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Thursday, 19 February 1987
Page: 267

Senator POWELL —My question is directed to the Minister representing the Treasurer. In view of the fact that Australians owe over $100 billion to foreigners and that most Australians have no personal overseas debts but that all Australians are suffering high interest rates, high inflation and bleak employment prospects because of this massive accumulation of overseas debts, I ask: How much of the corporate component of this debt is made up of borrowings used to finance takeovers which, through negative gearing procedures, enable a corporation to write off the interest bill incurred in the company taken over against the profits made from other companies owned by the same corporation? Will the Minister provide an estimate of how much revenue is lost to the Treasury as a result of such procedures so that Australians who have no personal foreign debts will know how much they are being used to subsidise this horrendous level of foreign debt which threatens to destroy the Australian economy?

Senator WALSH —I am not sure whether the specific information that has been sought is available, but I will try to get an answer on that from the Treasurer. The question is predicated on the assumption that our foreign debt-which is, of course, the net accumulation of current account deficits-is caused by borrowing for takeovers. That is a very commonly believed fallacy, which regrettably is sometimes repeated by people who ought to know better. I would not expect the Australian Democrats to know better. The Democrats basically believe in fairies at the bottom of the garden. Unfortunately, some people who ought to know better do not seem to. The current account deficit is caused by the imbalance of interest payments and imports of goods and services as against receipts for the export of goods and services and interest received overseas and so on. If nobody was borrowing privately overseas for any reason at all, either the Reserve Bank of Australia, a merchant bank or some other trading bank would have to borrow the same amount of money.

I believe there are other undesirable associations with this rash of takeover activity, not the least of which, of course, is that it feeds and encourages the casino mentality, just as peddling the belief that the current account deficit is caused by borrowings for foreign takeovers feeds the casino mentality, but in a different sort of way. It fosters the self-delusory notion that this is a problem which can be easily fixed up, that all one has to do is stop overseas borrowing for takeovers and the current account problem will disappear. Well, it will not, and the sooner that is realised the better. If Senator Powell and others of the `fairies in the bottom of the garden' brigade want to do something useful for the country I suggest that they stop peddling that sort of nonsense and start telling people the truth.

Finally, one small qualification should be made to what I have said. To the extent that people who are selling shares or making windfall gains from the casino through raiding and takeover activity and that sort of speculation squander the money derived from those sources, or indeed from any other source, on luxury imported motor cars, overseas holidays, French perfume, French wine and all that sort of thing more than it would otherwise have been squandered on those sorts of self-indulgences, the current account deficit problem is marginally aggravated.