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Wednesday, 13 May 1987
Page: 3075

Dr HARRY EDWARDS(12.30) —The Supply Bills which have been introduced for the customary purpose of providing funds for the Government for the period from 1 July to 30 November give us an opportunity to comment on the Government's economic policy at this critical point immediately preceding this evening's economic statement. The economic statement is testimony that the imperatives of Australia's very serious, indeed quite critical and, in the event of a sudden change in the international financial climate, dangerous economic position-without being alarmist that climate is not without parallels to 1929-have gotten through to the Hawke Government.

Mr Reith —About time.

Dr HARRY EDWARDS —As the shadow Minister says, it is about time. There is a good deal of complacency about this. Lately things appear, on the face of it, to be looking better. The Australian dollar is firmer and interest rates have been easing, although they are still at crippling levels. That fall is to be welcomed. Without wishing to seem to be a knocker, those outcomes are the result of a combination of good luck, to which the Government is welcome, and some wrong reasons such as, in the case of interest rates, the widespread running down of stocks in the Australian economy due to a lower level of activity and the associated reduced demand for finance.

But the economic fundamentals have not changed. The parlous state of the Australian economy, due largely to the wrong-headed policies of the Hawke Government-tonight's mini-Budget is an attempt, and hopefully it will be a serious and major effort, to bend policy on to a proper course-remains. However complacently the Hawke Government, until recently, appears to have viewed the position, that parlous state of the economy has gotten through loud and clear to the average Australian. Australians know, from hard and often bitter firsthand experience, that their living standards, particularly those of the one income family, have fallen drastically under the Hawke Labor Government. The cri de coeur comes from every side, including the Shop Distributive and Allied Employees Association. I have in front of me a pamphlet outlining a campaign it is running to try to encourage the Government to take action about falling living standards which, it says, have placed extreme financial pressure on Australian families.

Australian families are coping with higher taxes which are taking a greater proportion of their income-even after the so-called reforms by the Treasurer (Mr Keating) are put in place-than was the case when the Hawke Government took office. They face crippling interest rates-the repayments on a typical home mortgage have increased by up to $50 a week. The prices of items in supermarkets increase visibly every week. That is the story of this decline in living standards and, in particular, the devastation of the situation of the ordinary family.

What that reflects is the wrong-headed economic policies of the Hawke Government, exacerbated, it is true, by the adverse movement in the terms of trade-but that latter only to a certain extent. The Prime Minister (Mr Hawke) keeps on saying, with Goebbels-like intensity, that the change in the terms of trade has knocked $9 billion off available national income'. It does not amount to anything like that, as the technical literature makes clear. However, if it is said often enough, Goebbels-like, it becomes received truth.

Much more important have been the failings of the Hawke-Keating economic management, starting with the cumulative massive Budget deficit situation to which my colleague the honourable member for Curtin (Mr Rocher) referred a short time ago, reflecting the reckless overspending of this Government during its four years in office. That has been a major factor, indeed, a quite central factor. The essential point is that it piles up debt and vast interest obligations. In turn, the deficit situation in the Budget is reflected in deficit in the balance of overseas payments. What happens is that when one adds this excessive government spending to continued private spending, this country has to suck in, so to speak, resources from overseas, financed by overseas savings, money, to meet the excess of domestic spending-government plus private spending-over the Australian domestic output.

Along with other factors, notably faster wages growth than overseas and slower productivity growth, what we have is a situation of the country living beyond its means to the tune last year, and again this year, of the order of $13 billion to $14 billion. That piles up debt overseas and vast interest obligations to foreigners which subtract directly from living standards here. Further, this yawning balance of payments gap undermines the Australian dollar. We have the very large depreciation of the order of 35 per cent-the fall in the value of the dollar which has been visited upon us. That was not purposeful policy, as the Treasurer often implies, though of course, when it has happened it does help in restoring the situation. But that very fall in the Australian dollar itself spells reduced real product, reduced real income for the nation, reduced real goods and services available for Australian living standards. And then the yawning balance of payments deficit calls for crippling interest rates to attract the money to finance our excessive purchases, plus interest, over our exports. Those crippling interest rates, apart from being an instrument of enforcing the fall in living standards through higher mortgage repayments and so on, hold back the productive investment in new plant, in new factories and production facilities so necessary to enable expanded production at lower cost, which would then support and begin the process of restoring Australian living standards.

The Hawke Government has got the country into one heck of a bind, one heck of a mess. As is apparent from what I have said, the focus of concern and policy is the vast balance of payments gap and the massive and still increasing overseas debt in excess, as everybody knows, of $100 billion. The dimensions of this mess are such that there is no quick fix, no easy, overnight solution.

Mr Rocher —They could start by admitting this.

Dr HARRY EDWARDS —I hope and believe that the Government has begun to admit that there really is a problem. As I said the other day, the position is one where it will require the toughest of budgetary policy-that is, really axing government spending; the mini-Budget tonight is just the start of the process-and a really tough line on money income increases, preferably a wage freeze. It will require that, plus a good deal more of the luck the Government-and good for it-has recently enjoyed. It will particularly require an expansive international environment-currently under threat; witness the pessimistic assessment of the Organisation for Economic Co-operation and Development in the Press earlier this week. It will need all this to enable us just to stabilise-not to reduce-Australia's overseas debt at the order of 40 per cent of our total national product, and a similar order of drain on our export income. It will take all that just to stabilise it-and that over five years. That is the dimension of the problem that confronts us.

Getting responsibility back into government spending begins, hopefully, tonight. The mini-Budget tonight will be the beginning of the process of, in the first place, matching our demands to the available national production with spending reductions that are genuine and lasting-and the Opposition will be looking for that--

Mr Rocher —I'll believe it when I see it.

Dr HARRY EDWARDS —As my colleague says, we will believe it when we see it. It is the beginning of that process of matching demands to available product. In the second place, it is the beginning of the process of taking the load off interest rates and thereby encouraging the investment in new production facilities which will enable an expansion of the nation's production to provide the basis for restored higher living standards. This will be assisted also by improving confidence in the Government's willingness to come to grips with the problem, if we find that, and by the cutting back of government expenditure freeing skilled labour and other resources for investment. The new investment is the major factor, but other important approaches are needed to increase production, in particular, getting rid of restrictive work practices and lifting production that way.

I conclude by saying that this is the challenge to which the mini-Budget tonight, hopefully, will provide an adequate response. The Hawke Government has left its run pretty late. I can only hope that it will not be too little as well as too late.