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Thursday, 2 June 1994
Page: 1192

Senator SHORT —I refer the Leader of the Government in the Senate to the fall of 6.8 per cent in private sector investment in equipment in the March quarter, after adjusting for the sale by the Queensland government to the private sector of the Gladstone power station. I also refer the minister to the fall in the household savings ratio in the March quarter to the lowest level ever recorded. Is the minister aware that the entire growth in GDP in the March quarter was due to consumption expenditure, 60 per cent of which was due to increased government expenditure? How does the government expect the present consumption-led economic growth to be sustained and long-term jobs created if the two essential requirements, investment and savings, are so markedly missing?

Senator GARETH EVANS —It is very hard to get a smile out of the opposition, even when one produces news, as we did yesterday, that the Australian economy is growing at the rate of five per cent per annum, with the last quarter result of 1.9 per cent—phenomenal growth rates which give us all, particularly occurring as they do in the context of very low inflation, enormous confidence about the future. It is, of course, only a matter of time before that is translated through into the kind of investment surge which will ensure that that growth continues to be sustainable.

  The growth in real terms over the year to the March quarter has been broadly based across all the components of aggregate demand. It is the case that private consumption has been strong; that grew by four per cent. The housing sector grew by nearly 10 per cent. Business investment, which does need to be stronger, grew by a little under five per cent. Exports grew by nearly 12 per cent over that year to the March quarter.

  It is important to appreciate that exports continue to be a very significant contributor to that growth. It is not just consumption; exports are contributing directly to it. They grew by 2.2 per cent in the last quarter, building on strong growth in the previous one. Over the year to March they have grown, as I have already said, by 12 per cent. That was stronger than imports; imports grew by only nine per cent over that particular period. Net exports over the year to March contributed 0.7 percentage points to growth. So it is happening there, where we want it to happen, on the export side of the equation. Employment continues to rise; that increased by over 236,000 since the trough which occurred in April last year. The growth outlook for the budget for 1994-95 of 4 1/2 per cent certainly remains intact. All of this is far exceeding expected world economic growth, in particular by the OECD countries.

  The conditions for business investment growth do, of course, continue to improve all the time. Company profits rose by 5.3 per cent in the March quarter and by 14.8 per cent over the year, raising the profit share now to 18.3 per cent, which is at record levels. Business surveys, which are important in indicating expectations, are continually reporting very high levels of business confidence, the latest being the ACCI-Westpac survey of industrial trends putting it at its highest level for more than 30 years.

  Capacity utilisation, which is one of the things that has been inhibiting investment because of productivity gains creating additional capacity which has not yet been fully utilised—or not until the growth boom really got going—continues to rise and is now at the point where we can reasonably expect it to be translated into new investment.

  Interest rates, of course, are at an historically low level. As the Treasurer and the Prime Minister have been saying, there is absolutely no reason, on present economic fundamentals, to expect them to rise. The savings ratio, as I have indicated in answer to previous questions, is not as strong as we would like. That is one of the reasons why we are going down the path of superannuation reform in a way that the opposition has never liked but which will, over time, obviously be one of the major elements in place to ensure a shift in that to give us the capacity to produce that domestic investment in the way that we want without having to rely on further borrowing offshore. Of course that is important, of course it is a crucial component, but that is built there into the fundamentals of this economic strategy.

  It is a very good news story, Mr President. The problem with those opposite is that they simply cannot bring themselves to act in a way which recognises the basic national interest that is involved. They are not interested in the national interest but in crude, opportunistic, political self-interest, and they will go on being miserable for so long as the news continues to be as good as it is.

Senator SHORT —Mr President, I ask a supplementary question. Having listened to that harangue, which did not even attempt to answer the question I put to the minister, I draw his attention to the fact that in the March quarter the growth in imports considerably exceeded the growth in exports. I do not know what he is going on about. What evidence does the government have to suggest, through anything showing in relation to investment and savings, that we are not once again on the boom-bust treadmill that has been the hallmark of this government's appalling record of economic management since it came to office?

Senator GARETH EVANS —When this lot opposite last had their hands on the levers, we had unemployment ranking at around 11 per cent and inflation at 10 per cent. When we came out of that particular recession we still maintained inflation at around 10 per cent. The huge difference between the capacity of those opposite to manage the economy and ours is that we can manage recovery; we can manage growth; and we can manage it by creating the conditions for sustained growth with extremely low inflation. The conditions are there for very real confidence in the economy. That confidence is shared by every single observer of this scene. Those opposite are a low quality, low life mob, and they do not deserve ever to get their hands back on the levers of government. They will make as big a mess of it in the future as they did in the past.