Welcome to the latest edition of my economic note. After spending the weeks leading up to the Budget locked away in meetings and reading Budget papers, it was great to be able to get out and about last week to talk to locals in Melbourne, Sydney, Brisbane, Adelaide, Perth and Darwin. It really was a wonderful opportunity to see what Nation Building for Recovery means out on the ground, and the positive impact our plans will have on jobs in the community.
We have some massive challenges to face up to as a nation. Economic news from abroad last week provided further confirmation we are experiencing the worst global economic conditions in 75 years, with more of our major trading partners reporting sharp falls in economic activity.
Japan's economy contracted by 4.0 per cent in the March quarter, its worst contraction since records began in 1955. Real GDP is now back to where it was in 2003, effectively stripping Japan of five years of growth. This news is significant for Australia since around one-quarter of our exports go to Japan. You can read more about Japan's first quarter result in this New York Times article by Bettina Wassener.
This past week, we also learnt that in the first three months of the year, Hong Kong contracted by 4.3 per cent, Singapore contracted by 3.9 per cent, and Taiwan contracted by 1.1 per cent.
These figures demonstrate just what we're up against with this global recession. The sharp contractions in our major trading partners will have big consequences for our exports here at home. This week's Fact of the Week is that our export earnings are expected to fall by $50 billion in 2009-10, compared to the current year. If realised, that would be the largest fall in more than 50 years.
During a global economic downturn of this magnitude, the Rudd Government is stepping in with action to stimulate the economy and support jobs. If we didn't, the full burden of the global recession would fall on the shoulders of Australian families and small businesses. That's why we have put in place substantial economic stimulus to support jobs and cushion our economy.
In his usual post-Budget speech to the Australian Business Economists, Treasury Secretary Dr Ken Henry presented some insightful graphs showing what would have happened in the absence of the Government's economic stimulus measures. These graphs show that without our economic stimulus, forecast real GDP would be 2¾ per cent lower in 2009-10 and the forecast unemployment rate would peak 1½ percentage points higher.
Nearly 70 per cent of our economic stimulus is for nation building infrastructure. Travelling around Australia last week gave me a chance to visit more of the sites where these vital investments are taking place. These included the Regional Rail Express Line from Werribee to central Melbourne, the Noarlunga to Seaford Rail Extension in South Australia, the Adelaide Desalination Plant, and the Port of Darwin. I also dropped into Moulden Primary School in Darwin with local MP Damian Hale, a good mate of mine, where we talked to locals about the importance of the Government's unprecedented school modernisation program.
I also addressed a number of business organisations throughout the week, taking part in a panel discussion with the NSW Business Chamber and delivering a speech to the WA Chamber of Commerce and Industry, just to name a few. I also gave a speech to the Queensland Media Club about the events leading up to the Budget, and how our nation building plans will position Australia for recovery.
The Westpac-Melbourne Institute Survey of Consumer Sentiment released last week found consumer sentiment fell slightly in May, but still remains 8 per cent higher than its level of October 2008. Consumer confidence has held up relatively well in Australia compared to many major economies, where consumer confidence fell to record lows in the first few months of 2009.
This week we will receive important news on business investment plans as well as new figures on lending to businesses and households. Some data releases in the period ahead will no doubt contain disappointing results. But it's important to remember that our actions are helping to cushion Australians from the worst impacts of the global recession and will position us to take full advantage of the global recovery that will come.
There's no more important objective for this Government than supporting jobs today by investing in the infrastructure we need for tomorrow. I want to thank all the great people we spoke to on my post-Budget travels. I take great heart from the knowledge Australians understand how important it is we pull together in these tough times, and commit ourselves to the nation building for the recovery our nation needs.
Treasurer of Australia
Sunday 24 May 2009