Building the Education Revolution in the Economic Stimulus Package – Address to the National Conversation with Principals

It is great to be here at the first National Conversation with Principals.

I hold my own Principals Forum with 52 principals in my electorate about four times a year. I understand Jihad Dib the Principal of Punchbowl Boys High School is here this morning; he is a regular at our Blaxland principals’ forums.

I am sure he would agree that these regular meetings are a great sounding board, both for me and my local principals.

At our last meeting we talked about a lot of local issues and challenges, but the principals all wanted me to know how much they appreciated the Building the Education Revolution (BER) and how excited they were to be working in education at this time. One principal described it as the biggest investment in education since the Whitlam era.

They’re right. The Rudd Government is more than doubling the investment in education over the next four years.

All of this means we are all very busy at the moment. I’m not going to talk today about the BER process; each one of you here today know all about that. Instead I want to talk about the impact the BER is having on the national economy and how it fits in our broader strategy to keep Australia working. First some background.

Last year the world experienced an economic heart attack. Although there are signs of recovery now emerging, these are the grimmest set of economic conditions the world has experienced in 75 years. For the first time since the OECD started collecting this data the world is in recession.

When Australia went into recession during the 1980s, the world grew by 0.9 per cent. When we went into recession in the 1990s, the world continued to grow by 1.5 per cent. That’s not happening this year. This year the world economy will shrink by 1.1 per cent. So how has Australia performed in this context?

Australia is the only major advanced economy that has continued to grow in the past year. The economy shrank in the December quarter in 2008, and then grew in the March and June quarters of this year. Without the stimulus, the economy would have contracted in all three quarters.

Remember you only need two consecutive quarters of negative growth for a technical recession. Without the stimulus Australia would have gone into recession, and unemployment would have been a lot higher. 

Unemployment in Australian is currently 5.7 per cent. That is a lot lower than America; where the unemployment rate has now hit 10.2 per cent. Australia’s unemployment rate is lower than every other advanced economy in the world bar one, Japan.

Last week the Treasurer released the Mid-Year Economic and Fiscal Outlook, an update on the budget. It forecasts that unemployment will hit 6.75 per cent by in the middle of next year. It’s in this context that the BER is so important.

We need to create about 18,000 jobs a month just to keep unemployment static. This requires an economic growth rate of about three per cent. This financial year the economy is expected to grow by one and a half per cent. That is why unemployment is rising, even with the stimulus in place. Without it even more Australians would be unemployed.

That is why it is so important to keep the stimulus in place. And why the BER is so important. Almost half of the stimulus over the next twelve months is the BER.

Over the last year building approvals have fallen in both number and value. Almost a million Australians work in the construction industry and without a pipeline of approved projects, many of these workers may be at risk of losing their jobs. The good news for these workers is that the BER has triggered a massive increase in non-residential building approvals in the education sector.

A few months ago I visited the Sacred Heart Primary School in Cabramatta where they are building a hall and upgrading the kindergarten classrooms. There were about 20 people working on site, including two blokes who have been unemployed for more than 12 months. Now they have a job.

It’s a story being repeated in thousands of primary schools all around the country. Dan White, the Executive Director of Catholic Schools in NSW wrote to me after I visited the school to tell me what the impact has been in Catholic Schools:

“…around 2,300 new jobs have been created as a direct result of the work being undertaken in Sydney Catholic schools alone. BLL has directly employed around 100 new staff and have been able to retain another 50 who were likely to have been made redundant had this funding not been made available.”

According to the Master Builders Australia the stimulus is protecting 50,000 jobs in the building industry that would have otherwise been lost.

But it is not just construction jobs being protected. For every construction job supported by the BER, other jobs are also being protected in other parts of the economy. This is the multiplier effect.

The Australian newspaper reported the effects of this at the Sacred Heart Primary School in an article in September:

“It’s not only Mr Zuma and his men who benefit from the weekly wage; the crew buy their morning coffee from the Gloria Jeans up on John Street, the main drag in Cabramatta, buy their lunch every day at the milk bar around the corner, shop for basic groceries at the Cabramatta Woolworths, buy their paper from the local newsagent and their breakfast muffins from the McDonald’s.”

It might not be the perfect diet, but it’s protecting jobs. And it is not just the service industry that benefits either. The construction industry spends about $2 billion on steel each year. They spend more than that on IT. They also spend a lot more than that on legal and accounting services.

So the impact is felt right across the economy. The stimulation of the construction industry, happening in schools at the moment, is having a ripple effect through the entire economy.

The total BER package is worth more than $16 billion. Most of that, more than $9 billion, will be spent this financial year. It has been timed purposely to have the maximum impact when it is needed the most – as unemployment is expected to peak.

Our strategy is based on the lessons we have learnt from past recessions.

1. Unemployment goes up quickly and takes a long time to come down

We know unemployment goes up quickly, but it takes a long time to come down. In the 1980s unemployment jumped from 5.4 per cent to 10.4 per cent in two and a half years. It then took 6 years to come back down. In the 1990s, unemployment jumped by a similar amount and then took 11 years to come down.

In the time in between a lot of people suffered. A lot of families were destroyed and homes lost. A lot of skills were lost. A lot of workers, particularly middle aged men, who fell out of the labour market in the 1990s recession never got back into full-time work again.

That’s why the BER is so important, because it helps keep people employed and keeps their skills in tact.

But it’s more than this – because unemployment isn’t indiscriminate – it hits some people and some areas harder than others.

2. Young people are particularly vulnerable

We know that young people are particularly vulnerable in tough economic times. In the 1990s youth unemployment went up faster than the general unemployment rate; and it is happening again.

Of the 169,000 people who have lost their jobs in the last 12 months 35 per cent are aged between 15 and 24. In Canterbury-Bankstown, the region I represent, the full-time teenage unemployment rate is 47.7 per cent. That’s why I take this issue so seriously. This is more than a job to me, it’s a responsibility.

3. People without skills and qualifications suffer the most

Skills are also important. The more skills you have, the greater your likelihood of being employed. This trend is exaggerated in times of high unemployment.

When the recession hit in the 1990s young people who hadn’t finished high school were three times more likely to be out of work or study than those they once shared a class room with. A lost generation of missed apprenticeships and missed opportunities.

4. Some regions are hit harder than others

But its not just individual skills levels that affect unemployment – where you live can also be a big factor.

The government has identified 20 areas around the country that are being hit harder than others. These are places that have been hit harder by the global recession; they are places that we expect will take longer to recover.

Over the last few months I’ve been on the road, working in these areas with Lindsay Fox and Bill Kelty; from South West Sydney to the south-west suburbs of Perth.

Some of these areas have high levels of manufacturing. Others are very reliant on other industries, like Cairns where unemployment is now in double digits. It has been hit hard because of its heavy dependence on construction, mining and overseas tourism.

But the common thread across all these areas is low levels of education attainment.

That is why the government has introduced a new policy called ‘Learn or Earn’. This means young people under the age of 21 years without a year 12 or equivalent qualification must be in education or training in order to qualify for Youth Allowance. We are doing this because more skills mean more chance of being employed.

To help young people meet these requirements, the Rudd Government has developed the National Green Jobs Corps. This will provide 10,000 places in environmental work experience and training targeted specifically at young people without year 12 or equivalent qualifications. This program will give young people a certificate 1 or 2 training qualification. The National Green Jobs Corps program will start on 1 January 2010.

The Rudd Government is also tripling the bonus to employers to put on a traditional trades apprentice this summer from $1,500 to $4,850. There has been a big drop in the number of apprentices starting a trade. The number of young people starting an apprenticeship has dropped by more than 20 per cent in the last year.

This policy is designed to turn this around. It will help us recruit 21,000 young Australians entering traditional trades like butchers, bricklayers and pastry cooks between December 1 and the February 28 next year.

Some of the students leaving your schools over the next few weeks might apply to take up one of these apprenticeships. They might even come back to work on the BER projects at your schools.

BER is a big chunk of the Government’s economic stimulus. It’s about 77 per cent of the infrastructure stimulus projects. And it will do a lot of the heavy lifting over the coming months to keep a lot of people employed and keep Australia working as unemployment peaks.

But the BER is only a small part of the government’s education agenda. As you know, the Education Revolution is not just about building infrastructure, it’s about building skills. This is what this conversation today is all about.

We live in an age where smart countries are wealthy countries. Brain power is the engine that drives our GDP, and education is the key. It is the great equaliser in an unequal world.

 It is the work we do with you, and the work in the classrooms and libraries we are building that will make sure we remain in front the other countries of our region and the world. That is why the principals in my local area are excited about working in education at this time, and why I know you are so excited.

Because we are making a difference. Not just for today, but for tomorrow.