Senator BRANDIS (3:11 PM) —It is disappointing to me that Senator Sherry does not seem to understand the difference between, and the different economic consequences of, sovereign debt and non-sovereign debt. One of the most striking differences between the economic position of this country today after nine years of Peter Costello’s stewardship in the Treasury and the economic position of Australia after 13 years of Labor government is that sovereign debt—debt owed by the Australian government or Australian governments overseas—has been reduced to virtually nil. Today sovereign debt constitutes only 3.2 per cent of all Australian foreign debt. The debt is held by the private sector.

Senator Sherry asserts: ‘Well, this could have a significant influence on mortgage interests rates.’ Not so, Senator Sherry. When a government is heavily indebted, heavily burdened by sovereign debt, when the net government debt comprising foreign borrowings and domestic borrowings is high, then the government has to go into the market to borrow to support that debt, and that is what drives interest rates up. But that is a consequence of there being an inflation of sovereign debt. There is virtually no sovereign debt owed by Australia today. Certainly the debt position bears no comparison to the situation after 13 year of Labor government.

Standard and Poor’s, the respected ratings agency on which Senator Sherry relies, reaffirmed in the report that they published in February that Australia enjoyed the highest rating that that organisation can give: a AAA rating. Do you know what happened in the 13 years that Labor was in government? The same ratings agency, Standard and Poor’s, downgraded Australia’s sovereign debt rating three times: from AAA to AAA-, then to AA, then to AA-. And you might ask yourself, Mr Deputy President, when was the last time Australia’s sovereign rating had been downgraded so severely by the international markets? It is no surprise that you have to go back to the previous period of Labor government, when Mr Whitlam was the Prime Minister and Dr Cairns and Mr Crean were the treasurers, because then too Australia’s creditworthiness in the eyes of the international markets and the world was downgraded.

That is the undulating pattern. Under coalition governments, running strong economic policies and strong budget surpluses, Australia has historically enjoyed the best international credit rating in the world, AAA. That was the case throughout the sixties. Along comes the Whitlam Labor government and, for the first time in memory, in the 1970s Australia’s debt serviceability, its international credit rating, was downgraded. Along comes the coalition and our creditworthiness rating was restored. Then, after 13 years of Labor government, we are downgraded again and again and a third time by the international markets while Labor governments clock up a $96 billion deficit, much of it borrowed from overseas.

Along comes the Howard-Costello government in 1996 and all but a few billion dollars now of that $96 billion has been paid off and Australia’s international credit rating, by the very agency that Senator Sherry relies on, Standard and Poor’s, goes up to the highest international rating, AAA. That is the real story of debt. It is not a tale of two cities; it is a tale of two parties: the Labor Party that left this country debt ridden and the Liberal-National Party coalition that has restored its economic fortunes, a fact acknowledged by the ratings agencies and the international markets.