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Thursday, 27 November 1986
Page: 3869

Mr BLANCHARD —Has the Treasurer noted today's release by the Australian Bureau of Statistics which shows seasonally adjusted current account deficit figures for the September quarter? What do these figures demonstrate in respect of developments in Australia's trade position?

Mr KEATING —Today the Australian Statistician released a totally recast format for the quarterly balance of payments publication. He has attempted to do a number of things in the recast format: Firstly, to present the quarterly figure in seasonally adjusted terms for the first time, secondly, to publish officially the effects on the current account of the terms of trade; and, thirdly, to publish changes in the volumes of imports. In today's release the Statistician has computed the September quarter in seasonally adjusted terms and put the current account deficit at $3,696m. Annualised, that comes to around $14.75 billion, which is just about spot on the Budget estimate for 1986-87. He also records the impact of the reduced terms of trade on these numbers that he has now officially computed and he says that, but for the terms of trade decline, the current account deficit in Australia would now be running at an annualised rate of $8.6 billion. He puts the cash value of the terms of trade loss at a staggering $6.2 billion.

Of course, this indicates very much what the Government has been saying, namely, that Australia has been living through an adverse trading phenomenon the likes of which it has not seen before. If we were living with the same terms of trade as the former Treasurer was living with in 1982, we would have an annualised rate of around $7 1/2 billion. This decline in the terms of trade is an indication of the fact that, as a primary export--

Mr Cadman —Try that on the Yanks.

Madam SPEAKER —Order! The honourable member for Mitchell!

Mr KEATING —The decline in the terms of trade indicates that countries that are primary producers have borne this enormous burden of having the terms of trade decline in this way. I made the point in Japan last week that, while Australia's terms of trade have declined by 20 per cent in the last two years, the terms of trade for Japan's finished products have risen by 40 per cent in the same time.

The other interesting piece of data in today's publication is that the volumes of all types of endogenous imports, that is, underlying imports, are now lower than they were as at September 1984. In other words, the import volumes are now back to the September 1984 level. The overall endogenous volume fall in the September quarter is 3.7 per cent and the overall endogenous volume fall since December 1985 is 11.6 per cent. In other words--

Opposition members interjecting-

Mr KEATING —I am interested to see that the Opposition takes this with such mirth. It is not even interested in raw data from the Statistician.

Mr Ian Cameron —Why not tell us--

Madam SPEAKER —Order! The honourable member for Maranoa and other honourable members on my left will cease interjecting.

Mr KEATING —Honourable members opposite are so irresponsible and empty headed that they cannot even listen.

Mr Ian Cameron —Paul has told them--

Madam SPEAKER —Order! Is the honourable member for Maranoa looking for a holiday?

Mr KEATING —As I have said, the overall endogenous import volume fall since December 1985 is 11.6 per cent, which means that imports are falling and have been falling quite strongly and, as the national accounts also confirmed yesterday, endogenous imports are down for the third consecutive quarter. So, we are certainly seeing this very strong effect of the exchange rate cutting import volumes and lifting export volumes. But today we are very clearly seeing why the current account is masking this improvement because the terms of trade have cut the value by the enormous amount of $6 billion over the period that I mentioned. Of course, in this climate the Government has adopted a disciplined and responsible monetary policy to put the burden on the right arms of policy in this trading phenomenon.

Hence, one views with disgust the terms of the matter of public importance this afternoon, which will have the Opposition saying that the Government ought to let interest rates fall like a stone, that we should remove the monetary props to the exchange rate, that we should ignore the terms of trade and that we will not wait to see the volume changes on exports and imports which are part and parcel of the restructuring and part and parcel of the Government's strategy. Opposition members want to score some cheap political points by calling for interest rate falls when the parlous position of Australia's terms of trade exposes our country as never before to the people who need to fund the current account deficit abroad. They say that the reasons for running a responsible monetary policy ought to be simply abandoned by a party which has no understanding of rudimentary economics. I spoke to about 400 people yesterday at the Merchant Bank Administrators Association in Sydney. I get people saying to me that the only party in this country that understands Australia's problem at this time, the only party that understands the need for some real fiscal discipline and monetary discipline, is the Australian Labor Party; and that is why the confidence of Australian financial markets, Australian business and international financial markets is in the Labor Party.

Let me make one final point. In the 1970s Australia went through very disadvantageous terms of trade: Coal prices were up and oil prices were up. What did the `prudent' Government of that time do with this terms of trade benefit? Did it use it to repay debt? Did it use it to rebuild investment? No, it spent it on a major consumption binge. It squandered it, as it would do with any terms of trade improvement in the future. I tell the House this: Any terms of trade improvement under this Government will not be spent on a consumer boom; it will be spent repaying Australia's debt-the very thing those opposite never did. They came along with a massive increase in coal prices, a massive increase in oil prices and increases in cereal prices and they spent the lot, because they had no semblance of a decent policy and no sense of the national economic interest. That is why Australia ended up in domestically-induced recession in 1982-83, the greatest depression for 30 years and the first negative growth in 30 years.

Is it any wonder, when these figures reveal that Australia has lost $6.2 billion in lower prices, that the business world looks favourably upon this Government, its fiscal policy and its monetary policy and unfavourably on the Opposition's matter of public importance this afternoon, with its cheapjack proposition of dropping interest rates and putting the nation at risk for a few cheap political lines on the parliamentary pages of the Sydney Morning Herald and the Age? That is what those opposite are about. They are about the cheapest and lowest common denominator politics they can possibly get away with. What this release today shows is that the Party on this side of the House has understood the problem, has responded to it and has put discipline in policy, and will lead Australia through this problem to a future of sustained non-inflationary growth and, of course, longevity of public office for the Labor Party.

Madam SPEAKER —Before I call the next question, I point out to the honourable member for O'Connor that the Standing Orders of this House apply to him as well as to everyone else. Everyone in this House is expected to heed the Chair when the Chair asks him or her to stop interjecting. The honourable member has been continually interjecting. I ask him now to be silent.