Senator WATSON (3:19 PM) —We have just heard a strong presentation from the Labor Party, from our colleague Senator Sherry. It was indeed very strong in terms of emotional content but rather limited in economic sense. The issue in Australia at the present time is that, despite difficulties in the Asian region, Australia has a very strong domestic economy. Having a strong domestic economy means that there is a very strong pull on imports into this country. Senator Sherry referred to Australia's ability to fund this deficit. The issue is that we should be looking at our ability to fund this trade deficit and at the underlying ratios that make sense. Our deficit, as I said, is not unexpected given our strong domestic position, with growth going at a very high rate, at the same time keeping down interest rates and, surprisingly, in terms of world scenes, keeping down inflation. In fact, our domestic economy—our economy per se—has been described as one of the miracles around the world, given the economic crisis.

Senator O'Brien —Who by?

Senator WATSON —I will give you that in a minute. The increase is not unexpected given this very strong content. It reflects the difficult external environment in which the domestic economy is operating. Let us look at something tangible, something meaningful, with which to compare this deficit for the December quarter last year. We find that the proportion of GDP, which I believe is a far better measure of the deficit in terms of dollars, was 2.1 per cent in the December quarter. That is well below the Labor figure of 4.5 per cent in the December quarter of 1995. That, I submit, is a far better measure than some of the emotive waffle that has the potential to mislead a lot of the listeners to the debate today.

The coalition government has a plan to further exports to make Australian exporters more competitive in world markets. This is certainly a GST. We have a situation where we are moving from a tax system which collects taxes and does not credit them back, to a system where there is a full credit for goods that are actually exported.

Senator Sherry —Will it help the tourist industry?

Senator WATSON —Yes, Senator Sherry, you are great on interjections. Let me give an example from where you live in your area of Forth. Some of the principal exports include horticultural products such as onions, peas, beans.

Senator Sherry —And they will get hit for a six by a GST.

Senator WATSON —These are the very industries, Senator Sherry, that are going to benefit. These are the industries around where you live, and you are not aware of the benefits.

Senator Sherry —What about tourism? What about the wine industry?

Senator Murphy interjecting—

The DEPUTY PRESIDENT —Order! Senator Sherry and Senator Murphy will cease interjecting and Senator Watson will address the chair and ignore the interjections, because the more you respond to them—

Senator Sherry —He invited them.

The DEPUTY PRESIDENT —Order, Senator Sherry. Senator Watson, please continue.

Senator Faulkner —He is emptying the gallery.

The DEPUTY PRESIDENT —Senator Faulkner, that is enough, thank you. Order!

Senator WATSON —I have been challenged to give some Tasmanian examples.

The DEPUTY PRESIDENT —Well, address the chair, please.

Senator WATSON —I am addressing you, Madam Deputy President. I have some Tasmanian examples where there is going to be direct benefit as a result of the GST and the full crediting of the GST back to the exporter. Because of our taxation system we compete at a disadvantage at the moment with New Zealand, particularly for markets in Japan and other places around Asia. Senator Sherry knows that our prices are loaded because of the tax impact we currently have. Senator Sherry knows that these export prices will come down under a GST and therefore Tasmanian agricultural producers will be able to compete on a level playing field. (Time expired)