Easing of trade tensions will help the Australian economy

The phase one trade deal between the US and China is good news. No one benefits when these two economic giants are in conflict. The International Monetary Fund predicted that, if left unresolved, the trade dispute would reduce the level of global GDP by 0.8 per cent — $US700bn by this year.

With that deal concluded and concerns about a “no-deal” Brexit having diminished, the IMF updated its global economic outlook yesterday and pointed to tentative signs of improved market sentiment.

As an open economy where one in five jobs is related to trade, Australia stands to benefit from the easing of trade tensions and less global uncertainty.

With the government having struck free-trade agreements with China, Japan, South Korea and Indonesia as well as the multilateral Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership, our exporters enjoy access to billions of new customers.

The dividend for the Australian economy is evident, with the first current account surplus in more than 40 years.

The IMF is forecasting the Australian economy will grow faster this year than the US, Canada, Japan, Germany, France and the UK — and above the OECD average.

The most recent economic data, released for November last year, showed unemployment falling to 5.2 per cent with the creation of 40,000 jobs, building approvals were up 11.8 per cent and retail sales had their best monthly outcome in two years.

The housing market continued to stabilise and auction clearance rates are up on last year. Household disposable income also increased in the September quarter by 2.5 per cent, the fastest rate in a decade.

But we do not downplay the economic headwinds. The drought and bushfires have an economic impact beyond the directly affected communities.

In relation to the fires, not only have lives been tragically lost but thousands of businesses across agriculture, forestry, tourism and retail, to name just a few sectors, have experienced damage and loss of income.

Having brought forward company tax cuts for small and medium enterprises by five years and having expanded and increased the instant asset write-off in the last budget, the government will continue to engage with the business community about what further reforms can drive even greater investment and further improve our competitiveness.

It has taken us six years to repair the fiscal mess we inherited, with the budget now in balance for the first time in 11 years, a $48bn turnaround.

By maintaining our fiscal discipline and responsible economic management we have seen the creation of about 1.5 million jobs and employment growth of 2 per cent, double the OECD average.

But, notwithstanding Australia being in its 29th year of consecutive economic growth, there is no room for complacency.

We are focused on a series of reforms, particularly on the supply side, to strengthen the economy. The record $100bn infrastructure pipeline continues to be rolled out with $4.2bn of additional spending to be invested over the forward estimates and announced in Mid-Year Economic and Fiscal Outlook.

Projects that have been on the drawing board for a half-century, such as the second airport in Sydney and the airport rail link in Melbourne, with federal support are becoming a reality.

The benefits of more than $300bn in tax cuts for individuals have already been legislated by the Coalition and are making their way into people’s pockets.

We’re abolishing a whole tax bracket which will see 94 per cent of taxpayers paying no more than 30c in the dollar, enabling Australians to earn more and keep more of what they earn.

Small and medium businesses with a turnover of up to $50m will see their tax rates cut to 26 per cent on July 1 and 25 per cent from July 1 next year.

They are also benefiting from an extended and expanded instant asset write-off.

Deregulation, skills and industrial relations reforms are our other areas of focus.

In MYEFO, there were measures to cut red tape for small business including food exporters and we are streamlining major project approvals.

In the last budget, measures were announced to create 80,000 apprenticeships.

With respect to industrial relations, there has been legislation before the parliament to stamp out unlawful conduct and in the process unnecessary costs that the building industry has estimated could be up to 30 per cent higher in some cases.

The Australian economy has a remarkable story to tell.

However, too often people put self-interest ahead of the national interest and talk down the Australian economy, ignoring its resilience and undermining confidence.

Nowhere is this on display more than from our political opponents. After having racked up $240bn of accumulated deficits, they left us with an economy where unemployment was at 5.7 per cent and rising, business investment was falling and 62,000 small businesses shut their doors in their last year.

Having learned nothing from their failures in office, they took to the Australian people an election platform that included $387bn of higher taxes on income, savings, investment and business. Nothing and no one was spared. Not to mention their class-war rhetoric that saw them attack the so-called “top end of town”.

Fortunately for Australia, Labor’s disastrous economic plan was emphatically rejected. As we enter 2020, Australians can be confident about the future and our capacity to respond to the challenges that we face, and capitalise on the many economic opportunities we have.

Josh Frydenberg is the federal Treasurer.