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Wednesday, 25 March 1987
Page: 1323


Senator SIDDONS(5.02) —There is no doubt that high interest rates are strangling the Australian consumer, the home buyer, the small business person and, in particular, the farmer. It is clear that interest rates must be brought down. The question is how. I asked that question of the Opposition and it said that it should be done by a tighter fiscal policy, which means that we have to reduce expenditure in this country; we have to cut down on government expenditure. The unfortunate inevitable result of that policy is that it will dramatically increase unemployment at a time when unemployment in this country is already too high.

A little while ago we saw the Prime Minister (Mr Hawke) on television saying: `No government likes high interest rates. If we could do something about getting them down we would'. The question has to be asked: Why is it that Australia has an interest rate of 18 per cent when Japan has an interest rate of 4 per cent and Canada-a rural exporting economy-has an interest rate of only 7 per cent? Our interest rates are about twice the average interest rates of Organisation for Economic Co-operation and Development countries.

I think we can legitimately ask the question: What has gone wrong with the economic management of the country? Surely we can ask the question: Has the complete deregulation of all our financial institutions worked? When the present Government first moved to free all controls on capital movements in and out of the country and to free the exchange rate we were told that this would have the effect of reducing fluctuations in the Australian dollar and help to alleviate our balance of payments problem. However, the reverse has been the case.

The Unite Australia Party, alone amongst political parties represented in this Parliament, says that some measure of re-regulation of our financial institutions-by which I mean both the banks and the non-banking financial institutions-must be introduced in this country. We must do something about controlling to some degree the flow of capital in and out of the country. At the present time banks are borrowing enormous amounts of money overseas, presumably at low interest rates, lending it in Australia at 18 per cent and, in turn, again investing overseas in speculative activities. Each year $6 billion goes off-shore from our banks. Each year our superannuation funds invest 20 per cent of their money overseas.

Some measure of control on the flow of capital in and out of this country must be established. The problem could easily be solved by saying to the Reserve Bank of Australia: `What about having a deposit on the percentage of foreign borrowings that institutions involve themselves in overseas?'. They could vary those deposits up or down depending on whether the Reserve Bank thought that capital was being invested in productive or non-productive areas. If there was too much speculation the Reserve Bank could up the deposit; if it felt banks were taking notice and trying to invest money productively it could reserve the deposit. That is one measure and there are many others. The simple fact is that we have to face up to a more regulated economy if we are to get interest rates down to reasonable proportions in this country.

Question put:

That the motion (Senator Crichton-Browne's) be agreed to.