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Thursday, 26 March 1998
Page: 1674

Mr BARTLETT (11:16 AM) —The shock waves from the Asian financial crisis have served to reinforce what has become obvious in recent decades; that is, that the increasing interdependence of economies in the region, in addition to bringing obvious benefits to the country, also increases our vulnerability and brings with it increasing levels of responsibility.

The International Monetary Agreements Amendment Bill 1998 establishes the framework for the provision of financial assistance by Australia in conjunction with the IMF and other countries to provide assistance for adjustment programs in the threatened economies. The bill is significant in relation to Australia's participation in the IMF packages for Korea and Indonesia, and follow on a package already put in place for Thailand. It provides balance of payments support to the recipient countries to restore market confidence and to try to prevent exchange rate volatility in those countries.

The legislation involves amendments to the International Monetary Agreements Act 1947 to enable the government to act swiftly in providing support for countries in receipt of financial assistance from the IMF. Under the bill the Treasurer can, in response to requests from the IMF for assistance, make an appropriate response to countries in need. This provides for an appropriation from the budget, compared with the package put together for Thailand recently that came from the Reserve Bank.

There has been considerable misunderstanding and distortion in some sections of the community about the nature of Australia's assistance to Asia in this current crisis. These misunderstandings need to be addressed. Two things need to be said. Firstly, this assistance is not a give-away. Australia is not simply throwing billions of dollars of taxpayers' money into Asia, as some would have us believe. Nor, on the other hand, does it come out of the current aid budget. This package does not detract from our other aid programs.

These packages—both the one already put in place and the potential under this bill for others—will consist of loans or currency swaps; not grants, not donations, not gifts. For example, the rescue package for Thailand to which Australia contributed in August 1997 pledged Australia to a currency swap between the Reserve Bank and the Bank of Thailand. The Reserve Bank provided US dollars to the Bank of Thailand in exchange for the Thai baht, with a predetermined exchange rate to unwind the swap at renewable six-monthly periods until completion date.

Furthermore, the return to the Reserve Bank is equal in that case to the prevailing US Treasury bond rate. The bill will enable Treasury to make loans or similar currency swap arrangements. It does not allow for simple grants. Thus, the bill does not allow action which will impose any direct cost on Australian taxpayers. To the contrary, it provides the opportunity to earn some income as part of the process of providing much needed assistance to the region.

Secondly, the bill does not expose Australian taxpayers to undue risk. As the member for Holt (Mr Gareth Evans) pointed out, obviously there is risk in assisting countries in need, but there is no undue risk or excessive risk entailed in this legislation. Any currency swaps or loans come with government guarantees and without significant exchange rate risk.

Australia, furthermore, is not out on a limb on its own. It is part of an international effort. Any assistance under this legislation must be part of an IMF package involving other countries, and Australia will participate only where such an IMF package is in place. This ensures not only a productive outcome for the recipient country but the means by which Australia can be repaid at some future time. Furthermore, any agreement must allow Australia to withdraw and require repayment if the IMF program is suspended or terminated prematurely.

This bill and the associated rescue packages provide two important roles for Australia. Firstly, it is an avenue for responsible involvement in the region. This is what we would expect from a leader in the region, as Australia is. It would be grossly irresponsible, on the other hand, for any international citizen to ignore a crisis on its doorstep, particularly considering the potentially grave social and political fallout which may result from financial and economic collapse.

Secondly, this bill is a matter of significant self-interest to Australia since the Asia-Pacific region contains our largest export markets. It is clearly in our interests to protect these markets by doing whatever we can to restore financial and economic stability to the region and maintain social and political stability.

Some figures might illustrate the point. Thailand now takes $1.7 billion of Australian exports, which is up from $1.2 billion just four years ago. Indonesia now takes $3.3 billion of Australian exports dollars a year, which is up from $1.7 billion four years earlier. South Korea, our second biggest export market, takes $7.1 billion worth of Australian exports a year, which is up from just $3.9 billion four years earlier. Japan, of course, our largest export market, accounts for over $16 billion of exports a year.

Clearly, it would be suicidal for Australia to allow total financial collapse in the region; the effect on our exports would be devastating. Virtually every region around the country would feel the impact, if such a collapse occurred. As it is, we are certainly feeling some impact.

My electorate of Macquarie is no exception to this. My electorate is very dependent on tourism, and the crisis in Asia has led to a significant downturn in inbound tourism figures. We have seen already a reduction of 40 per cent from Indonesia, a reduction of 30 per cent from Thailand, and a reduction of a remarkable 75 per cent of South Korean tourists. This must affect Australia's tourist industry. In fact, the hospitality industry in my electorate is so heavily based on tourism that it is one of my electorate's largest employers.

Almost 2,000 jobs in the Blue Mountains are in the core hospitality industry, with more in the Hawkesbury. In the mountains alone, there are nearly 5,000 jobs in over 680 businesses which provide services directly to visitors at some time. The Blue Mountains Tourist Authority figures indicate a decline of 20,000 visitations in February of this year compared with last years figures—although there are other factors that have contributed to that downturn. A number of local operators report declines of 30 to 40 per cent in their inbound market from Asia. For those who are very dependent on this part of the market, the impact has been significant. One or two operators who have specialised in catering for the South Korean visitors have seen their visitor numbers absolutely decimated.

Fortunately, anecdotal evidence is that inbound tourist numbers from Europe and North America are beginning to show signs of picking up. Timely and appropriate assistance to our prime export markets is a matter of self-preservation. Tourism provides 11.7 per cent of our GDP, 13.3 per cent of our exports, and employs 694,000 people. Therefore, it is entirely appropriate that Australia does whatever it can to protect these South-East Asian markets, and to protect the viability of the Asian economies. Certainly, it is appropriate that the Australian government does whatever it can to assist the Australian tourist industry.

While we are talking about the impact, or the potential impact, of the Asian crisis on Australia, however, it is worthwhile noting that it could have been far worse. It is worth repeating again what has been patently obvious: had the coalition government not taken action to strengthen the fundamentals of the Australian economy, the fallout on Australia would have been far worse than it has. It is not good enough for the member for Holt to stand there and try to deny the obvious facts; the fallout would have been far worse.

The currency collapse of the threatened Asian economy should be a clear warning to everyone. From the 1996 average to January 1998, the Malaysian ringgit has depreciated by 47 per cent against the Australian dollar, the Thai bhat has lost 73 per cent, the South Korean wan has fallen by 75 per cent, and the Indonesian rupiah has fallen through the floor losing a massive 203 per cent against the Australian dollar. South Korea and Indonesia have experienced stock market collapse, widespread financial losses and bankruptcies, and massive falls in living standards—especially in Indonesia. Further, the tightening of monetary and fiscal policies, as part of their restructuring packages, will also create significant short-term hardship.

Had our economic fundamentals not been so strong, the financial markets would have brutally sold down the Australian dollar. The results would have been accelerating inflationary pressures, higher interest rates and economic slowdown. It is not good enough for the members of the opposition to deny this fact. I will just refer to a comment in the Sydney Morning Herald by that paper's financial commentator, Max Walsh, on 3 February this year. He states:

. . . there is no doubt that Treasurer Costello's policy of winding back the fiscal deficit has been a major contributing factor to Australia's immunity from the direct financial contagion which has swept through the region to our north. The economy is certainly much more fireproof than would have been the case had a Labor government been returned at the last election.

There it is, in black and white, in simple terms that even the opposition can understand. Yet it is evident that Labor has not learnt its lesson from this. I follow up with a comment—

Mr Andrew —Very briefly.

Mr BARTLETT —very briefly, from Mr Laurie Oakes in the Bulletin . He states:

Whatever else can be said about the draft platform Kim Beazley and his shadow treasurer, Gareth Evans, took to Hobart, fiscal rectitude was not one of its more glaringly obvious characteristics.

Again, if the Australian economy had not been growing so strongly, if we had not had such high levels of private sector investment, if consumer confidence and spending had not been so high, if interest rates had not been so low, our ability to cope with this impact would have been far, far worse.

In conclusion, firstly, it is essential that Australia is able to respond quickly as part of an international package to help countries in crisis, as we have done with Thailand and as we have committed ourselves to doing in Indonesia and South Korea. The bill before the House provides the framework for this to happen. Secondly, it is in Australia's best interests to do whatever we can to ensure social, political and economic stability in the region. Thirdly, the message is clear: responsible economic management, as we have seen from this government, is a necessity—not a luxury, as the opposition would have us believe.