john howard's election platform

8/14/2019 John Howard's election platform

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A STRONGER ECONOMYA STRONGER AUSTRALIA


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A STRONGER ECONOMY

A STRONGER AUSTRALIA

OCTOBER 2004


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PART 1 RESTORING PROSPERITY

Introduction

In eight and a half years the Coalition Government has restored Australias economic

prosperity and implemented measures that have ensured this prosperity is spreadthroughout the community to workers, families, pensioners and self-funded retirees.

Strong and stable economic growth, low inflation and a decline in unemploymenthave contributed to a significant increase in the living standards of Australians.These strong economic conditions have opened up greater opportunities. They haveallowed more Australians to make their own decisions about participating in theworkforce.

Since March 1996 more than 1.3 million new jobs have been created and Australiasunemployment rate has been sustained below 6 per cent for a year the best

outcome for more than a quarter of a century.

A steady stream of income from regular employment has provided individuals andhouseholds with an opportunity to save, borrow and invest for their future and tocontribute to the well-being of their children. Interest rates have fallen and remainedlow, and income taxes have been cut. These conditions have ensured that the takehome pay of Australian households has risen.

A frequent misconception in recent years is that the rich have got richer and the poorhave got poorer that people are being left behind. The evidence proves otherwise.A rise in household disposable income has occurred across the board. The rich and

poor have both got richer.

In real terms, household disposable incomes for all Australians, onaverage, increased by 12 per cent between 1994-95 and 2000-01.

Average real household disposable incomes for low income householdsgrew by 8 per cent.

Average real household disposable incomes for middle income householdsgrew by 11 per cent.

Average real household disposable incomes for high income households

grew by 14 per cent


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INFLATION

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0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04

Labor Coalition

Per cent

HOME LOAN INTEREST RATES

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

18.0

Jan-88 Jan -89 Jan-90 Jan -91 Jan -92 Jan-93 Jan -94 Jan-95 Jan -96 Jan-97 Jan -98 Jan-99 Jan-00 Jan -01 Jan -02 Jan-03 Jan-04

Per cent

CoalitionLabor

UNEMPLOYMENT RATE

5.0

6.0

7.0

8.0

9.0

10.0

11.0

Jan-88 Jan -89 Jan-90 Jan -91 Jan -92 Jan-93 Jan -94 Jan-95 Jan -96 Jan-97 Jan -98 Jan-99 Jan-00 Jan -01 Jan -02 Jan-03 Jan-04

Per cent

CoalitionLabor


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Since 1996, Australias real GDP has grown by an average of 3.6 per cent each year,and inflation has averaged 2.4 per cent. In per capita terms, Australias GDP hasincreased by more than 20 per cent.

Australias economic performance has also been amongst the best in the world.

According to the OECD, over the eight years to the end of 2003 Australias totalgross domestic product grew by more than any of the major seven industrialisedcountries.

GROWTH IN REAL GDP

0

5

10

15

20

25

30

35

40

Australia Canada United States Britain France Italy Japan Germany

Per cent change over past eight years

Lower Interest Rates

In the eight and a half years since 1996, home mortgage interest rates haveaveraged 7.15 per cent. This represents the best period of sustained low interestrates since the 1960s.

HOME LOAN MORTGAGE INTEREST RATE

4

6

8

10

12

14

16

18

Jun-59 Jun-63 Jun-67 Jun-71 Jun-75 Jun-79 Jun-83 Jun-87 Jun-91 Jun-95 Jun-99 Jun-03

Per cent


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During the 13 year period that the Labor Party was last in office, home loan interestrates peaked at 17 per cent and averaged 12 per cent.

If home loan mortgage rates were to rise by just one percentage point, Australianswho have taken out an average new home mortgage of $200,000 would be payingan extra $167 per month in higher interest payments.

The Benefits of Strong Productivity

Australias economic growth has been underpinned by a strong productivityperformance. Structural reforms - including to the workplace relations system andthe taxation system - have made Australias economy more flexible and dynamic.

In Government, the Coalition has simplified the overly prescriptive and outdatedaward system. The introduction of workplace agreements has given businesses and most importantly their employees - greater flexibility in negotiating workingconditions and helped ensure that wage rises are underpinned by productivity

improvements.

We have introduced more effective sanctions to protect businesses from unlawfulindustrial action, including through the restoration of the secondary boycottsprovisions, and we successfully legislated to protect junior rates of pay.

At a time when fewer than one in five Australian workers in the private sector areunion members, we have brought compulsory unionism to an end.

TRADE UNION MEMBERSHIP - PRIVATE SECTOR EMPLOYEES

15.0

20.0

25.0

30.0

35.0

40.0

1986 1988 1990 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Per cent of Workforce

The result has been fewer industrial disputes, higher real wages and restraint in thereal unit labour costs of business so necessary to encourage stronger employmentgrowth.

Historic reforms to Australias waterfront have been achieved. These reforms haveresulted in a 75 per cent improvement in the productivity performance of our ports -with average crane rates increasing from 15.9 movements per hour in late 1995 to27.8 movements per hour by the end of 2003. A result critics said could never beachieved.


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National competition policy and other microeconomic reforms have deliveredsignificant benefits to Australians. The Productivity Commission estimates thatAustralias GDP is 2 per cent higher than it would otherwise have been, andAustralian households annual incomes are on average around $7,000 higher, as aresult of competition policy.

Competition policy has delivered lower electricity prices, cheaper airfares and lowercommunication charges. Consumers have taken advantage of the convenienceoffered by extended retail trading hours. In Sydney and Melbourne, wheresupermarkets can trade all weekend, about one third of all customers do their foodand grocery shopping on Sundays.

The extent of the improvement in productivity across the economy is evident from thefact that the average worker in the market sector now produces 24 per cent morethan he or she did in 1996.

Higher productivity growth has expanded the range of policy possibilities. It has

allowed low inflation to co-exist with rising profits and wages.

Workers have been rewarded through real wage increases. Real wages in Australiahave increased by 13.3 per cent since March 1996, compared with a rise of just 2.5per cent over the 13 years of the previous Labor Government.

More rapid increases in output per head mean faster improvements in livingstandards.

The business sector is also taking advantage of Australias strong economicperformance and improvement in labour productivity by investing in greaterproductive capacity of its own.

The more competitive business environment has led to a rapid and widespread take-up of information and communications technology. A recent ProductivityCommission study has found that the effects of increased use of information andcommunications technology on Australias output and productivity growth have beenamongst the highest in the world, behind only the United States, Canada and theNetherlands.

Over the past eight years, real private business investment in Australia more

generally has almost doubled. This significant growth in productive capacity has paidoff through higher profits, with the corporate profit share currently at a record high.

Everyday Australians are sharing in these strong profits because more than sevenmillion of them hold shares, either directly or indirectly.

Sharing the benefits with Pensioners

Australias age pensioners have shared in Australias recent economic prosperitythrough the Coalitions decision to link the age pension to the higher of 25 per cent ofMale Total Average Weekly Earnings or the Consumer Price Index. With wages

rising on the back of the productivity improvements of Australias workers, it is onlyfair that these benefits are spread more widely through the community.


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The new indexation arrangements were first applied in the March Quarter 1998 whenthe single age pension stood at $347.80 per fortnight. Had the link to the CPI alonebeen maintained, the pension would now be $423.10 per fortnight. Instead, with thelegislated link to 25 per cent of MTAWE, the single age pension is today $470.70 perfortnight.

In other words, the single age pension has increased over this time by $120 perfortnight and is currently more than $40 per fortnight higher than it would otherwisehave been had the previous indexation arrangements been maintained.

This provides a good example of how the benefits of good economic managementcan be spread more broadly to include the 850,000 Australians receiving the singleage pension. For someone receiving the single age pension over the entire periodfrom 1998 to the end of 2003, the total benefit from the improved indexationarrangement has accumulated to more than $2,500.

Recipients of the partnered aged pension have likewise benefited from the revised

indexation arrangements. The fortnightly benefit from the improved indexationarrangement for the one million Australians who receive the partnered aged pensionis more than $36.50, and the accumulated benefit over the period more than $2,300.

The Coalitions disciplined approach to fiscal management has meant that we canafford to provide additional benefits to age pensioners. This included a one-off lumpsum payment of $300 in 2001 and, as recently announced, a new utilities supplementwill be paid twice a year to help pensioners pay their gas and electricity bills.

Helping Self-Funded Retirees

Before the Coalition came into office, older Australians who had saved for theirretirement and who did not receive a pension began to pay income tax once theirincome passed the tax free threshold of $5,400. They paid more income tax thanpensioners even when they had the same income.

One of the first things the Coalition Government did on coming to office was to putself-funded retirees on an equal tax footing with pensioners. We raised the tax freethreshold for older Australians to $11,185 so that a qualifying self funded retiree didnot pay tax on their income below that amount.

As part of the 2001-02 Budget, the Government provided a substantial increase inbenefits available to senior Australians. A new Senior Australian Tax Offsetwasintroduced from 1 July 2001 to replace the low income aged persons rebate andpensioner tax rebate for people of Age Pension age. The Medicare levy threshold forolder Australians was also increased, so that senior Australians would not face aMedicare levy liability where they did not have an income tax liability.

The Senior Australians Tax Offset combined with the low-income tax offset ensuresthat eligible single older Australians can have income up to $20,500 without payingtax or the Medicare levy. Similarly, eligible couples are able to have combinedincome up to $33,612 without paying tax or the Medicare levy.


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The Senior Australians Tax Offset phases out gradually and the phase out iscomplete at an income of $38,340 for single senior Australians and for couples at anincome of $59,244.

The Coalition has also substantially widened eligibility for the Commonwealth SeniorsHealth Card so that singles with adjusted taxable income below $50,000 and couples

with a combined income below $80,000 now receive the card.

The range of benefits available to holders of the card has been extended to includecertain telephone allowances and concessional travel on Great Southern rail servicesincluding the Indian Pacific, the Ghan and the Overland.

In this election campaign, the Coalition announced that it will make a new payment of$200 per year to self funded retirees holding a Commonwealth Seniors Health CareCard.

Self funded retirees have also benefited significantly from other tax measures

introduced by the Coalition including the introduction of refundable excess imputationcredits, the effective halving of capital gains tax and the 30 per cent private healthinsurance rebate. The Coalition recently announced that it will increase the PrivateHealth Insurance Rebate from 30 per cent to 35 per cent for people aged from 65 to69 years and to 40 per cent for people older than 70.

Sensible Fiscal Management: Delivering Better Social Outcomes

The Coalitions fiscal strategy has been an integral part of the policy framework todeliver economic growth, rising employment and higher living standards. TheGovernment has followed a primary objective of maintaining a balanced budget, onaverage over the course of the cycle. This ensures that it is not living beyond itsmeans.

The Coalition has a strong record on fiscal policy and fiscal sustainability. It is ontrack to record its seventh budget surplus and has so far repaid $73 billion of general

BUDGET BALANCE

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-3.5

-2.5

-1.5

-0.5

0.5

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2.5

1991-92 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08

-4.5

-3.5

-2.5

-1.5

-0.5

0.5

1.5

2.5Per cent of GDP


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government net debt. At just 2.9 per cent of GDP, Australia now has one of thelowest levels of net debt in the OECD, and its lowest net debt since 1977-78.

The benefits of lower government debt are apparent in the large reduction in theGovernments annual interest payments. Having peaked at $8.4 billion in 1996-97 toservice Labors record debt, net interest payments are expected to decline to $2.9

billion in 2004-05.

This represents an annual saving in interest payments of $5 billion per year.

As a result of this sensible fiscal management, the Coalition Government has beenable to boost its spending in priority areas. Much of this spending goes directly toimproving the living standards of Australians.

LOWER INTEREST PAYMENTS, MORE SPENDING ON THE COMMUNITY

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1995-96 2004-05

Interest on

Government Debt

Assistance to

Families with

Children

$ billion

Hospitals

& Schools

Interest on

Government Debt

Assistance to

Families withChildren

Hospitals

& Schools

Health spending, for example, has doubled since the Government came into office,from $17 billion in 1996-97 to $35 billion in 2004-05. Greater health spending isbeing reflected in better health outcomes for Australians.

Life expectancy for males has increased from 75.5 years in 1995 to 77.4 in2002, while life expectancy for females has increased from 81.1 years in1995 to 82.6 in 2002.

Infant mortality has declined from 5.7 per 1000 live births in 1995 to 5.0 per1000 live births in 2002.

The proportion of fully immunised infants aged 12 to 24 months hasincreased from 78.6 per cent in 1998 to 91.0 per cent in 2003.

Total health expenditure per person per year (in constant prices) hasincreased from $2,183 in 1995 to $3,397 in 2002.

The Coalition has also increased spending on schools. As a result, participation in

education and training has increased substantially. Over the next four years totalAustralian Government spending on schools will be a record $32 billion.


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Year 12 retention rates increased from 65.9 per cent in 1996 to70.3 per cent in 2003 for males and from 77.0 per cent to 80.7 per cent forfemales.

Vocational education and training students increased by 19 per cent from1997 to 2003, the number of apprentices and trainees more than doubledfrom 1996 to 2003 and the number of higher education students increasedby almost half from 1996 to 2003

More than 55 per cent of Australians aged 25 to 64 now hold post-schooleducation qualifications, up from 48 per cent in 1996.

A more disciplined and focused approach to fiscal policy has enabled the CoalitionGovernment to focus on other long term economic and social objectives. This yearsBudget provided a significant funding boost to the aged care sector.

$2.2 billion was committed to the sector to ensure that it is able to provide affordable

and quality aged care services for an ever increasing number of older Australians. Aone-off $3,500 payment was made to providers for each resident in an aged carefacility to improve fire safety and building standards.

To ensure that all of our citizens live in a safer society, more than $3 billion has beencommitted on national security since September 11 2001. A total of $40 billion hasbeen spent by the Government on defence since 1996.

Lower Taxes and Improved Family Benefits

A key aspect of the Coalitions approach to budget management has been to offer

personal income tax cuts. Three major tranches of income tax cuts have beendelivered to date, with a further cut coming into effect on 1 July 2005.

The New Tax System introduced on 1 July 2000 provided major income tax reform,delivering the largest income tax cut in Australias history. In the 2003-04 budgetincome tax thresholds were adjusted further and additional tax relief was enacted inthis years Budget.

These three stages of income tax reform have delivered major structural change.The tax cuts improve the rewards from working overtime, acquiring skills or seekingpromotion. As a result of the changes, over 80 per cent of taxpayers face a top

marginal tax rate of no more than 30 per cent.

Taxpayers on average full-time weekly earnings will remain in the 30 per cent taxbracket over the coming years, even allowing for ongoing wages growth.

The increase in the top threshold will make Australias personal tax system moreinternationally competitive, providing incentives for skilled Australians to stay andwork in Australia.

The tax relief delivered by the Coalition over the past eight and half years has beensubstantial. An Australian earning $35,000 per year is today paying $1,250 per year(or $24 per week) less in tax than they were when Labor was last in office. Someoneof $45,000 is now paying more than $2,200 per year less ($44 per week) than in1995.


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INCOME TAX SCALES

Labor's Tax Scales Tax Scales 1 July 2004 Tax Scales 1 July 2005

Taxable Income Tax rate (%) Taxable Income Tax rate (%) Taxable Income Tax rate (%)

$0 - $5,400 0 $0 - $6,000 0 $0 - $6,000 0

$5,401 - $20,700 20 $6,001 - $21,600 17 $6,001 - $21,600 17

$20,701 - $38,000 34 $21,601 - $58,000 30 $21,601 - $63,000 30

$38,001 - $50,000 43 $58,001 - $70,000 42 $63,001 - $80,000 42

$50,001 + 47 $70,001 + 47 $80,001 + 47

The Coalitions tax cuts have delivered significant benefits across all income ranges.Taxpayers earning $20,000 have enjoyed a measured reduction in their income taxof 23 per cent. For taxpayers on $50,000 their income tax reduction has been 21 percent. By 1 July 2005, a taxpayer on $90,000 will have benefited from a reduction of18 per cent.

Assistance to Families

The Coalition has demonstrated a consistent and ongoing commitment to the role ofthe family in our society. Successive policy initiatives commencing with the FamilyTax Initiative announced in the 1996 budget have recognised the financialsacrifices made by parents in raising children.

The Family Tax Initiative provided a $1,000 per year increase in the tax freethreshold for each dependent child in almost two million low and middle incomefamilies. For single income families with at least one child under the age of five,there was an additional $2,500 per year increase in the tax free threshold.

With the introduction of the New Tax System, the Coalition further increasedassistance to families with children. From 1 July 2000, new Family Tax Benefitarrangements took effect. A major simplification was undertaken with twelveprevious payments replaced by three new benefits. Benefits were also increased by$2 billion per year, withdrawal rates were reduced, income test limits were increasedand the assets test abolished.

The Treasury has analysed the real disposable incomes of Australians before the

new tax system was introduced and about one year after. The analysis found that allfamily types had a greater real disposable income twelve months after theintroduction of tax reform.

The increase in real disposable income was generally significantly higher for coupleswith children and sole parents than for households without children.

The analysis found that between 1999-00 and 2000-01:

- Couples with two children in the bottom income quintile receiveda real increase in average weekly disposable income of $36.

- Couples with children in the second bottom quintile received areal increase of $51 per week.


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- Couples with children in the top income quintile received anaverage increase in real disposable income of $32.

- Sole parents across all income quintiles received an averagereal increase of between $34 and $46 per week.

Working families in the lower income quintiles saw greater proportional

increases in their disposable incomes than those in the highest incomequintiles.

In the 2004 Budget the Coalition introduced a package of further assistance tofamilies which delivers an additional $19 billion to help with the costs of raisingchildren. This included a $600 per child lump sum payment to eligible families aswell as an ongoing increase of $600 per child in the rate of Family Tax Benefit Part A.

Withdrawal rates were also reduced to improve the rewards from working especially for families where a second earner is in part time or casual work or wherea woman is returning to work after having a child.

The arrangements surrounding the Family Tax Benefit Part B payment whichprovides extra assistance to single income families have been made moregenerous, including through a higher free area and a relaxation of the withdrawalrates.

This change means that many parents who undertake part time work a few days perweek will be eligible for more of the FTB (B) payment. It will improve incentives for asecond income earner in a family to take up part time or casual work and will provideadditional assistance for those combining work and family responsibilities.

Taken together the total assistance to families has increased by more than $6 billionper year since 1996. The base rate of family assistance has increased substantiallyfrom less than $600 per child in January 1996 to almost $1,700 per child in July2004. This represents a real increase of more than 100 per cent.

INCREASE IN FAMILY ASSISTANCE - MINIMUM RATE PER CHILD

0

500

1000

1500

2000$ per child

1996 1997 2000 2004

Family Assistance

Family Tax Initiative

FTB Part (A)

Increase in FTB (A)


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A family on a single income of $35,000 with two dependent children (one of whom isaged under five) currently receives more than $10,000 per year from the Governmentin family tax benefits.

In fact, for a single income family with two children the net transfers they receivemean that they do not pay tax in net terms until their family income reaches about

$40,000. In other words, for many families all of the tax they would have paid isrebated by the Family Tax Benefit.

An important additional element of helping families balance their work and familyresponsibilities is the provision of affordable child care places. The 2004 Budgetprovided an additional 40,000 outside school hours child care places and an extra4,000 family day care places. Since 1996, more than a quarter of a million newplaces have been created in child care centres, family day care and outside schoolhours care representing an increase of 85 per cent.

In this campaign, the Coalition has emphasised its approach to supporting families by

providing them with greater choices. Choices about their working arrangements,their family payments and about child care.

New initiatives will provide extra assistance in meeting the cost of child care throughthe introduction of a 30 per cent tax rebate on out of pocket costs for approved childcare. The eligibility rules for Child Care Benefit will also be relaxed to better supportgrandparents who care for children. To ensure that families continue to have choiceas to the arrangements that best suit their own circumstances, the maximum rate ofFamily Tax Benefit Part (B) will be increased by $300.

PART 2 PROLONGING PROSPERITY

Meeting the Challenge of an Ageing Population

Australias continuing record of economic strength and prosperity is the envy of theworlds developed nations. A major source of this national wealth was the relativeyouthfulness of our population providing a growing and more skilful workforce.

But birth rates in Australia have fallen since the 1970s while life expectancy hasincreased. With fewer babies being born and more people living longer, Australiaspopulation is ageing.

The ageing of the population will have a substantial effect on the economy. It has thepotential to drastically affect our living standards and national prosperity.

Over the next forty years the proportion of our population aged over 65 will almostdouble to 25 per cent. Whereas in 2002 there were five people of working age tosupport every person aged over 65, there will only be two and a half people ofworking age to support each person aged over 65 by 2042.


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It is estimated that the extra spending pressures arising from this development willresult in required Government spending outstripping the amount it raises in taxes by5 per cent of GDP by 2042. In todays dollars, this would mean a budget deficit ofalmost $90 billion.

We must act now so we can maintain our prosperity through a cohesive society

without transferring an enormous burden on future generations. To do nothing wouldcondemn our children and their children to higher taxes. To put this in perspective,personal income tax collections would need to increase by 40 per cent to increasecurrent revenues by 5 per cent of GDP. This is not the sort of Australia we shouldleave to our children.

Planning and preparing for Australias demographic challenge is one of theCoalitions highest priorities. An Intergenerational Report was a specific requirementincluded in the Charter of Budget Honestyand the first such report in Australiashistory was delivered with the 2002 Budget.

The IGR looked ahead 40 years and concluded that with no policy change the ageingof our population would result in:

Slower economic growth because of a lower proportion of thepopulation in the workforce (in other words, diminishedworkforce participation);

Increased government spending on health as a result ofincreasing demand for new technology and treatments(especially drug subsidies under the Pharmaceutical BenefitsScheme), and

Increased spending on age and service pensions.

The Coalition Plan

Strong economic management has been the hallmark of the Coalition. Unless wehave a strong economy, we cannot expect to be in a position to handle the problemsthat confront us as a nation.

To meet our demographic challenges, the Coalition has set out a solution to thisproblem based around policies that are designed to grow the economy more quickly.

The Coalition is committed to ensuring ongoing high economic growth by increasingproductivity and improving labour force participation.

We have put in place strategies for our economy to grow through:

Improving incentives to work and save for retirement

Improving the capacity to work through better health andeducation, and

Supporting improved flexibility in the workplace.


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Enhancing our Productivity Performance

To maintain Australias outstanding productivity performance into the future, theCoalition will press ahead with reforms that free up economic activity, enhance labourmarket flexibility, improve the skills base of our workers competition and continue todevelop a more innovative and dynamic society which embraces new technologies.

Labour Market Flexibility

The Coalition is committed to enhancing labour market flexibility. We will pressahead with workplace relations reforms which maintain and extend the framework fordirect, co-operative relationships between employers and their employees.

We will make workplace agreement making easier and more widely accessible. Wewill reduce the formality and cost of having agreements certified and we will preventunwarranted interference by third parties.

A new Independent Contractors Act will be legislated to protect and enhance thefreedom to contract and to encourage independent contracting as a wholly legitimateform of work.

The Coalitions explicit commitment to pursue a full exemption from unfair dismissalslaws for small business employers stands. The Coalition will also protect smallbusinesses from new redundancy obligations.

Better Skills for Our Workers

In recent years, Australians have become more educated and skilled. We havebecome more flexible, adaptable and better able to use new skills and technologies.Further increasing our skills and educational attainment will be important if we are toimprove our productivity.

The Coalitions Higher Education reforms will deliver much needed improvements,freeing universities to grow in areas of expertise and reducing class sizes. Combinedwith measures to boost innovation through the Backing Australias Future package this will mean that the education sector can continue to turn out high quality and

highly skilled graduates.

In addition, apprenticeship programs have nearly tripled over the last decade withmore than 400,000 trainees now, compared with 140,000 in 1995.

Participation in vocational education and training has grown significantly with ongoingreforms designed to deliver relevant and high quality skilled employment and trainingoutcomes.

Nevertheless with the unemployment rate at 23 year lows, Australia is facing anational skills shortage in many of the traditional trades. While this is in part a

product of our great economic success, it is also the legacy of bad decisions taken ageneration ago when the country turned its back on the old system of technicaltrades.


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This growing national deficiency in skilling our young will be addressed through anumber of initiatives, including the establishment of 24 new Australian TechnicalColleges and an Institute of Trade Skills Excellence.

If Australia is to maintain its strong productivity performance, we must better target

and match the skills needs of industry to job seekers through improved links betweenindustry, registered training organisations, the vocational education and trainingsystem and employment services.

Science and Innovation

Science and innovation will play a crucial role in lifting Australias future productivity.Developing skills, generating new ideas through research and turning them into acommercial success is a key to Australias future prosperity.

A key feature of the Coalitions approach to science and innovation has been theBacking Australias Ability package and its $5.3 billion successor Backing AustraliasAbility Building Our Future through Science and Innovation.

Key elements of this approach include an ongoing commitment to high qualityresearch through additional funding for bodies such as the Australian researchCouncil, the National Health and Medical Research Council and the CSIROsNational Flagships Initiative.

Substantial funding has also been provided for a National Collaborative ResearchInfrastructure Strategy which links Australian Government investment in researchinfrastructure to national research priorities.

The Coalition has also provided additional funding for the commercialisation ofresearch through a new $1 billion Commercial Ready Programme. Smallerprogrammes have also been funded by the Coalition that provide innovators withadvice and financial assistance to plan their commercialization, attract capital for theirproject and to establish strategic partnerships to take the innovation to market.

What will happen if we succeed in maintaining our productivity performance?

If we can succeed in achieving a productivity growth rate of 2 per cent for thenext forty years equal to the average achieved since the early 1990s thenwe will go some way to meeting the fiscal challenges of an ageing population.Such an outcome would help keep the budget in surplus longer and the deficitin 2042 would be closer to 3 per cent, rather than the deficit of 5 per centpredicted in the Intergenerational Report, assuming no policy changes.


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Improving Labour Force Participation

The greater supply of job options from a more flexible labour market arrangementshas encouraged more people into the workforce, especially those with family andother responsibilities. However, we still have considerable potential to improve ourlabour force participation rates.

The CoalitionsAustralians Working Togetherpackage released in 2001 built on ouruniquely Australian safety net to provide more choices and opportunities to people onincome support to help them get a job wherever this is possible. Initiatives such asthe working credit and training credits improved financial incentives to ensure thatpeople are better rewarded when they undertake available work, even if the work isintermittent or irregular.

Amongst the 30 OECD countries, Australias total participation ranked twelfth in2002, suggesting that we have considerable potential to improve participation both inthe short and medium term. For men aged 60 to 64, Australias participation rate

ranked fourteenth.

Today, opportunities and expectations when it comes to workforce participation aredifferent. Part-time and casual work is more common. Most women now workbefore and after having children. Others who worked full-time for most of their lives(such as older men) can have problems getting back into work if they lose their jobswhen they are around 45 or 50. There is also a strong trend for skilled males to retireearly, well before age pension age.

The Coalition has set about addressing the challenge of supporting more flexiblework options for older Australians. Of the 4.8 million Australians over the age of 55,only 860,000 - or 18 per cent - are in the workforce.

Mature aged workers are vital to our workforce and we need to support their on-goingparticipation. This will be more important as Australians grow older and live longer.To further reward and encourage mature aged workers to stay in the workforce, theCoalition has announced the introduction of the Mature Aged Worker Tax Offset.This offset will be available to people over the age of 55 and will provide a maximumannual rebate of $500 on their earned income.

This is an important initiative that recognises the contribution that mature age

workers make to productive workplaces but also that there is a strong trend for skilledworkers, especially males, to retire early.

The Government has already legislated to remove any age discrimination that existsin relation to the employment of Federal Government employees. The businesscommunity has also issued guidelines aimed at encouraging big business to keepmore older Australians in the workforce.

The Prime Ministers Community Business Partnership has suggested a number ofpractical ways to encourage the employment of more mature aged workers; changecommunity perceptions and improved incentives to encourage older workers to

remain in the workforce.


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The Coalition is committed to increased flexibility in the workplace relations system toallow older workers to choose whether to remain in the workforce for longer in parttime work as they approach retirement. This approach is not about forcingpeople towork longer. It is about letting people choose when they want to retire.

What will happen if we can improve participation rates in Australia?

If Australian labour force participation rates by age and by gender graduallyrise to reach the top one fifth of the current OECD experience, we will makesignificant inroads into meeting the fiscal challenges of an ageing population.This would imply an aggregate participation rate for the working agepopulation of 61 per cent in 2042, compared with a projected rate of 55 percent on a no policy change basis and a current rate of about 63 per cent.Such a participation rate outcome would ensure that the budget remains insurplus for about a decade longer and the deficit in 2042 would again be closerto 3 per cent rather than the deficit of 5 per cent predicted in theIntergenerational Report, assuming no policy changes.

Retirement Incomes, Superannuation and National Saving

A sound and sensible retirement income policy is essential if Australians are to enjoya high standard of living in retirement.

The Coalitions three pillar approach to providing for retirement incomes is wellestablished and has been endorsed by both the OECD and World Bank.

These pillars are the publicly funded Age Pension; compulsory superannuationcontributions; and voluntary superannuation and other savings supported bygenerous tax concessions.

This year, taxpayers will provide more than $20 billion to fund aged pensions and afurther $11 billion for superannuation through tax concessions. An additional $6billion will be spent on income support payments to people aged 55 to 64. Whencombined, these arrangements provide Australians with higher levels of retirementincomes than before.

The Superannuation Guarantee directs some of an employees current wages intosuperannuation accounts that will improve their standard of living in retirement. Thecurrent rate of 9 per cent provides a balance between employees foregoing currentconsumption for increases in living standards after retirement. On this basis, theCoalition does not intend to increase the rate.

The Coalition has significantly improved the retirement income system since 1996.As Australias population continues to age, it will become increasingly important forour retirement incomes system to become more flexible and adaptable.


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Superannuation is good for individual Australians, giving them greater control overtheir own future. The Coalition also believes that superannuation is good for thenation. A strong superannuation system will deliver long-term benefits and makeAustralia financially stronger.

To further increase national savings and maximise our net national worth, the

Coalition has announced that it will establish a Future Fund.

We know from the Intergenerational Report that future Australians will face a gapbetween expense pressures and revenue which will emerge over the next fortyyears. If we build a Future Fund now it can be used to meet the liabilities of thefuture which are being incurred today.

The Australian Government has never fully funded its superannuation schemes forpublic servants and defence force personnel. Payments to superannuants are madeout of recurrent revenue so that today we are paying benefits to those whoseentitlements may have arisen thirty or forty years ago.

A Future Fund built now can be used to pay the superannuation costs that arecurrently being incurred. It will reduce the call on the Budget in future years and freeup recurrent revenue for the important health pressures and pressures from anageing population that we know are emerging.

Now that Commonwealth net debt is under control, the Coalition believes that futuresurpluses should be used to build the Future Fund to meet the liabilities which lieahead. If we dont act, out children and our grandchildren will be paying the debtsleft by previous generations.

PART 3 HARNESSING OPPORTUNITIES FROM THE GLOBAL

ECONOMY

Integrating Australia into the Global Economy

The pace of Australias integration into the world economy has increaseddramatically in recent years. A stable macroeconomic framework along with anambitious programme of structural reforms and the adoption of new technologies

have resulted in Australia becoming one of the most dynamic and competitivecountries in the world.

Over the past four years, Australia has moved from eleventh to fourth in the Instituteof Management and Development World Competitiveness rankings.

A deepening in our economic linkages abroad has promoted growth and instilled inour economy a greater resilience to adverse shocks.

The Coalitions commitment to an open and competitive economy has helpedAustralia to benefit greatly from increased global economic integration. Today import

and exports represent almost 47 per cent of GDP, up from 39 per cent in 1995-96.


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GROWTH IN AUSTRALIA'S TRADE

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Per cent of GDP

Australias exports account for nearly a quarter of our national income and areresponsible for one in every five jobs. In rural and regional Australia, exports areresponsible for one in every four jobs. In addition, exporters pay wages which are onaverage $17,400 a year higher than non-exporters, with obvious benefits to thoseemployed in the export sector.

Australian consumers have also benefited from increased trade cheaper importsdirectly benefit consumers in the prices they pay and by expanding the choices theycan make. The benefits also extend to our producers through lower input costs andincreased competitiveness.

As Australias economy has opened up, the composition of our exports has changed.Mining has become increasingly important, accounting for about one third of allexports - the same contribution as was made by rural exports three decades ago.Rural exports currently contribute a little less than 20 per cent of the total.

An interesting development has been the rising contribution of manufacturing exports- which have more than doubled in the past two decades. Trade liberalisation haslifted performance in the traditional traded goods sectors of the economy. However,it has also lifted performance in those sectors that might not have seen themselvesas having any connection with the outside world. A good illustration of this andperhaps the greatest export success story in recent times is Australias automotivesector. Where it once supplied almost exclusively to the domestic market, it nowexports successfully to many corners of the globe.

Australia has also benefited from a marked increase in trade in services. Serviceexports - such as tourism, education and financial services have grown by nearly20 per cent since 1996 and now comprise over 20 per cent of Australias exports. Byway of example, the number of overseas students studying in Australia hasincreased from 135,000 in 1996 to 300,000 in 2003.

With the services sector representing the largest and fastest growing sector of theworld economy accounting for more than 60 per cent of global output the exportopportunities are boundless.


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In recent years, Australia has enjoyed both stronger and less volatile terms of trade.Since 1995-96, Australias terms of trade has increased by close to 10 per cent. Arise in the terms of trade has allowed Australia to buy more imports for a givenquantity of exports, thereby helping to raise our real incomes. One factor behind therising terms of trade has been the diversification of Australias exports across both

products and markets.

To the extent that the rise on the terms of trade also reflects import price declines ithas put downward pressure on inflation and contributed to greater economic stability.

Australia has benefited from increased global integration in more ways than justthrough trade. A liberalisation of global capital flows has seen Australia to dateattract almost one trillion dollars of foreign investment.

Despite our tradition of being a significant importer of foreign capital, in recent yearsthere has been a marked up-tick in the levels of Australian direct investment abroad.

As noted by the RBA, this direct investment abroad has been undertaken bysuccessful Australian firms that have reached the limit of their expansiondomestically, but are good enough to compete and succeed in offshore markets intheir area of expertise.

The realities of Australias integration into global markets has required a policyresponse to better assist Australian companies competing offshore and to encourageforeign companies to invest and establish a regional presence here.

The Coalition has always believed that Australian companies can successfullycompete globally while remaining based in Australia. Following from a previouselection commitment to review Australias international taxation arrangements, theCoalition has legislated changes that better enable Australian businesses andmanaged funds to compete for capital offshore. Australias tax treaty policies havealso been modernised.

Australias International Economics Agenda

Having implemented a wide range of economic reforms that have strengthened ourinternational competitiveness and export performance we cannot rest on our laurels.We must continually strive for better ways to do business and constantly be on the

look out for new markets and ways to deepen and expand Australias existing tradingrelations.

The Coalition will continue to push to open markets wherever and whenever theopportunity presents be it with individual countries, via regional arrangements or ona global basis. We intend to take advantage of any opportunity that can deliver realbenefits to Australian businesses and consumers. However, the Coalition willcontinue to be strategic in our trade policy choices. At the heart of any deal theremust be a clearly demonstrated benefit to Australias national interest.

While the World Trade Organisation will be of critical importance to Australia, multi-

lateral agreements can be lengthy and complex processes. We recognise thereforethat economic integration, especially specific market access, can often be addressedmore quickly through individual agreements with key trading partners.


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The Coalitions focus in expanding bilateral trade links has centred on thosecountries with which we have important trade and investment relationships. Anagreement has been concluded to deepen the economic linkages between Australiaand Japan and negotiations are well underway to establish a new frameworkagreement between Australia and China.

Our economic relationship with China is an important one that exhibits a high degreeof complementarity. The demand for resource commodities and energy to satisfyChinas industrialisation is already having a significant impact, as illustrated by thesigning of the $25 billion LNG contract between the North West Shelf Venture andthe Guangdong Province.

The Free Trade Agreements Australia has concluded with Singapore, Thailand andthe United States will complement rather than undermine the multilateral tradeagenda. The Agreement with the United States is especially significant linkingAustralia to a powerhouse economy. It is estimated that this agreement will result in

a boost to Australias economy of more than $6 billion per year one decade aftercoming into force. All major sectors of our economy and all states and territories areexpected to benefit and positive employment effects are envisaged (includingadditional jobs and a sustained increase in real wages).

The Coalition is working hard to deepen our already extensive engagement with EastAsia and our other major trading partners. Within the region Australia contributes togrowth in many ways by sharing our experience in reforming markets, developingsound institutions and designing effective policy. Australias Pacific neighbours arebeing assisted in direct and practical ways to build sustainable systems ofgovernance. This will allow them to better reap the gains from increased economicintegration and raise their own living standards.

To prosper in the global economy requires a Government that is committed to anopen and competitive domestic economy. The Coalition is committed to doing justthat.

Printed and authorised by B Loughnane, Cnr Blackall and Macquarie Streets, Barton ACT 2600

john howard's election platform

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