Mr O'CONNOR —My question is also addressed to the Treasurer. Can the Treasurer elaborate on part of the Prime Minister's answer to the first question and advise the House what impact the budget will have on the government's financing task in 1995-96?

Mr WILLIS —I am happy to do so. As the Prime Minister mentioned earlier in question time, it is the case that the Commonwealth's borrowing program will be considerably reduced this financial year, 1995-96, by the fact of the budget turnaround as announced by me on Tuesday night. What we have seen is a $12.9 billion turnaround, from a deficit of $12.2 billion to a surplus of $700 million. That turnaround means that there is, accordingly, much less need for the government to go to the markets to borrow. It means that the government's financing task in association with repayment of maturing debt—instead of seeking some $21 billion, which was the borrowing task this year—in 1995-96 will be just over $6 billion. So it is a major reduction.

  The overwhelming part of that reduction of some $15 billion comes from the turnaround in the budget as presented to this parliament; that is, going from a deficit of $12.2 billion to a surplus of $700 million—almost a $13 billion turnaround. That demonstrates the importance of delivering the budget in the way in which it is delivered and has traditionally been delivered. The way in which the budget is set out has a direct significance for the financing task of the Commonwealth, and that reduction in the financing task is itself very significant.

  As the Prime Minister alluded to, what it means is that, with a lesser amount of borrowing, we have the likelihood of a higher price for government paper, which means the yields on them will be less and therefore there is reduced pressure on interest rates, because the bond rates will be less than they would otherwise have been with a higher financing task. That is a very important factor. That is the way in which the reduction in the budget deficit and turning it into a surplus turns into reduced pressure on interest rates. That is the way it happens, in association with the fact that the fiscal tightening in the budget reduces the inflationary pressures in the economy. This also bolsters the confidence of investors about inflation in the future. It means that they are less likely to be looking for higher interest rates.

   The change in the government's borrowing task is of great significance. The presentation of the budget—in the way it was presented to this parliament; as it has always been—has that direct significance in terms of demonstrating the change in the financing task and the impact on the markets in terms of pressure on interest rates. It is important for the House to understand that.

  It also means that we are looking forward to reductions in Commonwealth debt. We are seeing that the Commonwealth net debt, which in 1994-95 is about 19.1 per cent of GDP, will reduce over the forward estimates period to 13.7 per cent of GDP. There will be about a 5 1/2 per cent decline over that period. We are looking forward to reduced pressure on interest rates and substantial declines in government debt. Those, of course, are important and satisfactory outcomes for the nation.

  It is also of interest to note that the importance of that is recognised by influential people. We had a demonstration of that this morning by a representative of Moody's, the international ratings agency, who on the AM program had some comments to make about that.

Mr Tim Fischer —On a point of order, Mr Speaker: on 9 May last year, just over a year ago, you issued an admonition to all ministers with regard to the length of their replies to questions and pointed out that your carriage of the control of the House required a quid pro quo from ministers with their answers. This is a comprehensive question from the member for Corio, yes, but the answer is now going on to an extended length. I invite you to ask the minister to draw his answer to a close.

Mr SPEAKER —You were right, inasmuch as it was a comprehensive question asked by the member for Corio. The Treasurer has been entirely relevant in his response. As I have also remarked previously, economic ministers, as are others on the other side, in this place are given some discretion.

Mr WILLIS —I did not think I had been going that long. I think that all that I have said is very relevant to the question, and very relevant to this House and to the nation. I just conclude my answer by referring to the comments made by Mr Truglia from Moody's on AM this morning. He said:

. . . we are just interested in seeing the overall level of borrowing go down . . .

He went on to say:

From our point of view, going to surplus is a good idea no matter how it is achieved. So I think this is an appropriate policy to take under present circumstances.

Quite clearly, from the point of view of Moody's, the fact that we have moved into surplus and that we are reducing the borrowing task is a very important development. He was then asked:

How much of a concern is that current account deficit?

His answer—which I think is quite interesting—was:

Our expectation is, and is proving true, that the Government would not allow such a large current account deficit to be maintained in the medium-term and therefore the Government is making sure that fiscal policy tries to deal with it . . . the best way to try to deal with a current account deficit is to try and reduce the Government deficit. As a result, I don't know what else you could ask the Government to do to try to deal with a current account deficit, the size of which no one had, as far as I know, really predicted a year or so ago.

That I would say is a clear endorsement by Moody's of the budget, of the government's fiscal policy, of the fact that the borrowing task is being greatly reduced and of the fact that this has considerable relevance to addressing the current account deficit.