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Tuesday, 16 April 1985
Page: 1052

Senator SHORT(5.07) —I have pleasure in joining Senator Peter Rae and Senator Messner in this debate. Before making the remarks I have in mind to make I will address a couple of the points that have been made by earlier speakers. Senator Walsh, in leading the debate for the Government, said-if I understood him correctly-that there is only one issue on which the Government has not yet stated a firm policy in respect of its overall economic policies; that is, discounting the consumer price index for devaluation. That is a very interesting statement. I ask Senator Walsh and the Government-perhaps Senator Cook, who will follow me in this debate, will help me out-because I would be very interested to know, and I am sure the people of Australia would be interested to know, precisely what is the Government's policy on monetary targets, interest rates, wages, the export sector of this economy, with the reduction that is taking place in export incentives, taxation and the encouragement of investment. Many people in Australia are asking questions about these matters. Senator Walsh not only side-stepped those matters but he also did not address any of the very telling criticisms made by Senator Rae and Senator Messner.

In the last 10 weeks alone, since 1 February, the Australian dollar has fallen in value by a record amount to a record low. Against the United States dollar it has fallen by 17.8 per cent. Against sterling it has fallen by a massive 26.5 per cent. Against the yen it has fallen by 20 per cent. Against the deutschemark it has fallen by 21.2 per cent. Against the average of the currencies of our major trading partners the Australian dollar has fallen in value by 19.2 per cent. These are figures to cause all Australians great concern. It is no wonder that the value of the dollar has, for the first time in my memory, become a focal point of everyday conversation for most Australians. The fall in the value of our currency and, therefore, our real standard of living-let us not forget that-is symptomatic of serious problems facing Australia. Those problems are not just economic although economic factors play a major part. We are heading for a record deficit in our balance of payments on current account in 1984-85-probably a figure of $10,500m to $11,000m. That is $2,000m more than the Government forecast at the time of the last Budget. Our overseas debt is skyrocketing and with it the interest on that debt. The interest bill on our foreign debt has increased by 200 per cent since 1980 and most of that increase has occurred in the last two years. There is the answer to Senator Maguire's point, with which I agree, in terms of the importance and the significance of the invisibles deficit in the balance of payments. It is coming very largely from skyrocketing and continuing interest bill increases.

Our interest bill on our foreign debt now represents 12 per cent of total exports. That means that we need $1 of every $8 worth of exports simply to meet the interest bill on our foreign debt. That takes no account at all of the need eventually to repay the debt itself. No wonder the Australian Finance Conference, in a submission to the Economic Planning Advisory Council in recent days, said that our overseas debt is now threatening Australia's long term growth prospects.

Our economic growth rate is declining. Gone are the heady days of 1984 when the Government basked in the wake and the wash of the recovery of the United States economy, the breaking of the drought in 1983 and the previous Government's wages pause. The decline in our inflation rate has plateaued and the rate is showing signs of increasing, despite the fact that it is still higher than those of most of the other major Organisation for Economic Co-operation and Development countries and despite the fact that we still have the devaluation impact of the recent exchange rate decline to take into account. That will probably add directly about 2 per cent to the CPI. Unemployment is on the rise again. Money supply is increasing at an unhealthily rapid rate and, despite this increase in the money supply, interest rates are rising in complete contradiction of the claims of the Treasurer (Mr Keating) that they would fall. As Senator Rae and Senator Messner so rightly pointed out, interest rates are rising directly as a result of the actions of this Government. We are being taxed at a record level and government charges are having an increasingly severe impact on all sectors of industry. No wonder the economy is showing signs of sluggishness again. No wonder unemployment is on the rise again. These are some of the economic reasons lying behind the fall in the value of the Australian dollar. They cannot be ignored. There are also significant political reasons, all of which add up to a Prime Minister and a government which have lost control, a government which has lost the capacity to govern.

Let us look at the Government's record since the last election. It is an appalling record of vacillation, dithering, confusion and lack of leadership. First there was the MX missile fiasco, when the Prime Minister (Mr Hawke) backed away from previously given support to our major ally, the United States, under pressure from the left wing of the Labor Party-a 180-degree turnaround-all done on the basis of a few hasty phone calls across the world without any serious consideration by the Cabinet. This fiasco was closely followed by the ill-fated visit of the Foreign Minister (Mr Hayden) to Kampuchea and Thailand during which time he managed to put off side entirely all our friends in the Association of South East Asian Nations. Then there was the abandonment of monetary targets by the Treasurer. Then the Minister for Social Security (Mr Howe) got himself and the Government into all sorts of trouble over the iniquitous effects of the assets test on many pensioners and particularly pensioners on farms. Mixed up with all this has been the Government's somersault on the police tapes in New South Wales, its continuing and increasing confusion on the issue of restructuring the taxation system, the defeat of the Prime Minister and the Minister for Finance (Mr Walsh) over the reintroduction of tertiary fees and the most recent debacle, the confusion generated by the Prime Minister last week throughout both the union movement and the business community with his statement about the productivity case. This litany of mismanagement, inconsistency and bungling by the Prime Minister and the Government has reached alarming proportions. It is a major factor in the decline of the Australian dollar and therefore in our living standards because, quite simply, the rest of the world has lost confidence in the ability of the Australian Government to govern-and very understandably so.

The implications of the dramatic fall in the value of the dollar are profound. I agree with Senator Maguire that certainly there are some sectors of the economy which will benefit in the short run, in particular the export-oriented rural and mining industries. Australian producers of goods which receive competition from imports will also benefit in the short term. But these benefits to some sectors of the economy are achieved at great cost to the economy as a whole because, in its simplest terms, depreciation of our currency means that we have to sell more and more abroad in order to pay for the same amount of imports. This automatically means a reduction in the living standards, in the real income, of every Australian, unless we can capitalise on the short term increased competitiveness which devaluation provides.

The only way we can capitalise on this situation is for the Government to take firm and responsible economic management decisions in the light of the reduced capacity of the economy to pay. This involves some tough decisions. It requires the Government to exercise much tighter restraint on its expenditure. Government expenditure has ballooned wildly in each of the last two Budgets. It must be reined in, and even more extensively so as a result of the depreciation of the currency. It requires the Government to reduce its Budget deficit so that it puts less pressure on money markets. It requires the Government to reintroduce firm targets for monetary growth rates and to communicate these to the market; a market which at the moment is very confused as to where this Government is going. It requires the Government to exercise the maximum influence over the trade union movement and the Australian Conciliation and Arbitration Commission to have wage increases discounted for the effects of devaluation. To say that that is a decision to be taken several months down the road is a nonsense because the longer the Government delays taking a decision on that issue the greater the lack of confidence and the greater the uncertainty that will be created in the community. It also requires the Government to use its influence to have abandoned the productivity case scheduled for later this year. It requires the Government to press ahead with freeing up those sectors of our economy where there are rigidities which prevent us from producing efficiently at effective costs. It is quite essential that the Government tackle head on the need for greater flexibility in our wage fixing system and the vexed question of the ever escalating labour on-costs that are plaguing industry generally.

If we can achieve these things we can capitalise on the opportunities which the depreciation of the dollar opens up for us, but if we do not we are inevitably headed for further lack of competitiveness, increased inflation, reduced employment and progressively declining living standards. We can either try to get it right ourselves or have the mechanism of the market place impose its disciplines on us. It is essential that the Prime Minister and the Government take a lead in this. It is not too late. As Senator Rae outlined earlier, we have great potential as a nation, but that potential will not last if we continue to fritter away our opportunities under this leaderless and rudderless Government. If it does exercise leadership I can assure the Government that it will receive the support of the Opposition, but the regrettable fact is that leadership is not being given. That is the reason why Senator Rae, on behalf of the Opposition, has submitted this matter of public importance today. The Prime Minister is not only not showing leadership, he is also adding to the confusion and to the declining confidence, both within and outside Australia, by a series of contradictory and vacillating actions that are the opposite of leadership.

The Treasurer also has a great responsibility to exert leadership at this time, but where is the Treasurer? He has become the invisible man of Australian politics in recent weeks. Is it because he is deliberately distancing himself from the Prime Minister; is it because he is incapable of performing his duties now that the going has got tough; or is it because the three Australian Labor governments-the so-called right wing Labor Government, the so-called left of centre Labor Government and the certainly far left Labor Government-have collectively become incapable of governing?

Senator Gareth Evans —He has been out of the country. Don't you read the newspapers?

Senator SHORT —If he has been out of the country in recent weeks, he should have been back here because he has a very serious problem. In recent weeks we have seen a formally factionalised government in very serious disarray. At a crucial time in our economic development we have a Prime Minister and a Government tragically lacking any exercise of firm and responsible government. The situation is serious. It urgently demands leadership. The Prime Minister and the Government are failing Australia and Australians by their inability or unwillingness to provide this leadership. The Opposition urges the Government to act now to stop the slide before it is too late.