This past week demonstrated just how varied and interesting the economic debate is at the moment. Whether it was discussions on banking competition, the release of more material to help foster a national conversation about the future of the tax system, a swing through North Queensland with Bob Katter and Joe Ludwig, an important economic speech from the Prime Minister or holding the fort while she's overseas – there's never a dull moment! In this week's note I'll do my best to update you on as much of this as I can, so you're up to speed on some really important developments in our economy and some useful progress on our economic reform program.
Today I was very proud to join with Martin Ferguson and the British Gas Group and announce one of Australia's largest capital infrastructure projects, the Queensland Curtis LNG project. Federal and State Governments have been working with BG for close to three years on this project to put in place a framework that would allow the project to proceed within appropriate environmental and social parameters.
This project is a US$15 billion investment in our economy and represents the biggest ever investment by BG anywhere in the world. The investment will expand existing coal-seam gas production in the Surat Basin and link it to a new LNG plant at Curtis Island. All up, the project will deliver 5,000 direct jobs during construction and 1,000 direct ongoing jobs. This investment is a ringing endorsement of Australia's strong economic fundamentals and demonstrates strong business confidence in our economic management.
The LNG project is just one of the many exciting energy opportunities in regional Queensland. One of the reasons I headed north to Townsville with Bob Katter and Joe Ludwig yesterday was to discuss a new 700km Townsville to Mt Isa transmission line. If it receives the appropriate approvals, the Government will provide up to $335 million to support it. The line would help unlock the potential of the North-West Minerals Province, giving new and existing mines access to reliable and affordable energy. There are bountiful clean energy resources along the planned transmission line – including wind, solar, biomass and geothermal. So the Government will also support renewable energy along the line by providing up to $350 million for the construction of a large-scale solar-biofuels generation plant after a new round of the Solar Flagships program.
I also enjoyed the opportunity yesterday to talk with a number of representatives from the agriculture and resource sectors, including some of the millers and growers at the Victoria Mill up in Ingham which has been operating for over 100 years. It was a very valuable chance to spend some time with Bob and Joe and really get a feel for the economy up there and how we ensure it grows sustainably well into the future.
Earlier this week nine of Australia's leading superannuation funds and funds' management organisations announced plans to form a new industry panel dedicated to pursuing certainty around carbon pricing. The new panel will include financial institutions like AMP Capital Investors and Australian Super, with more than $350 billion in funds under management. Mark Lazberger, CEO of Colonial First State Global Asset Management said that the current uncertainty surrounding carbon pricing was hindering investment decision-making across both emissions intensive and low-emissions infrastructure. In a speech to the Australian Industry Group this week, the Prime Minister explained that the uncertainty, which is contributing to an investment freeze, is beginning to put further upward pressure on electricity prices. These concerns were also echoed by Origin Energy Chairman, Kevin McCann AM, who said at his address to the company's Annual General Meeting on Friday: "…without a carbon price, Australia risks locking in a higher cost, higher emissions electricity system for the future than we need to."
The Consumer price index figures released on Wednesday showed that both headline and underlying inflation continued to moderate through the year. It was really encouraging to see underlying inflation was 2.4 per cent through the year to the September quarter – the lowest rate since December 2005. CPI inflation fell to 2.8 per cent through the year to the September quarter 2010, from 3.1 per cent in the year to the June quarter. The main contributors to the September quarter's inflation outcome of 0.7 per cent were price increases in housing components, largely driven by utilities. Other key contributors were alcohol and tobacco, household contents and services, and recreation.
Despite this positive outcome, we understand that many Australians still face financial pressures. That's why we're so focused on lifting the productive capacity of our economy through investments in skills, education, infrastructure and economic reform, so we can enjoy strong growth with low inflation well into the future.
The IMF has again confirmed the strength of our economy and the Government's responsible economic management in its annual assessment of the Australian economy. The Article IV staff report, released on Friday, concluded that "Australia avoided a recession in 2009 and is recovering on the back of a substantial policy stimulus and strong demand for its mining exports, especially from China". The IMF expects that the Australian economy will grow by 3 and 3 ½ per cent in 2010 and 2011.
The IMF also supports the pace in which stimulus is being withdrawn from the economy and concluded that should the world recovery stumble "returning quickly to budget surpluses as the authorities intend, would put Australia in a stronger position to deal with future shocks." Whilst this is good news, it also brings challenges. Critically, we need to manage the strength of our economy to ensure future productivity. This is why we intend to build on our proven economic track record and continue with our plans to reform the Australian economy.
The coming week will be another big one for the economy. The RBA Board will meet on Tuesday to announce its rate decision. Last week, we again saw the major banks report very healthy profits, so there's no justification for any of the banks to raise rates beyond official rates on Tuesday. That's why I have already brought in a range of measures to support competition in banking, including cracking down on unfair exit fees and supporting smaller players to compete through our $16 billion investment in residential mortgage backed securities. Later in the week I will be attending the APEC Finance Ministers' Meeting in Kyoto, Japan and holding bilateral meetings with my Chinese counterparts in Beijing. These meetings provide an important opportunity to pursue Australia's national interest with key regional players. At APEC, I will be focused on improvements to regional infrastructure investment. This will help support economic growth in the region and support trade links, which is of critical importance to the Australian economy.
Finally, I want to give a plug to the blokes in my office who are participating again in Movember, to help raise money for a cause very dear to me – prostate cancer research. They raised about $11,000 last year and this year they want to go even better. If readers of this note have a spare dollar or two and want to help out the link is http://au.movember.com/mospace/715666/.
Deputy Prime Minister and Treasurer of Australia
Sunday 31 October 2010