Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Tuesday, 11 September 1984
Page: 810

Senator WATSON(5.54) —The purpose of the Loan Bill 1984 is to finance the 1984-85 Budget deficit-a deficit to win popularity for a 1984 election. The Labor Government is indeed mortgaging the future of our nation. It is conceivable that if these sorts of policies are pursued in the future they have the capacity to bankrupt future generations. The real tragedy, however, lies not only in this scenario becoming a reality, but also in the fact that those who are in a position to prevent such an occurrence refuse to act while the opportunity still exists. We have to acknowledge that there are structural problems that must be faced when one drafts a Budget, even if one cannot fully overcome all the structural problems. But these structural deficit problems should never be allowed to assume a role of some form of bureaucratic sacred cow and so remain largely unchallenged.

The simple fact is that no country can continue to live beyond its means. Everything that is bought must be paid for. Likewise, everything that is handed out must also be paid for. Interest now accounts for 64c of every dollar borrowed-a horrendous amount. If history has taught economists just one thing it is that despite economic theories countries can go bankrupt. Germany in 1930 was bankrupt. Mexico, Brazil and some other Latin American countries are approaching bankruptcy, as is Poland. As much as I would like to say that the position in Australia is far different, in all truth I cannot say that that is the case. The International Monetary Fund has pleaded for austerity programs to be implemented in nearly all Latin American nations, particularly in the Argentine. Instead, the President submitted a plan to increase wages 6 per cent to 8 per cent above the inflation rate, which is currently running at an almost incomprehensible 568 per cent.

I think that there are valuable lessons for Australia in studying the burgeoning debt crisis. International indebtedness has reached such staggering proportions that people-and, still worse, governments-find it almost impossible to effect any coherent economic revival programs. But such programs must be implemented, because we in Australia cannot allow the situation to go unchecked any longer. We must put our house in order. Decisions-and they are not easy decisions by any means-have to be made because we cannot allow another year to go by. The decisions required will necessitate the re-educating of Australia because people must learn to expect less. They must come to a realisation that if leadership is not taken the almost artificially inflated standard of living that we enjoy in this country will come crashing down.

The people of this nation deserve and expect leadership from the Government. That is the essence of democracy. A government must never abdicate its responsibility. President Kennedy once remarked that he was the President of the unborn as well as the living. This country needs a government with just such a vision of its role. But at a time when this country needs leadership, none is forthcoming from this Government. At a time when this country needs a freeing up of regulations and big government bureaucracy, it finds itself saddled with a big spending, high taxing, socialist government. This year Australia needed a Federal Treasurer who would bring down a responsible, future-saving Budget. This year Australia was let down for a second successive year. Australia is saddled with an inept government and a Prime Minister whose sole motivating factor is the retention of power and personal glorification. Australia is currently in debt to the tune of about $75.3 billion and it is estimated that in two years this could rise to as high as $105 billion.

Senator Button —Is that the public or private sector?

Senator WATSON —It includes authorities. The writing is on the wall for all to see, if we care to look. John Stone was one such man who cared enough for the future of his country to look and to tell the people of the future he saw. This country cannot paper over the enormous cracks in the economic edifice. Since March of last year the Government has added about $15 billion to the total debt by its own spending programs. In just 18 months a thousand dollars for every man , woman and child in Australia has been added by this Government to our debt.

Just the interest on the public debt will cost each person $380 this year, or a staggering $875 for every person employed in this country. Every person who is employed is in effect in debt by $11,700, a situation which I think must border on the catastrophic. Fifteen years ago the total debt was $3.5 billion. Just this year alone, the Government intends to run an overdraft approaching twice that. There is no doubt the Government is guilty of abdicating its responsibility to rein in the deficit. It has produced a deficit this financial year estimated at $6.7 billion. In just two years this Government has achieved a record of economic mismanagement and suicide surpassing even the excesses of the Whitlam spending splurge. The average real growth of Federal government outlays has been 7 per cent under this Government compared with an average of just 2 per cent over the seven years when the Liberal Party was in government. In the last decade-and most of this has come in the last two years-Federal government spending has increased from 24.3 per cent of gross domestic product to 31.7 per cent. Total public sector outlays have risen to an almost unbelievable 42.3 per cent of GDP.

It is easy to dismiss these figures as inappropriate, or to pretend they do not mean as much as they in fact do. That was the sort of attitude that John Stone found hard to accept, and in the end found quite intolerable. Burying one's head in the sand is not a solution. All it achieves is an ignorance of reality.

Senator Button —He laid down his life for his country!

Senator WATSON —The Minister is one of the members of Cabinet who are burying their heads in the sand. The pace of the economic recovery in the past two years has been encouraging, but no one believes that such a rate is sustainable over a period of years. This is where the Australian population may have been fooled. It must also be remembered that the recovery is the result of the Liberal Party' s wages pause, the breaking of the drought, and the short term success of ' Reaganomics' in the United States. It is as well to remember that despite the rhetoric and euphoria generated by the Government, economic activity has yet to surpass the levels of 1980-81, when the Liberals were in power. The accumulated debt will now have a negative effect on future economic growth, a fact that the Labor Party refuses to acknowledge. High deficits require high borrowings to finance them, which leads to higher interest rates. To the Commonwealth deficit must be added the new Budget borrowings and including a responsibility under the Loan Council for State and local government borrowing. Higher interest rates result from the inevitable clash of private and public sector borrowing demands. High interest rates-and currently our prime lending rate-act as a disincentive for investment in the private sector, again a factor which this Government refuses to acknowledge. The deficit will hold interest and exchange rates at levels higher than they would otherwise be, thereby damaging Australia's international competitiveness. These factors act to the detriment of our essential export industries.

Australia's inflation rate is above that of the United States. This Government must be careful to avoid a crisis generated by the oversupply of liquidity in the market. The Government has abandoned any attempt to have a monetary target or to control the monetary base, which is easy to control. Any pretext of controlling the monetary base has had to be abandoned so that the Government can fulfil its social democratic ambitions. The Economics Editor of the Australian has said of this Labor Government-quite accurately I believe-that it is the most social democratic of Labor governments Australia has had.

No doubt this Government has directed the bulk of its spending towards the social welfare system and those areas from which it believes its traditional supporters spring. But the priorities of this Government are very wrong indeed. Those who say that this is the best Liberal government Australia has ever had are very wide of the mark. A Liberal government would not attack the poor and aged as this Labor Government does and has done. A Liberal government would not ransack the middle and lower income earners, nor would it move to dismantle the family unit, the very basis of our society. Defence under a Liberal government would not be allowed to become as run down as this Government has permitted.

What is this Government trying to do? At a time when it should be trying to rein in on the deficit, it is trying to spend its way out of a number of problems, just as the socialist Government under Mitterand in France attempted to do. But just as Mitterand had to reverse his policy, so will Bob Hawke and the Labor Government very shortly, if-and that is a big if-Labor wins this next election, because the tide is starting to turn. If the Labor Party wins this next election it will have to bring forward a mini-Budget or an austerity Budget in the next year. We hope that Australians have the good sense to see that this Labor Government, because of its folly, is defeated at the next Federal election .