I want to begin with two pictures.
The first is of today.
We live in a golden age.
Just 200 years ago, more than 9 in 10 people around the world lived in extreme poverty.
Today it’s less than one in ten.
Free trade – property rights – the rule of law – and entrepreneurship have been the greatest anti-poverty weapons in human history
According to the OECD, Australia is the now 13th most prosperous nation in the world.
We’re ahead of Canada, the UK, Japan, and – most importantly – New Zealand.
At the end of his presidency, Barack Obama said:
If you had to choose one moment in history in which you could be born –
and you didn’t know ahead of time who you were going to be…
You’d choose right now.
Given that now is the best time to be alive, you’d think we must be the happiest generation in history.
But we are not.
Instead of basking in this golden moment, Western democracies are torn with discontent.
Politics is polarised.
Communities are fractured.
And the traditional bonds of family have fragmented.
We see the same thing here in NSW.
Our economy is going from strength to strength
But not everyone feels they are sharing in the success.
Communities are feeling the strain of rapid growth – with more people – and seemingly endless construction – to build the housing and infrastructure they need.
Family budgets are under pressure – with mounting personal debt.
And housing is a big part of that.
Back in 1975, the great Australian dream cost four times the median income.
Today it’s thirteen times.
Interest rates are at historic lows, so they can only go in one direction.
But wage growth is stuck well below where it was before GFC.
By historical standards, we may be doing well –
but day-to-day – many people – especially young people –
feel locked out of the opportunity that should be within their grasp.
That’s the picture of today.
The second picture – is of a future that’s approaching fast.
A future where Asia – not the West – will account for 60 per cent of the world’s middle class consumption.
A future where – according to some predictions – one third of all Australian jobs could be replaced by automation.
A future where the NSW population will swell to 11.2 million –
The equivalent of every single person in Brisbane moving to NSW
And then the entire population of Adelaide moving here as well.
But the population won’t just grow – it will age too.
That means the number of workers for every person over 65 will shrink from 4 – to 2.4.
It’s a future where – one in every three dollars the NSW government spends –
will be swallowed up by healthcare.
And where government services will cost around $15 billion dollars more than the revenue the government collects.
That’s the forecast for NSW in 2056.
I’ll be 74.
My youngest daughter will turn 39.
In the future these burdens will fall on her shoulders.
But today, they falls on ours.
I believe that – at this moment in history – NSW has the potential – to be the best place to live – anywhere in the world.
Not just for today, but for future generations too.
To make that happen, we must face up to the challenges mounting on dual horizons:
To ease the pressures people are feeling today.
And at the same time – chart a course to weather the storms looming in the distance.
That means now is the time to launch a new wave of real reform.
But in our current political climate – mired in polarised, partisan debate – large scale reform seems out of reach.
So today I want to talk about three things:
First, the major obstacles to reform
Second, how state governments can address them
And third, how these ideas are shaping the work of our government –
And also how they’re shaping my own thinking as we head towards this year’s budget.
1. The obstacles to reform
There are many obstacles to reform and I don’t claim to have all the answers.
But there are two I think are especially prevalent in today’s political climate.
The first comes from the current flavour of the month – everybody’s favourite French economist, Thomas Piketty.
He’s someone who hold a number of views that I disagree with and someone who probably doesn’t quoted often at a CIS speech – but his recent analysis is quite interesting.
Earlier this year, Piketty published a study of the voting habits of people in France, the UK and the USA.
He shows that – since the middle of last century – politics has descended into a contest of elites.
On the right is the Merchant elite – big business and wealthy vested interests – locking in behind right-of-centre parties – and influencing their agenda.
Meanwhile on the left, parties that used to stand for the working class – are now captive to an out-of-touch, highly educated elite.
Piketty didn’t study Australia, but his analysis rings true here as well.
As the deputy leader of a party on the right, I reject the idea that we’re beholden to big business.
But it’s true that the Liberals have had to fight some bruising internal battles in recent times –
to get lobbyists off the executive –
to limit the influence of developers –
and to make preselections more democratic.
So we might be resisting it – but the pressure from elite interests is real.
On the left, it’s even more stark.
Just look at Labor’s latest party platform –
a litany of niche far left policies – that bears no resemblance – to the hopes and aspirations of most working Australians.
As Adam Creighton put it in the Australian:
Ben Chifley and Bill McKell – Labor leaders who once championed the dignity and incomes of ordinary men and women … must be turning in their graves.
This is why Labor’s biggest electoral battles these days are with the hard-left Greens, in affluent inner suburbs.
And it’s why you can be sure that wherever the Greens are today, Labor will be tomorrow.
When democracy is reduced to a contest of elites, more and more people will continue to feel shut out by the major parties.
It erodes the very currency of politics – trust.
It’s no surprise then that last year Essential Research published a poll that found the most distrusted institutions in Australia were now political parties.
So the rise of elitism should make every conservative sit up and listen.
For Liberals, it means we risk forgetting the very people Menzies cautioned us not to.
And so when an outsider comes along – listens –
and gives those people a chance to reject the establishment –
they will grab it with both hands.
The second major roadblock to reform I see is the rise of the 24 hour media cycle.
Back in 2011 Lindsay Tanner wrote a great book about it – called “Sideshow”
Tanner’s point was that in a world of 24 hour news –
with media outlets desperate for an audience –
and with politicians eager to get their message out –
political discourse veers to the simplistic and the sensational.
Politics becomes more entertainment than government – a daily ritual of stunts, slogans and sound bites.
Reform is hard.
And you have to go out on a limb.
But in the 24 hour media cycle, you have to be brave to do that –
Especially when elements in the media and social media are just waiting to fire up the chainsaws
The reforms of the Hawke, Keating and Howard eras delivered enduring prosperity for our nation
27 years of uninterrupted economic growth
But the combination of these two phenomena – elite politics and the 24/7 news cycle – help to explain can be more difficult.
It produces governments more focused on winning the next election, than on future generations.
That matters – because if we’re going to have any hope of addressing the challenges of the coming decades –
we will need reform on at least that scale.
But I believe the biggest opportunity for reform dividends will not come from the Federal government – but from state governments transforming the everyday services they provide
2. How we can fix it
So what can state governments do to relieve some of the pressure today
And at the same time, get a head start on the challenges of the future?
The first step is for governments to rediscover their purpose – to regain trust and respect.
The antidote to elitism isn’t populism – it’s restoring trust
Too often – among the voices of vested interests, lobbyists and activist groups – it’s Middle Australia that misses out.
People need to trust that government is working for them, not against them.
That the development of public policy has their best interests at heart
And that major reform will preserve – not dismantle – the social contract
Creating equal opportunities for all citizens to get ahead.
Secondly, state Governments need to get back to basics.
To quote George Bush Sr – Government should do what it does well, and no more.
That means focusing on the fundamentals.
Things like quality education, world class healthcare, and roads and transport for growing communities.
Doing these things well is what citizens expect.
When a Government’s agenda becomes too broad – it gets distracted – and it falters on the things that matter most.
And if you can’t execute the fundamentals, you can’t be trusted with reform.
The third step is for governments to commit to living within their means.
One of government’s strongest impulses is to find more ways to spend more money.
Departments keep growing. Programs never end.
And it’s the taxpayer who pays.
The better way is not to spend more – but to spend more wisely.
To make better use of the resources we already have.
To cut waste – and put lazy assets to work.
To use digital technologies to transform our services.
To measure success by outcomes, not by how much is being spent.
This is a matter of justice for the tax-paying citizens of the state.
And it’s a matter of justice for future generations too.
That’s why the issue of government debt – at any level – is so important.
In the end, someone has to pay.
So as well as focusing on their agenda – the third thing governments must do – is commit to living within their means.
If we do – we can deliver the services and infrastructure that our communities need right now.
We can use our present financial strength to prepare for the future.
And we can even do it while lowering the burden on taxpayers today.
A fourth challenge is to find new ways to engage citizens in the policies that will shape our shared future.
To drive big reform, you have to bring people on the journey.
That could mean finding new ways to involve citizens more directly in decision-making – with ideas like participatory budgeting, which give people a say in how budgets are spent.
But ultimately it comes down to communication:
We must be up-front about the challenges of the future.
We must be clear about how we plan to solve them.
And we must articulate the ultimate benefits of reform.
That’s why I think Lindsay Tanner’s book only told half the story.
Yes, the amplified voices on social media have made reform harder.
But the flip side is in the age of the Internet, there are more avenues than ever to give people the information they need to back reform for the future.
Lastly, state government should be in the business of enabling aspiration.
I believe government’s role is to create the conditions for a strong, free and fair society to flourish.
Not to run people’s lives –
but to provide the broad architecture –
so that people are free to lift themselves up to ever greater heights.
To chase the richness of life and the productive opportunities that abound in this great state.
Former English PM David Cameron called aspiration “the engine of progress”.
“For us Conservatives”, he said:
It’s not just about growth and GDP…it’s what’s always made our hearts beat faster – people rising from the bottom to the top.
And whether it’s “Howard’s Battlers” or “Tony’s Tradies”, history shows centre right governments are at their best when helping people get ahead.
3. How we are responding
It will come as no surprise that these principles are shaping the story of our government.
After 7 years of a Liberal-National administration –
We are living within our means
The finances are on a strong and sustainable footing.
We are dedicated to the fundamentals – more schools – better hospitals – the new road and rail links that we so desperately need.
We have braved bold reform – like the poles and wires
And we’ve harnessed technology to transform government services.
The economy has a spring in its step.
Businesses are investing again.
More than half a million new jobs have been created since we came to office.
We have cut taxes.
We’ve made inroads in getting first home buyers back into the market –
And we’re helping families to win the cost of living battle – with programs like our Active Kids voucher – CTP rebates – and rego rebates for heavy toll users.
We have also developed the most significant and comprehensive vision for Sydney’s future – as a metropolis of three cities
It’s a framework to support our future population
Creating room to grow – and space to thrive.
In Treasury, the last 12 months have seen us turbocharge our reform agenda.
We’ve completed the poles and wires transactions – and launched into WestConnex
We’ve recognised the need for states to drive reform – and formed the Board of State Treasurers.
And we’ve created the first ever Productivity Commission to drive de-regulation
This year’s budget will take us on the next important step in the journey.
It will push the benefits of a strong economy deeper into our communities.
Focusing more intently on making them great places to live.
And it will continue our efforts to lighten the tax burden
cut red tape –
And ease the pressure on family hip pockets.
It will also have an eye firmly on the future.
There will be new initiatives to harness our current financial strength to meet the coming challenges.
To better engage the public on the journey ahead.
And to position our state for the reform we will need to tackle in the coming decades.
To finish, I have real skin in this game.
The future that’s coming – is the future my kids will grow into.
I worry about the jobs they will do.
The quality of life they’ll be able to enjoy.
They remind me every day that the Government I’m a part of has a great responsibility
To earn the trust of the people of this great state
And carry the torch of reform – to secure its future.
A government that did what it had to do – deliver for today
And build for their tomorrow.