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Wednesday, 1 June 1994
Page: 1090

Senator WATSON (3.55 p.m.) —I wish to use this occasion of the presentation of the corrigenda to the portfolio budget measures statements 1994-95 to address the Senate on a number of disturbing measures. I remind the Senate that never before has an opposition been denied the opportunity, as it was in the budget in May this year, of being allowed to bring its expert advisers into the lock-up. Not only that, but we who were in there noted that the index of the budget papers, particularly document No. 1, bore no relation to the contents. I know that the professionalism of Treasury would not have allowed such errors. It points to the fact that there were a lot of last minute political changes to that document.

  I also wish to take issue with the statement made by the Leader of the Government in the Senate, Senator Gareth Evans, in the Senate this afternoon when he asserted that the wider Australian community does not share the burden of its foreign debt because in those budget documents that I referred to the Treasury itself said something quite different. Who is right? I back my case on the Treasury officers, because their assertion is based on facts and learning, and an understanding of the issue. Was the minister at the time not aware of the decline in the living standards of Australia, a decline attributable to the policies pursued by this government during its term in office?

  I remind the Senate that interest rates went through the roof arising from the recession that this government said Australia had to have, and companies are only now crawling out of that recessionary process. What is the government doing? It is restructuring the debt under great difficulty as things get just a little bit better from that recession that we had to have. Those policies were directly attributable to the rise in the interest rates, and as interest rates moved, what did the private and the corporate sector do? They were forced by sheer necessity to seek their funding and financing overseas. So it is not surprising that the debt increased.

  The government cannot walk away from that responsibility and attempt to blame the private sector for the huge increase in private debt. It has gone from a figure of $34 billion gross to over $210 billion under this Labor government. This is a legacy that the Australian people at large have to carry in the form of lower standards of living. Because interest rates are very much higher, and because we are so locked into the international community because of the extent of our borrowing, we are now captive to the movers and shakers of international monetary movements around the world.

  How can we have political independence if we have not got economic independence? We are losing our economic independence because we are locked into the decisions of what is happening around the world. No matter what Mr Bernie Fraser might say about interest rates; if, around the world, interest rates are firming they must firm in Australia.

  There has been some discussion of when interest rates are about to rise. Those of us who have overdrafts at the present time are aware that interest rates are rising. While it might be true to say that the base rate of 9.25 per cent has not risen yet but it may in the future, that ignores the fact that individual banks are raising their risk margins across the board. That is a de facto interest rate rise, because instead of paying something like 10 or 11 per cent the figure is now probably up to 12 per cent. That is a real rise that is happening here and now at a time when the Treasurer is denying that, as yet, there have been any interest rate rises. It demonstrates that this government is out of touch with what is happening in the real world.

  We are coming out of the recession that Australia had to have. I was speaking to some small businessmen in Queanbeyan who are still recovering from the recession. What are they doing? They are trying to restructure their debt in the hope of trying to hang on. At the end of the December quarter 1993 the Australian Bureau of Statistics figures showing the international investment position in ABS document 5306.0 showed gross foreign debt to be $210 billion, of which $96 billion was in the public sector. This approximates $5,300 for every man, woman and child in this country.

  This debt includes debt held by Commonwealth and state governments and by their semi-government authorities. The public sector share of gross foreign debt is currently 46 per cent. There can be no argument that the public sector debt is not a burden on the public or on the community. Yet this afternoon this government denied that. Through its ownership of the government, the public does bear the burden through the taxation system to repay public sector debt.

  Even if it is argued that Australia's foreign debt is different to that of the developing world in that our foreign debt is mainly private sector debt, the Australian community can still be said to bear this burden, although perhaps not as directly as in the case of public sector debt. But a debt does get reflected in higher interest rates and lower standards of living. We all know from personal experience that as the mortgage goes up we have to contribute more in repayments and our standard of living drops because we have less money to spend on other goods, services and needed things. The same is true of the public sector.

  The logic behind this is that whilst owners and shareholders of companies bear the burden of their overseas debt, Australia's private sector is large and widespread. This means that all Australians have a de facto involvement in bearing the private sector debt since we are all involved in the economy and, as the employees of the owners and managers, we contribute to their profits and hence their ability to repay those debts. This is another example where the burden of private sector debt cannot be said to lie on owners and shareholders only: the community, both indirectly and directly, is burdened in some way too.

  Another argument is that the growth of foreign debt helps to drive down the value of the Australian dollar in the foreign exchange market. This is yet another mechanism by which the community at large bears the foreign debt. It bears the burden of the foreign debt indirectly since the lower value of the dollar tends to reduce the purchasing power of the dollar and causes lower living standards resulting from things such as higher import prices. Of course, as the value of the dollar drops, we find an increase in the ultimate indebtedness to the worldwide community.

  Madam Acting Deputy President, I put to you that we are very much in the hands of the international money market at the present time. We are captive to it. As interest rates rise overseas, so too will they rise in Australia. But we are much worse off because of the other factors which internally will create rises for people who have to repay mortgages. I warn people in the wider Australian community that they should not get themselves into debt, otherwise they may be facing a horrendous interest and repayment burden in the near future—all the responsibility of this delinquent government.