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Wednesday, 12 September 1984
Page: 953

(Question No. 1100)

Senator Watson asked the Minister representing the Treasurer, upon notice, on 24 August 1984:

(1) Will the massive increase in public sector borrowings as evidenced by the ratio of public debt to gross domestic product crowd out the borrowing of companies and raise interest rates.

(2) Should the private sector wish to benefit from the Government's confidence in the economy by expansion through borrowing, will not interest rates rise within the next twelve months to both Government and private sectors.

Senator Walsh —The Treasurer has provided the following answer to the honourable senator's question:

(1) and (2) The public sector borrowing requirement is expected to fall as a proportion of GDP in 1984-85, reflecting the lower Commonwealth Budget deficit and the agreement reached by the Australian Loan Council in June 1984 that the ' global' borrowings in all forms by Commonwealth and State authorities would be limited to close to their 1983-84 money levels.

Meanwhile, the forecast increase in private investment spending in 1984-85 is expected to be largely financed by internally generated funds-reflecting the recent and prospective improvement in corporate cash flow. The corporate sector is therefore not expected to be a significant net borrower in 1984-85.

Interest rates paid on most private sector borrowings and government security yields have fallen over the past year. While prospective developments are always uncertain, the reduction in public sector borrowing and the outlook for corporate sector borrowing together with the significant decline in Australia's rate of inflation in recent times should help to keep pressure off interest rates in the period ahead.