Thank you for the opportunity to speak today at the Master Builders Australia Conference here in Perth.
It has been a tough time for many in the construction industry in Western Australia, particularly in residential property construction, and this has had a broader impact on the economy.
I want to discuss today how we are going about maintaining strong economic growth in Australia, including boosting the growth in housing and infrastructure investment. I also want to touch on how these three things – the economy, the housing market and infrastructure – can come together through City Deals, including one for Perth.
The economy, housing and infrastructure
This year Australia is on track to mark 28 years of uninterrupted economic growth. This remarkable record demonstrates the resilience of the Australian economy and the strength of the economic fundamentals.
In the March quarter of 2019, Australia’s real GDP grew by 1.8 per cent through the year, which while slower than the estimated potential growth rate, is comparable to other OECD countries. We maintain a triple A credit rating, the unemployment rate is close to what has typically been considered the “full employment” rate of 5 per cent, and the federal budget is coming back to surplus for the first time in more than a decade.
While it has been more challenging in Western Australia in recent times, there are also promising signs here also. Your population growth has picked up a little recently, although it is still below the national average, and the unemployment rate has broadly remained steady.
We went to the last election promising a strong economy and we are implementing our agenda to support this goal.
During our first week back at Parliament after the election we delivered massive tax relief for hard-working Australians. These tax cuts are now law and will deliver an estimated $158 billion in tax relief over 12 years. Over ten million Australians, including over 1 million Western Australians, are now eligible for immediate tax relief of up to $1080. This immediate relief is the equivalent of a 50 basis point drop in interest rates.
We continue to work on industrial relations reform, including providing greater powers to deal with registered organisations and officials who regularly break the law.
We make no apology for requiring organisations to follow the rule-of-law – and giving courts the power to penalise them when they don’t.
Our free trade agreements are also critical parts of the agenda to support growth by opening markets that were previously restricted.
Our education and training agenda is aimed at providing the skills for the future, and you may have seen comments from the Government in recent days of our plans to make the training sector more responsive.
However, there are two other parts to our economic plan that I want to focus on here given the audience: (a) the housing industry and (b) our $100 billion, 10 year infrastructure pipeline. Both are key economic contributors in their own rights, employing thousands of people, but both also have broader impact on the economy.
The construction industry (which comprises housing construction, in addition to other non-residential construction) employs almost 1.2 million people nationally and accounts for 9.1 per cent of total employment. The construction industry also constituted 7.5 per cent of GDP in 2017-18.
However, as you would be aware, the housing market is also one of the critical factors underpinning consumer confidence and spending. When property prices are rising, homeowners feel wealthier and are more able to spend in other parts of the economy. This could include by using their property as collateral to purchase a motor vehicle or by using their increased asset income to buy more retail goods and so on.
The RBA estimates that a 10 per cent increase in net housing wealth may raise the level of consumption by around ¾ of a per cent in the short run and by around 1½ per cent in the longer run.
However, the reverse is the case also, and we have experienced some of that.
Across Australia there have been declines in the housing market over the last few years, with combined capital city housing prices down by around 10 per cent from their peak in late 2017, although there are signs that this is starting to stabilise on the east coast, with prices lifting in recent months.
Here in WA, you have perhaps felt the housing price slump and the slowdown in the industry more than anyone. The number of dwelling approvals in WA over the December 2018 quarter was the lowest since 2001. Residential commencements in WA have also fallen by almost 60 percent over the last four years.
I hope we will soon see the green shoots here that are being experienced in the east coast markets. We are certainly on your side in supporting the growth of the industry.
The Morrison government has a range of initiatives to support the housing industry, particularly first home buyers who are trying to buy their first home.
The First Home Super Saver Scheme is assisting first home buyers to build a deposit inside their superannuation to save for their first home. As of 31 May 2019, the Australian Tax Office has released first home super saver amounts for more than 3,100 individuals, to the value of $37 million – which equates to an average release of around $11,800 per person.
And, as of 14 June 2019, more than 4,300 people have used the Downsizer Measure — freeing up housing for younger families, and allowing older Australians to contribute a combined $1 billion to their superannuation funds.
The Morrison Government will also support up to 10,000 first home buyers each year through the First Home Loan Deposit Scheme, commencing on 1 January 2020. Under the Scheme, eligible first home buyers will be able to purchase a home with a deposit of as little as 5 per cent, without incurring the additional cost of lenders mortgage insurance.
These will all make a difference.
$100 billion infrastructure pipeline
Like with housing, infrastructure construction has both a direct and indirect impact on the economy and, as such, is also a critical part of our economic plan.
Infrastructure supports the economy in three ways: It supports immediate economic activity; it builds economic capacity for the future; and it helps people live better lives by minimising transport costs.
Since 2013, the Coalition Government has announced around 900 major infrastructure projects, with some 160 under construction right now.
We have also announced more than 25,000 smaller projects, with around 24,000 of these projects already completed.
Five years ago that the Coalition’s $50 billion infrastructure package was lauded by then-CEO of Infrastructure Partnerships Australia Brendan Lyon as “representing the largest-ever national infrastructure investment program.”
Since then, the Coalition’s commitment to productive infrastructure investment has only intensified. In the April budget this year, we lifted transport infrastructure expenditure from $75 billion to a record $100 billion over ten years. About $43 billion of this will be delivered over the next four years. This is the most comprehensive infrastructure investment agenda the Commonwealth has ever embarked on.
This infrastructure pipeline is beginning to have a huge impact on the construction sector. In February this year the respected Macromonitor reported that Australia is in the “middle stages of our biggest ever transport infrastructure boom”. Over the 12 months to March 2019, over $29 billion worth of transport construction has been done. Compare this to the $23 billion worth of construction done in 2016.
And this is only the beginning. Macromonitor forecasts that we will reach close to $45 billion worth of transport construction in 2022. This is an all-time high, larger than the amount of transport construction we saw in any single year during the mining boom.
This means billions of dollars in new projects here in WA, including $5.7 billion over the next four years, towards critical projects such as the next stages of METRONET, upgrades to the Tonkin Highway as well as projects in our regions such as the Albany Ring Road and Bunbury Outer Ring Road.
This unprecedented level of investment builds on our existing commitments to projects that are underway or nearing completion, such as the $1 billion Northlink WA project, which will be fully completed by the end of the year.
Of course, we want to see Roe 8 and 9 built. We have $1.2 billion ready to be deployed as soon as a state government is willing to get on with the job.
Also at the 2019-20 Budget, we announced a string of congestion-busting projects under the national Urban Congestion Fund.
We recognise that while our larger, city-shaping projects such as METRONET will deliver huge benefits to commuters, these projects have long lead times and work is needed in the interim to bust congestion on our local and arterial roads.
The Urban Congestion Fund is delivering smaller, targeted works such as intersection upgrades, widening works and level crossing removals, and in WA, we have already announced $200 million out of the Fund towards these projects.
We want to get these under construction as soon as possible.
A Perth City Deal
I want to finish my remarks today by discussing the potential of our City Deals and to reinvigorate the Perth City Deal.
City Deals were initiated by our government three years ago and are a mechanism for the three levels of government to agree on a 10 to 20 year plan for a geographical region, typically focused on the very things I have been discussing so far today: housing, infrastructure, and jobs.
The most comprehensive of the City Deals that we have struck and are implementing is the Western Sydney City Deal. This 20 year agreement between the federal and state governments and 8 local councils, outlines an agenda for over 180,000 houses to be built, 200,000 jobs to be created, and rail and road infrastructure across Western Sydney. It complements our $5.3 billion new Western Sydney International (Nancy-Bird Walton) Airport and is universally recognised as a great way of planning a better future for Western Sydney’s growth.
In April 2018, the Australian and Western Australian Governments committed to negotiating a City Deal for Perth, but it is probably fair to say that we haven’t given it sufficient attention to date. Today I want to inject new energy into a reimagined Perth City Deal.
I know from my conversations with Rita Saffioti, the state Minister for Transport and Planning, have confirmedthat the Western Australian Government shares this commitment.
The potential of Perth is enormous. It is already a vibrant, wealthy and increasingly multicultural city.
Over the next thirty years, however, according to the latest ABS projections, Perth’s population is expected to grow from 2.1 million to around 3.2 million, requiring thousands of houses, townhouses and apartments to be built, as well as the foundations for new jobs, services and recreation across the city.
How this is managed will determine the city’s economic success and livability in the future.
In developing these plans, Perth has the opportunity to learn from the mistakes of Melbourne and Sydney. In both cities, insufficient infrastructure was built in advance of the population growth. Sydney is just catching up now with its huge investments in the last five to 10 years, while my home city of Melbourne is still a decade behind in my opinion.
Perth is in a stronger position with good city-wide infrastructure already in place. The Yanchep rail line extension, for example, is a good example of planning the right infrastructure for the future.
The huge investment in METRONET, of which the federal government is contributing $2.5 billion will provide the rail backbone for the whole city for decades to come.
The challenge is to leverage these investments and do the population and employment planning now for the future. Perth cannot continue to sprawl north and south indefinitely over the decades ahead. As we invest billions in METRONET, we should be considering how to ensure greater density of housing around the future train stations.
We should also be thinking about how to have greater density generally in the central business district so that it is more vibrant, inclusive and safe at night.
Melbourne provides a good example of how to do greater CBD densification.
Relocating university campuses into the CBD can also help bring vibrancy and enhance the night-time economy and this was a key part of the Darwin and Launceston City Deals.
These are the types of things that can be outlined in a Perth City Deal. It cannot be put together overnight and needs community input including from key organisations such as the MBA and Property Council.
But if we get it right, it can really set Perth up well for the future.
Let me finish by again thanking you for the opportunity to address your conference, and thanking you for the contribution that you are your member organisations make to our society – in building homes and workplaces and providing job for hundreds of thousands of people.
We have the best country on the planet, with some of the most liveable cities. Together, we can continue to keep our economy strong, our communities safe and our cities the envy of the world.