Thank you for the warm welcome. It's a pleasure to be here this morning talking about the transition to a clean energy future for our economy. There are some great opportunities ahead for Australian business, but also some pretty significant challenges. That's why I welcome the work of organisations like Green Capital – encouraging business leaders to think strategically about the future. About how we build an even stronger economy, while also protecting the environment and building stronger communities. Business leaders who are starting us on the path to the high-tech, low-carbon economy that we need to prosper in the 21st Century. But before I discuss that in detail, I'd like to briefly touch on recent developments in the global economy that have dominated the public airwaves in recent days.
In many ways the Australian economy is well placed to outperform its global peers over coming years. But it's also true that like many of you I have become increasingly concerned over the outlook for the global economy in recent weeks. We saw last week for example that US growth for the first half of the year had slowed to a crawl. The debt ceiling drama Washington hasn't helped. Though the US congress has finally secured agreement to lift its debt ceiling addressing some of the immediate uncertainty in global markets, we should be under no illusions about the magnitude of the challenges they still face.
The US, along with many European countries, are confronting a long and painful adjustment process to reduce their debt burdens and get their budgets back on a sustainable footing. But there are deeper and wider problems in the US: unemployment remains high, house prices are still declining and house construction is exceptionally weak, consumers are unwilling to spend, and business investment is still hesitant despite strong profit growth. I have no doubt that the US economy will find new sources of strength, but it is weaker than many expected it to be at this point.
Meanwhile, the Greek debt crisis is infecting the market for Spanish and Italian debt and enforcing sharp fiscal adjustments across much of Europe. I'm confident that Germany, France, the ECB and the IMF are strong enough to deal with the continuing crisis, but global financial markets are likely to remain uncertain and anxious for some time to come.
Australia is obviously not immune from these global developments, but we shouldn't forget that our fundamentals are strong. In fact, there is really no country that I can identify as being a better place to do business at the moment than in Australia. We have low public debt, low unemployment, a strong and stable financial system with our banks among the highest-rated in the world, a record terms of trade and an unprecedented investment pipeline.
In our own region we are encouraged by the continuing strength in China, evidence of a faster than expected recovery in Japan, and good growth elsewhere in the region. Even so, many of our import competing industries and non-resource exporters are challenged by the high Australian dollar. At the same time we are experiencing a structural change as Australian households rebuild their savings after the rapid increase in household debt in the last fifteen or twenty years. Because of these influences, most of the growth in Australian output over the next year or two is likely to arise in the resource sector, from increased exports and investment.
So Australia has some challenges ahead of us as well. But while we are dealing with challenges that largely arise from our relative strength; the rest of the developed world is dealing with crises. That's the difference that sets Australia apart.
While the global situation is worrying, we can take a lot of confidence from the fact we're in a far better position than just about any other economy in the developed world. And we have a proven track record when it comes to dealing with global instability, and a government that is getting on with the job of rolling out significant reform agenda to further strengthen our economy.
In contrast to the political gridlock we have seen bedevilling budget negotiations in the US and elsewhere, we have just about passed our own budget in full – a budget that delivers the biggest fiscal consolidation in our history. We have passed over 160 pieces of legislation through lower house and around 130 pieces of legislation through both houses.
We're investing more in education and training and taking steps to improve participation to not only give tomorrow's workers the skills and opportunities they need, but to improve the skills of today's workforce.
We're rolling out substantial new investments in infrastructure including the national broadband network, which will give us faster speeds, higher capacity and more productive businesses.
We're reforming the tax system to provide more reward for effort and better incentives to invest.
And we have secured an historic agreement to put a price on carbon – a fundamental economic reform that will drive the transition to a clean energy future. A transition that will see $100 billion dollars being invested in clean energy over coming decades. Innovation and investment that will drive new economic opportunity and new jobs, particularly in regional Australia. We simply can't afford to turn our back on this global growth sector. We can't afford to ignore the massive economic opportunities that lie ahead of us if we get this reform right.
The Clean Energy Future package that we released last month benefitted from extensive consultation with business and the broader community. From the Business Roundtable on Climate Change and its sub-groups, through to one-on-one meetings with business leaders from across the country, barely a day went by when I wasn't discussing climate change with business. The vast bulk of the business community took the opportunity to play a constructive role in the design of this policy. And as a result, we have a package which:
There has been lots of commentary about the package, trying to badge it one way or another. But the badge that I am most comfortable with is that this is a 'pro‑business/pro-jobs' package. A package that puts in place the settings we need for long-term growth and future jobs in this country. A package that sets us up to reap the benefits of what Nicholas Stern calls the "new industrial revolution". Because the real environmental reforms almost always turn out to be real economic reforms as well.
This is indisputably a real environmental reform – reducing our net pollution from over 1,000 million tonnes in 2050 to about 100 million tonnes. Equally, it is a real economic reform. You only need to look at countries like Germany and Denmark which have built world-leading wind turbine and solar panel industries on the back of strong environmental policies. Or look at Britain – where some of the world's leading wind turbine manufacturers have announce plans to build assembly plants and R&D centres since its offshore wind program was announced a year ago.
Perhaps the best example is China – where clean energy technologies are one of the core strategic priorities of its next five year plan. A country that already leads the world in terms of investment in renewable energy, with one out of every two wind turbines installed in the world being installed in China. A country that wants to do more.
The opportunities are there for Australia in a low-carbon goods and services sector that is already worth about $4.8 trillion dollars, and which employs 28 million people. A sector that is growing at 4 per cent a year, faster than world GDP, and which is expected to continue to accelerate.
Australia has great renewable energy potential. We have world-class entrepreneurs, scientists and researchers. A confident, dynamic country like ours should be at the front of this innovation race.
The Government will do its part to unlock innovation – including through the new $3.2 billion Australian Renewable Energy Agency and the $10 billion Clean Energy Finance Corporation. A Clean Energy Finance Corporation which will work hand in glove with the business community to attract private sector funding for renewable energy and clean technology projects.
Of course, there will always be vested interests that will oppose this type of economic reform. We saw it with tariff reform, we saw it with the floating of the dollar, and we saw it with compulsory superannuation.
For example, you would have seen claims from groups like the Food and Grocery Council that pricing carbon will increase food prices significantly - with claims of price rises of 3 to 5 per cent. But these claims just don't add up. Farmers aren't going to be subject to a direct carbon price; and very few food manufacturers are amongst the 500 biggest polluters. Energy costs account for only a small share of overall retail costs, so we expect that the overall price impact will also be small. All up, Treasury estimates that food prices will rise by less than ½ a per cent when the scheme commences. And a similar story will unfold in most other sectors of the economy.
You'll hear other groups claiming that even a modest carbon price will send jobs and businesses off-shore. The Australian Coal Association for example has raised this concern. I know the coal industry and I am a strong supporter of the coal industry. The fact is that the coal industry is booming. Over the last six years the number of people employed in the industry has doubled, and the volume of exports has increased by more than 50 per cent.
I was in Gladstone and Mackay just a couple of weeks ago and saw the massive investment underway to expand the port and mine capacity to deal with the surge in coal. We understand that there are a small number of 'gassy' coal mines that will face increased costs as a result of the scheme, and we'll provide targeted assistance of about $1.3 billion over six years to assist.
Of course, we haven't seen coal businesses move offshore since the Clean Energy Future package was announced, we haven't seen mine closures, and we haven't seen job losses. What we have seen is increased investment, including a major takeover bid for one Australian coal operation.
Over the last few weeks I have been out on the road with Prime Minister and other Ministers explaining the Clean Energy Future package. One of the things I've been asked is "Why are you risking the Government for this reform?" My answer is simple. "Because it is better to risk the Government, than to risk the country." And make no mistake, failure to act quickly and sensibly on climate change will put our nation at grave risk - a risk which our country simply cannot afford to ignore.
One thing that I am certain of, whatever the outcome in the short term, in time our decision to put a price on carbon pollution will be seen not only as worthwhile, it will be seen as essential. My view is that we are already gaining momentum in this debate. And support for this reform will only grow the longer we have a price on carbon.
Many businesses have already started reducing their carbon pollution. But many have been waiting for greater certainty about the competitive landscape before taking more ambitious steps.
Moving to a clean energy future will provide new economic opportunities for Australian workers. Many businesses will invest in new technology to cut their pollution and become more efficient.
Jobs will also be created in new clean industries such as renewable energy generation, carbon farming and sustainable design, to name just a few.
The massive opportunities presented by our clean energy future are just one reason why I'm optimistic about our economic prospects. Despite the global uncertainty, Australia's economic fundamentals remain strong.
We have low unemployment — around half the unemployment rate facing the US and Europe. In part because we so successfully fought off the global recession, we have a strong budget position with very low debt, and a record pipeline of business investment.
This could not have been achieved if the government and business had not worked together so effectively to tackle the big challenges. And it is why I am focused now on working with the business community to deliver lower corporate taxes, support business in the transition to a clean energy future and to ensure we are investing in the critical infrastructure that will drive our economy in the 21st century.