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Friday, 24 August 1984
Page: 364

Senator TOWNLEY —Will the Minister representing the Treasurer confirm that this year we expect to have a public debt interest bill of some $5,600m and we are now spending almost as much on our interest bill as we are on defence, a fifth more on our interest bill than we are on education, and that our public debt is now virtually out of control due, to a large extent, to the irresponsible spending in the last two budgets during the Australian Labor Party's period of office? Does the Minister agree that, unless some drastic action is taken, this country which is already in debt more per head than Argentina, Brazil, Mexico, Poland or Chile, all of which we know are in extremely bad economic situations, could well follow a similar path? Finally, will the Minister advise the Senate how much of the interest bill is paid to overseas organisations?

Senator WALSH —The audacity of members of the Opposition never ceases to amaze me , including a backbench supporter of the Government which in its last year of being formally in power produced a deficit estimate of $1.7 billion that blew out before the year was out to more than $4 1/2 billion and on a no policy change basis left this Government with a prospective deficit of almost $10 billion. That was the structural and cyclical deficit inherited by this Government for the financial year--

Senator Walters —I raise a point of order. If Senator Walsh continues along that line he will convince Senator Cook, as he has before, and make him apologise--

The PRESIDENT —Order! There is no point of order.

Senator WALSH —The structural and cyclical deficit inherited by this Government on a no policy change basis was almost $10 billion. Because of the rigorous expenditure controls put into place by this Government--

Senator Messner —You are lying again.

The PRESIDENT —Order! Senator Messner, I ask you to withdraw that remark.

Senator Messner —Mr President, I withdraw the word 'lying'.

Senator WALSH —The truth hurts; that appears to be the real trouble. Senator Townley is correct in one respect, that servicing the debt on a structural and cyclical deficit of that magnitude inherited by this Government, even though it was substantially pruned back by rigorous expenditure controls put into place by this Government, which included, among other things, the abandonment of a number of the particularly irresponsible and inequitable programs announced by the Fraser Government in its terminal months, does cause a significant problem. The figure he quoted for the estimate on debt servicing in this year of $5.6 billion or something like that is, as I recall it, either precisely correct or certainly not very far out. That of course reflects two things: The absolute increase in public debt, which has accelerated at a very rapid rate in recent years, mostly, as I have said, due to the practices of the Fraser Government, and its inheritance.

The present Government wound back the impending deficit for the last financial year from nearly $10 billion to what was an ultimate outcome of less than $8 billion and has produced an estimated deficit this year of something below $7 billion. A more realistic assessment of the size of the deficit is to express it as a proportion of gross domestic product. The deficit in 1983-84 was 4.3 per cent of GDP and the estimate for this year is 3.3 per cent. I want to clear up one misconception and that is that servicing accumulated public debt certainly does account for almost 10 per cent of total Commonwealth outlays.

Senator Townley —I believe it is 8.8 per cent.

Senator WALSH —That is almost 10 per cent. I was not claiming to be precise. I want to clear up one misconception which is a very common misconception and which Senator Townley reiterated in his question. A debt owed internally, although it imposes some strain on public outlays, does not impose any real macro-economic strain on the whole society, because it is owed internally. The problem which the countries that he names have-I am not sure which ones they were but I think they were Argentina, Chile, Brazil and countries like that-is that so much of the debt is owed externally and the servicing of that debt requires a net outflow of money from the country. Servicing charges on internal debt require a recirculation of an internal circulation of money.

Senator TOWNLEY —I ask a supplementary question. On the final point, will the Minister tell us how much of the debt for the public interest bill is paid to overseas banking organisations? If he has not got the information available, could he get it for us?

Senator WALSH —I do not know the precise figure. My answer, which is to be taken as a very provisional answer, is that it will be something of the order of 20 per cent. I will get an accurate figure for the honourable senator.