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Thursday, 23 June 2005
Page: 101

Senator CHAPMAN (3:21 PM) —What we saw in question time today, reinforced in this debate by Senator Sherry, was a typical Labor tactic, and that is to attempt to assert that there is a problem where in fact none exists. Senator Sherry made the false postulation that there is a problem with Australia’s foreign debt. Even if for the sake of this exercise we accept that false proposition, what do we hear from Labor apart from that? Is there one possible solution suggested by Labor to the problem raised in that false proposition? Of course not. This simply reinforces that Labor is a policy-free zone. It has remained a policy-free zone now for more than nine years and it continues to be one. What that really reinforces is that in reality there is no problem at all as far as the level of foreign debt is concerned.

The fact is that, as Senator Brandis said a few moments ago, over the life of this government the massive debt for which the government has responsibility—that is, the government debt, government borrowings—has reduced from $96 billion to $23 billion currently, and by next year it will be down to $6 billion. That is a tremendous record on the part of the Howard government, the Prime Minister and the Treasurer, who have implemented policies that will see that debt reduced by some $90 billion. It was the greatest level of government debt ever inherited by a government. Indeed, under Labor, it was the greatest government debt ever produced by a government, and it was inherited by this government. Over the life of this government it will soon have been reduced by some $90 billion, back to a more than sustainable level.

That is why, since this government came to office in 1996, on three occasions the Standard and Poor’s rating agency has upgraded Australia’s rating, so that it now stands at AAA, the highest rating that is applied by Standard and Poor’s to rate countries in terms of their credit situation. As I said, the rating has been upgraded three times since 1996 as a direct result of the policies of this government and the government’s success in reducing that massive inherited debt. That is in direct contrast to what happened under the Hawke-Keating Labor government when, between 1986 and 1989, Australia’s credit rating was downgraded three times, from the AAA that applied when Labor came to office down to AA-. The rating agency, in its report when it upgraded Australia’s credit rating, said:

Government finances are strong and the ratings on Australia remain underpinned by robust government finances which continue to strengthen.

That is the situation as far as that portion of debt for which the government has direct responsibility is concerned.

The foreign debt which is emerging of course is private sector debt—an area of debt which is not the government’s responsibility and over which it has no control. It is debt created by the decisions of private individuals as to their own spending and investing habits. What we need to recognise is that, even in that situation, the level of assets which Australian individuals hold compared with their level of debt is massive. For every dollar of debt in Australian households, they hold $2 of financial assets and more than $6 in total assets. So the level of debt is covered six times by the level of assets held by Australian households. That is because, under the sound policies of this government, the nominal wealth of households has increased by about 11 per cent for each and every year this government has been in office. That compares to growth of only six per cent—about half that rate—during the last eight years of the previous Labor government.

We now find ourselves in a situation where household net nominal wealth is $4.3 billion, more than double the level of about $1.74 billion when this government came to office. But do not rely on my words; hear what Professor Tony Makin, Professor of Economics at Griffith University and a man who well understands debt—he worked with the IMF in 2003-04—said:

… given the sizeable fiscal surplus at present, Australia’s current account deficit—

that is, level of debt—

is easily sustainable …

He also said:

… the high current account deficit remains the best measure of the extent to which foreigners are expressing confidence in the Australian economy.

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