Thank you Andrew for that kind introduction.
It is a great privilege to be speaking here today.
The Economist is a beacon of thoughtful and robust analysis and I commend the contribution your publication makes to the broader economic discourse.
In times of change, considered analysis only grows in value.
For Australia this is particularly prescient.
Because we know that the success of economic reform is shaped by the political environment.
The political context
So Id like to start my remarks today by responding to a recent edition of The Economist which made some pointed criticisms of Australias politicians.
Leaving aside the more colourful descriptors including that the current lot of politicians couldnt pull the skin off a rice pudding much of the criticism really centred on the shorttermism that has come to dominate our political discourse.
Short term thinking that risks leading to complacency.
And that without undertaking the necessary reforms, Australias luck could run out.
There has always been a disconnect, or an inconsistency between electoral cycles and the timeframes of substantial economic reforms.
This is not new.
But as I have previously said, the distance between where the political debate is and where it should be has never been greater.
At a time when the challenges before our country couldnt be larger, the debate could barely be smaller.
The gap between what gets a headline, and what matters never wider.
Political advantage is currently found in narrowing the debate to such an extent that the focus shifts from the important to the sensational.
And with this narrowing of the debate has come a narrowing of perspective.
Small thinking locks public debate in the immediate, unable to look to the future.
When big ideas collide with small thinking politics, uncertainty is exploited.
As some in the community try to establish reference points in a world of constant change, there are those that use this uncertainty for political gain.
Reform is cast as something to be feared.
It is looked at with suspicion, and opposition can be easily mounted.
At a time when lifting our eyes to the future could not be more important, the narrowing of the debate and the recourse to rank populism has the potential to halt the reform prerogative that has built Australias success.
Instead of debating how to use the benefits of the mining boom wisely, some are determined to mislead, claiming the Minerals Resource Rent Tax will be the end of the industry.
This is the same resource sector that has an investment pipeline of some $430 billion.
Instead of debating how the Governments carbon pricing mechanism compares to the Oppositions approach of picking winners, the debate is defined by the cost of a sausage or a box of weetbix.
Previous Parliaments have recognised the importance of economic reform and the role those reforms played in providing a stable platform for economic growth and prosperity.
Australia has a strong track record for bipartisanship on the important economic issues.
Deregulating markets.
Reducing tariffs.
Floating the dollar.
These were times when politicians placed their obligations to the long term national interest above partisanship.
In 2011, after 20 years of growth, I fear this political sensibility has been lost.
Pressure is exerted to retain the status quo, to put down the tools of reform and take the easy option.
But pretending that nothing needs changing will consign us to spectator status as the world moves past us.
It would be mistaking the debate as one between reform and the status quo.
The real political and economic challenge is recognising the changes occurring and positioning the country to benefit.
Managing change, not positing false notions that change will somehow pass us by.
If past governments, the Hawke and Keating Governments for example, had chosen complacency over reform, Australias trajectory would have been far different.
Our story far less impressive, our future less bright.
This is not the course of action that the Labor Government is taking.
We know reform is difficult, but we know that the benefits will be enduring.
Reform is central to governing, for this generation, and the next.
An economy in transition
This disconnect between the political debate and the economic challenges is not uniquely Australian.
The current volatility in international markets can, in part, be understood as an expression of concern that the markets are lacking confidence in the political class.
Internationally, markets are calling into question the capacity of political systems to face up to the right questions let alone deliver the answers needed.
As weak growth and high unemployment continues in key advanced economies, the malaise around addressing the underlying structural issues will only become more pressing.
Facing up to the tough questions will be inevitable.
Hard decisions will be unavoidable.
Choices will have to be made.
The onus on politicians worldwide is not just to ask the right questions it is also to elevate the debate so that answers can be found.
To not be afraid of complexity or turn our backs on the challenges.
We know that the next generations prosperity relies on todays reform.
For Australia, the right questions demand recognition of the changes occurring in the global economy.
Of how they will impact and shape Australia.
And how the Government can position the country for prosperity.
Australia is an economy in transition.
As an open economy, Australia rides the tides of the global economy.
Our economy is shaped by global forces.
This presents challenges, but also opportunities.
This generation of Australians is living through a fundamental shift in the world economy, as the economic centre gravitates from West to East.
Not only China and India, but Korea, and later Vietnam and more.
This is a structural change that will define the international economy in the coming century.
The impact on Australia will be lasting.
The clearest impact of this shift has been the growth in our commodity sector.
This elevated demand is expected to remain strong for some time.
And as China grows and modernises, the composition of trade with Australia will also reflect changes in its demography.
As millions move into a fast expanding middle class, consumption patterns will shift towards higher order goods and services.
As the burgeoning middle class looks to utilise higher rates of disposable income, the opportunities for the Australian economy will only be limited by the innovation and skills of our people and our businesses.
Australia China trade is largely driven by commodities.
Iron ore.
Coal.
And Natural Gas.
In the future we will see stronger trade growth in:
Knowledge and education.
Financial services.
Clean Energy Technologies.
Natural Resource Management practices.
And creative industries.
Value adding in logistics, law and medical research will come to the fore.
The Australian economy will respond to these changes.
Our geography, previously derided as a tyranny of distance is a strategic advantage.
Operating in the same time zone, our services and businesses linked by super fast broadband will be able to maximise their exposure to these fast expanding markets.
Our economic future is undeniably strengthened by the rise of Asia as a centre of economic activity.
The future is full of possibility. But we also know these structural shifts will bring challenges and risks to the Australian economy.
Changes that are already underway in our economy have been accelerated by the high dollar and strong terms of trade.
Our economy is adjusting to the relative shifts in demand for labour and resources.
Some sectors are doing it tough particularly our trade exposed sectors facing sustained pressure from the high dollar and those that are also affected by the return of the cautious consumer.
For the government, these shifts require policies that leverage our current strengths, and invest for future prosperity.
Leveraging the boom, investing for the future
In the midst of a mining boom in Australia, it is easy to imagine that complacency could set in.
Government revenues will benefit in the medium to long term as commodity exports continue.
Reform could be set aside.
Indeed this was a point raised in The Economist edition I referred to earlier the risk that complacency, coupled with a debased political dialogue could see the boom squandered.
The composition of our Parliament would have been excuse enough to put contested reforms into the too hard basket.
But this is not the response of our Government.
The current uncertainty in global markets has also been used by some to bolster their opposition to economic reforms.
But although Australia is not immune from these events, the fundamentals of our economy remain strong.
As our economy responds our links with Asia strengthen.
The shifts in the global economy will underpin an extended period of growth for Australia.
Failing to use this period of strength to invest for the future would mean lower productivity, and fewer opportunities for the next generation.
And its undeniable our wealth of minerals and resources is a natural endowment the likes of which that few other countries enjoy.
The current investment schedule is substantial, with exports to surge as new projects come on line in iron ore, LNG and coal.
These resources represent a once in a generation opportunity.
That is why we have committed to introducing legislation for the Minerals Resource Rent Tax.
The logic behind this reform is simple.
Our sale of resources is, in effect, exchanging a non-renewable asset for an time limited income stream.
Once those resources are sold, the asset is depleted, and the income stream will lessen or cease.
The approach this Government has taken is spread the benefits of the boom so that the broader economy can benefit.
The revenue from the MRRT will be reinvested to cut the company tax, provide small business with an instant write off and increase the compulsory superannuation contributions to 12 per cent.
These reforms will strengthen the economy and to better prepare Australia to respond to any external shocks.
The MRRT will also fund investments in economic infrastructure in regions, especially mining regions, to alleviate bottle necks.
These investments, not possible without the MRRT, will see Australia capitalise in the short to medium term by extracting and exporting greater quantities of minerals.
Were also investing in participation and productivity reforms so that the low unemployment levels do not become a barrier to growth, to enable every Australian the opportunity to fulfil their potential.
While the focus is now squarely on the skills needed to drive the resource sector, the future will also be on services, knowledge and information as we respond to the expanding Asian middle class.
We are investing around $7 billion into the university sector to meet our target of 40 per cent of 25-34 year olds having a qualification at the bachelor level or higher.
We are uncapping the number of Government funded university places, and in doing so shaping the knowledge base of the next generation, driving productivity growth and increasing opportunities.
These investments in human capital are matched by investments in the physical infrastructure also required to boost productivity.
The National Broadband Network is central to this drive for productivity growth, connecting all homes and businesses in the country via super fast broadband.
We want Australias future to only be limited by the bounds of our imagination and innovation, not by download speeds.
The NBN is an investment in the backbone of the Australian economy, for this generation and beyond.
Information and knowledge will be the currency of the 21st century.
For business, it is a connection to every household in the country.
Enabling business to be more efficient, it will reduce transaction costs.
It will see a transformative shift in communications and provide the platform for innovation. But of course underlying these reforms is a strong fiscal position.
This sets us apart from most other advanced economies.
Our net debt is expected to peak at 7.2 per cent of GDP this financial year.
This compares very favourably with the average net debt for major advanced economies, estimated to be just under 80 per cent of GDP in 2011.
By world standards our unemployment is low.
Our medium term economic prospects are positive.
Our economic fundamentals are strong.
Our banking and financial system is well capitalised and well regulated.
Reflecting a history of bipartisanship, Australias banks came through the financial crisis with their balance sheets intact.
So too, our financial services sector rode out the worst of the crisis.
The Commonwealth budget is also the envy of most other advanced economies.
We delivered stimulus to support the economy and jobs during the global financial crisis.
But we knew that it was important to provide a clear and decisive strategy to return the budget to surplus as the economy recovered.
With high terms of trade, an ageing population and increasing demands on the government budget, our fiscal strategy is the right course of action.
We are limiting growth in spending to 2 per cent per year.
We are keeping the tax to GDP ratio below that we inherited in 2007.
This strategy provides certainty, at a time when governments around the world are failing to present credible budget policies.
Markets have confidence in our Governments commitment to fiscal responsibility.
Not facing the immediate pressure of other countries, now is the time for Australia to use this period of strong growth to put the budget on a longer term sustainable footing.
We know, for instance, that by 2049-50 Australian government spending on health will increase as a proportion of GDP from 4 per cent in 2009-10 to 7per cent.
Waiting until 2050 clearly isnt the answer.
That is why the Government is using the annual budget process to strengthen the long term budget position.
Sensible reforms now will avoid large dislocations in decades to come.
Concluding remarks
Australia stands at a cross road on the path of economic prosperity.
Past economic reforms of the past have seen Australia prosper.
Politicians came together on an agreed understanding that we had to adapt to the world around us that reforms will underpin our future.
It is for this reason that our fundamentals remain strong.
Now we need to live up to the challenge of the next generation to overcome todays narrow debates and implement the reforms needed for Australias future prosperity.
The shifts in the global economy will have a profound and lasting impact on the Australian economy and society.
The Oppositions failure to debate these issues on the policy field, their unwillingness to engage with the key economic questions of our time is doing a disservice to Australias future prosperity.
But our Government is determined to not let the opportunities pass Australia by.
We are going to continue to raise the tone of the debate so that solutions to the challenges facing us can be found.
Thank you.