Dr CHALMERS (Rankin—Treasurer) (12:02): by leave—Australians have been through a lot in the last decade and a half but, despite a global financial crisis, a pandemic and a global spike in inflation made worse by war in Europe and the Middle East, they have maintained a very Australian sense of pragmatism, practicality and purpose—and so has this government. Today, I want to report on the progress that we have made together, not to claim credit for this progress but to share it. It's been 2½ years since I stood at this despatch box and delivered the first ministerial statement on the economy. That was July of 2022, the day after June quarter inflation data landed. It showed inflation at 6.1 per cent and rising very rapidly. Interest rates had already started going up in May and real wages were going backwards by 3.4 per cent. Productivity growth had suffered its worst full decade in 60 years. A budget surplus had not been delivered in 15 years. Cumulative deficits exceeding $225 billion were projected and debt was on track to exceed $1 trillion in the next year. Nation defining challenges, like the energy transformation and housing and skills shortages had been allowed to drift for the best part of a decade. The progress that we've made together since July of 2022 is very clear. Inflation has more than halved. Underlying inflation is falling as well. Real wages are growing again. The economy is still expanding. A million new jobs have been created—the majority full-time. Participation is near record highs and the gender pay gap is at a record low. We've turned two huge deficits into two substantial surpluses, the first in nearly two decades. We've found almost $80 billion in savings. We've banked the majority of revenue upgrades and saved tens of billions of dollars in interest as a result. At every stage, we've been up-front about the nature and the magnitude of our economic challenges. Even with very substantial progress in the aggregate numbers, we know that doesn't always translate to how people are faring or feeling day to day. We're not pretending that it's 'mission accomplished', because it isn't. We're realistic about this, but we're optimistic as well. So today I want to provide a stocktake of the global and domestic economy. I want to preview the midyear budget update, which we will hand down in December, and outline our policies and plans. In doing that, I'll explain why that very cautious confidence and emerging optimism is welcome and warranted. Global economy That first statement back in July 2022 was delivered soon after I met with G20 economic ministers in Indonesia. The global economic conditions at the time were complex and confronting—and they still are—with slower growth, ongoing conflict, busted supply chains and higher inflation, which had prompted the biggest synchronised tightening of global monetary policy in history. Now, more than two years on, persistent inflation and higher interest rates have taken their toll everywhere. Three-quarters of the OECD has had one or more negative quarters of growth in the last year, and unemployment has increased in most advanced countries. Global inflation has moderated from its peaks but it's still lingering. It ticked up recently in the Euro area, the US and, overnight, in Canada. Conflict is an even bigger feature of the global landscape and the biggest risk to global growth. And there's a greater risk of rising trade tensions and geopolitical fragmentation. In the decade prior to the global financial crisis, the world's economy grew at an average of 4.1 per cent, but over the last 15 years it's been just 3.1 per cent. Treasury is still finalising its forecasts for next month's Mid-Year Economic and Fiscal Outlook, but it's expecting global growth to remain soft and subdued. Treasury currently expects global growth to be 3¼ per cent this year and the two years after that—the weakest consecutive three years of growth since the early 1990s. As a trade-exposed economy, we have not been and will not be immune from all of these global challenges. But we are well placed, and we are well prepared to deal with them. We've already seen nearly $20 billion of trade restrictions lifted with China as we stabilise that crucial relationship. Australian economy The inflation challenge has been global, but the Australian economy has performed better than most countries. Our inflation peaked lower and later than in most developed economies. That means that prices have risen less here than in countries like the US, the UK and New Zealand, and our services inflation is lower than in the UK and the US as well. Interest rates also climbed higher than ours in almost every comparable country, causing worse unemployment, slower job creation, lower growth or a combination of all three. And even though rates are coming down slightly in places like the US, the UK and New Zealand, they are still higher than ours are. So our No. 1 priority for the past 2½ years has been getting on top of inflation. We've gone about it without ignoring the risks to growth and preserving the gains that we've made in our labour market. Any objective observer would acknowledge the progress that we've made together with this strategy. As I said, inflation was 6.1 per cent when we came to office and rising fast. It would go on to peak at 7.8 per cent in December of 2022. In the most recent quarterly data, headline inflation was 2.8 per cent, back in the Reserve Bank's target band for the first time since 2021 and its lowest rate in almost four years. Trimmed mean inflation also eased by half a percentage point to almost half its peak and its lowest rate in almost three years. So headline, underlying, monthly and non-tradable inflation all came off very substantially in the most recent data. Government spending is not the main driver of prices in our economy, and our surpluses are helping in the fight against inflation. These are two points that Governor Bullock has repeatedly made. The Reserve Bank also downgraded its CPI and trimmed mean forecasts across the period that they published a fortnight ago. Treasury's updated inflation forecast in the midyear update will be broadly in line with what we anticipated at budget. Treasury expected inflation to be back in band by the end of this year, and that's what has happened. The economy has continued to grow, but barely. For only the second time in the last half-century, growth was below 0.3 per cent in every quarter of the last financial year, but it would have been negative in the March and June quarters were it not for public final demand. Treasury's growth forecast at MYEFO will show that it expects slow growth in our economy to continue in the near term, but any growth in these circumstances is welcome given many other countries have gone backwards. Treasury is expecting a gradual recovery in the economy, driven by rising real incomings, thanks to our cost-of-living relief, jobs growth and the progress that we've made in bringing inflation down. We've already seen a modest recovery in consumer confidence with the ANZ-Roy Morgan measure at near two-year highs, showing households are now feeling a bit more confident about the next 12 months. This is the soft landing that we have been planning for and preparing for—inflation coming back to band, an economy still growing and unemployment with a four in front of it. The unemployment rate is on track to average below four per cent for this parliamentary term for the first time since monthly records began. Youth unemployment has averaged nine per cent since May 2022, which is two-thirds of the prepandemic average. More than a million jobs have been created. That's another record for a parliamentary term, and it represents stronger jobs growth than any major advanced economy. This is the equivalent of more than a thousand new jobs every day since May 2022—most of them full time. Workforce participation is near record highs, and the midyear update will confirm upgrades to participation and employment growth forecasts for this year. We've supported wage rises, and wages are now growing, on average, almost double what they did in the years leading up to the pandemic. Wages are growing but inflation is falling, and that means real wages are growing again. They were going backwards by 3.4 per cent when we came to office. Real wages grew by 0.7 per cent in the year to September—the biggest annual increase in over four years—and there have now been four consecutive quarters of real wages growth. The average full-time worker is now earning $159 more per week since when we came to office, and for women it's $173 more per week. Since we came to government, wages in industries dominated by women have risen by more than eight per cent. This is one of the reasons why the gender pay gap is the closest it's ever been. After plateauing for almost four years, the gender pay gap has narrowed by 2.6 percentage points since May 2022. All this means more Australians are in more jobs, earning more and keeping more of what they earn. Cost-of-living relief Our tax cuts for every taxpayer are part of this, but they're not the only part of this; they are one element of a very comprehensive and considered strategy of relief, repair and reform. We've pursued all three of these objectives in ways that are complementary, not in conflict, in providing cost-of-living relief for people doing it tough, repairing the budget and reforming our economy. We've come at this cost-of-living challenge from every conceivable and responsible angle: energy bill relief for around 10 million households and one million small businesses; increasing childcare subsidy rates; expanding paid parental leave; increasing the maximum rates of Commonwealth rent assistance by 45 per cent; tripling bulk-billing incentives; lowering the cost of PBS medicines; boosting eligible working-age and student income support payments; delivering 500,000 fee-free TAFE places; helping small business by extending the instant asset write-off and improving payment times; helping Australians get fairer supermarket prices through stronger protections and greater competition; looking to cut close to $20 billion in student debt for more than three million Australians; and those tax cuts for all 13.6 million Australian taxpayers. Cutting two rates of income tax and lifting two thresholds are two of the ways we've kept tax to GDP well below 24.2 per cent, which was its peak in the early 2000s. This financial year, tax to GDP is expected to fall to around 23.4 per cent of GDP, down from 23.7 per cent. Budget repair We've delivered this responsible and substantial cost-of-living relief at the same time as repairing the budget, not instead of repairing the budget. We don't see our surpluses, our savings and the substantial turn around in the budget as an end in itself; it's how we take pressure off inflation and make room for things that we really value as a government and as a society. These are the facts about the fiscal position when we came to office. Gross debt was projected to be at levels not seen since the aftermath of World War II. Deficits over the forward estimates totalled $225 billion, the highest in any pre-election outlook. Programs that Australians rely on everyday, like aged care and the NDIS, were facing real risks of exploding in cost. We've made good progress here, and I'd like to particularly acknowledge and thank the Minister for Finance, in the other place, and other ministers and colleagues for their work here. That work in the Expenditure Review Committee and the cabinet has helped oversee the biggest ever fiscal turn around in a single term. The first surplus in 2022-23 was followed by a second in the year just gone, the first back-to-back surpluses in almost two decades, the largest nominal back-to-back surpluses on record, meaning the budget was $172 billion better off. This record turnaround hasn't been accidental and it hasn't been incidental. Banking 82 per cent, or $285 billion, of revenue upgrades, delivering almost $80 billion in savings and restraining real spending growth to less than half it's 30-year average was intentional, and it hasn't just been cyclical; it's been structural as well. Bringing down our debt burden is making a meaningful structural difference and so are our reforms to aged care and the NDIS. Gross debt was almost $150 billion lower at the end of 2023-24 than forecast in the pre-election outlook, and it's expected to remain lower than that outlook across the forward estimates and the medium term. This progress means we've been able to save around $80 billion in interest payments compared to the 2022 PEFO over the decade to 2032-33. Our reforms in the care economy will see aged-care spending grow by 5.2 per cent over the next decade, not 5.7 per cent, and the NDIS at around eight per cent instead of 19 per cent. This very substantial progress is even more important as the fiscal outlook becomes more, not less, challenging. In recent years, the resilience of the labour market has been one of the reasons why revenue upgrades in budgets have been the norm. In each of our four budget updates there was $80 billion in revenue upgrades on average, but, with the labour market softening around the edges, this trend is diminishing. This has been compounded by structural challenges in the Chinese economy weighing on key commodity prices. Iron ore, for example, is down 30 per cent since the start of the year. As a result of these factors, I can inform the House that Treasury expects any revenue upgrades in the midyear outlook to be much smaller. There's still a fair bit of data to land before the midyear update, including the national accounts and tax collections numbers, but Treasury's latest estimate is that any upgrade will be a sliver of what we saw in the first four budget updates. At this stage, Treasury is also expecting to revise down company tax receipts for the first time since 2020. This is why we've been so focused on improving the structural position of the budget—so that we can build buffers against the global economic uncertainty we're facing while also investing in the future. Economic reform In 2022, it was already clear that it wasn't just structural challenges in the budget that had been neglected but structural challenges in our economy as well, in areas like climate change, the net zero transformation, housing and skills. Our productivity performance was languishing, averaging just 1.1 per cent a year in the decade to 2020, worse than the decade before and barely half the rate of the 1990s. So we're implementing a broad and ambitious reform agenda to turn this around, but we know that it will take time. For us, it's all about managing and maximising the five major shifts in our economy and in our society, from globalisation to fragmentation, information technology to artificial intelligence, hydrocarbons to renewables, younger to older and the rapid growth in services. We're building a more dynamic, competitive and productive fourth economy, powered by cleaner and cheaper energy, indispensable to the global net zero transformation where we teach and train our people to better adapt and adopt technology and where capital flows more efficiently and effectively. Here again we've made substantial progress together on delivering cleaner and cheaper energy by legislating a commitment to net zero by 2050; unlocking $67 billion in private investment through the Capacity Investment Scheme; introducing a new vehicle fuel efficiency standard; providing low-cost finance for household energy upgrades; reforming the safeguard mechanism; and modernising and diversifying our industrial base, including through the National Reconstruction Fund and our $22.7 billion Future Made in Australia agenda. This includes a new front door to make it easier to invest in Australia and production tax incentives and programs to support solar and battery manufacturing. We've made progress on investing in our people, with university reforms, free TAFE, record investment in skills, reforms to income tax and student loan repayments that support participation, and changes to the migration system. We're investing in new technologies in the digital economy. We're unlocking access to advanced satellites and national data assets, investing in quantum computing and robotics and expanding the digital ID. We're making progress on getting capital to flow more efficiently with better designed and better informed capital markets, including our foreign investment framework reforms, sustainable finance and modernising payments infrastructure and regulation. Finally, we're making our economy more dynamic and competitive by abolishing almost 500 nuisance tariffs; introducing comprehensive competition reforms—including the biggest overhaul to merger settings in 50 years; and improving competition in the supermarket sector. The midyear update will budget for measures we've recently announced as well such as our $900 million investment in our National Productivity Fund to boost competition and productivity right across the economy. The road ahead This reform agenda is about modernising our economy, managing pressures and maximising our advantages. It's also about making up the ground that's been lost over the past decade and a half. For us, this is not just about the biggest fiscal turnaround in a term on record. It's more than the biggest nominal back-to-back surpluses in history, the most jobs created in a single term ever, the lowest average unemployment rate in over half a century or the fastest turnaround in real wages growth on record; it's about what all this means for our people. We know that Australians are still under pressure. But we're confident, not complacent, that the worst of the inflation challenge is now behind us. There's still much more to do and there is still plenty to lose if we don't do more. But our vision is to push further and farther; to use our progress that we've made together as a platform, not a destination; to be optimistic but realistic about the future we're making together in the defining decade ahead; and to ensure that our people, our businesses and our communities are beneficiaries and not victims of all of this churn and change that we're seeing in the world. The Albanese Labor government is proud of the record that I've set out for the House today. But we are prouder of the Australian people, to whom the credit really belongs. I present a copy of my ministerial statement, and I thank the House.