, emails and letters. Of course, there have also been the predictable criticisms from the predictable quarters that dismissed the essay without dealing with the substance of the argument. The fact that a company took out full page ads in major newspapers to attack the essay seemed to prove the very point I was making: that the debate over the future of our country is at risk of being distorted and decided not by the strength of ideas, but the strength of influence money can buy. More people should have a say in the debate about the fair go, and a stake in our success – and I am pleased people are discussing the essay, whether they agree with me or not, including on Twitter at #FairGo.
An important part of the Gillard Government's agenda to build a fairer society is the Minerals Resource Rent Tax. With Parliament resuming this week, it's really important that the minor parties and Independents pass this critical reform. Around 2.7 million small businesses stand to benefit from the passage of the $6,500 instant asset write-off that will help make their businesses grow, around 8.4 million workers will enjoy a more secure retirement with the increase in superannuation guarantee, and communities across the country will gain new and better infrastructure. The MRRT will help spread the benefits of the mining boom to every corner of our economy.
Lastly, as so many of our own communities battle floodwaters, our thoughts today are also with the Japanese people on the first anniversary of the terrible earthquake and tsunami. I'm proud of the efforts of so many Australians who are lending a hand today, as well as those who helped in the recovery and rebuilding efforts to disasters both here and in Japan a year ago. Australia will continue to stand with its friends in Japan as the nation rebuilds its homes, schools, hospitals and communities.
Deputy Prime Minister and Treasurer of Australia