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Thursday, 9 June 1994
Page: 1604

Senator O'CHEE (1.16 p.m.) —Mr Acting Deputy President, never let it be said that we on this side of the chamber are not charitable. I have listened for the last 15 minutes of Senator West's 20-minute contribution. I thought she was in state parliament in New South Wales, because I could not find any point of relevance to this federal budget. I certainly could not find any point of relevance to the appropriations; and Senator West, having fired off her great shot, is now going to leave the chamber. That is probably good for the relevance that we are going to have in this debate.

  The ACTING DEPUTY PRESIDENT (Senator West)—In fact, Senator O'Chee, I have now taken the chair, and I would ask you to address your remarks through the chair.

Senator O'CHEE —I did, Madam Acting Deputy President. I will be pleased, of course, to note that you uphold the fine traditions and will ensure that there are no interjections in this speech.

The ACTING DEPUTY PRESIDENT —I will do that, Senator O'Chee. Please proceed.

Senator O'CHEE —It is interesting to note that if this were Queensland Mr Willis would be probably on charges, because in Queensland it is illegal to tell fortunes. The reason it is illegal to tell fortunes is that some time ago we had a spate of con men fleecing innocent members of the public. And that is exactly what this budget is. It is a con man's budget, because none of the figures in the budget are of any worth or any substance at all. For example, it is suggested that the economy will grow this year by 4 1/2 per cent. The budget also predicts that the economy will grow the year after by 4 1/4 per cent, and each of the two following years by four per cent. That brings us up to around about 1998.

  There is only one problem with that, and that is that a week before the budget came out, in its white paper on unemployment the government predicted that economic growth between now and the year 2000 would average 4 3/4 per cent. One does not have to be Albert Einstein to know that if one starts with 4 1/2, adds 4 1/4, adds four, adds four more and then divides by four, one does not get to 4 3/4 per cent. In fact, we will need growth of around about 5 3/4 per cent in each of the last two years of the decade. Assuming there is no more boom-bust cycle, we are going to need a growth rate of 5 3/4 per cent to get to that growth rate of 4 3/4 that was predicted in the white paper.

  Which document, I ask, is correct? Is the white paper correct, with its predictions of 4 3/4 per cent growth on average for each year from now and until the year 2000, or is the budget correct? This is the problem, honourable senators, that faces those of us who attempt to read this budget: that it does not make any sense at all. It is a total and utter nonsense. If one goes to Budget Paper No. 1, one finds that on page 2.30 the Treasury itself states:

The central feature of the economic outlook is the substantial pick-up in business investment. Forecasting business investment is, however, difficult since the timing of investment decisions is flexible and heavily influenced by changes in sentiment. While an increase in business investment in 1994-95 is certainly in prospect, the strength and timing of the pick-up are less certain.

They certainly are less certain, Madam Acting Deputy President, because in the March quarter of the 1993-94 year we saw business investment decline by five per cent, instead of seeing the predicted continued growth in business investment which was a centrepiece of the budget estimates. It declined by five per cent in that quarter, so it is quite simply ludicrous to attach any credence to, or to have any confidence in, the predictions that this government has put in its budget.

  I am sure that Senator Minchin, who is coming into the chamber now, knows full well that the people on the other side have absolutely no credibility when it comes to economic forecasting. Senator Minchin comes from the state of South Australia. If the economic brains of the Labor Party in South Australia perpetuate their policies across this country, then we are really in serious strife, because it was the Labor Party in South Australia which managed to clock up the $3 billion debt, as Senator Minchin said before, for a state bank in a state with one and a half million people. That is $2,000 for every man, woman and child, including—how old is your young son, Senator Minchin?

Senator Minchin —Three years old.

Senator O'CHEE —Three years old. That is the economic standard, Madam Acting Deputy President, of this Labor government. These people are appalling. They cannot add up. They would fail remedial mathematics. They are the most appalling economic forecasters that this country has ever seen, and yet here they are coming up with a budget in which they predict that everything is going to be great. Hey-presto! There are going to be no problems! Yet before we get to the end of this financial year it will undoubtedly be necessary for this government to revise its economic forecasts, if only on the matter of business investment growth. With business investment falling in the last half of the 1993-94 financial year—Madam Acting Deputy President, I am sure that you will understand—we have to have even bigger growth than the 14 1/2 per cent in the 1993-94 year to get to the actual dollar amount of investment which is a centrepiece of this budget.

  Already we can see that, firstly, the overall economic growth figures do not match up with the overall economic growth figures contained in the white paper. Secondly, we can see that the bunch of economic illiterates who sit on the other side of the chamber are totally incapable of getting business investment growth right, and the Treasury does not want to know anything about it.

  Then, of course, we come to all the other great fiddles. One of the other great fiddles is the problem that we have with the government's borrowings. If one reads the budget, one might be fooled into believing that the government is only going to borrow $11.7 billion, because that is what the deficit is. Most people equate a deficit with borrowing. In other words, if they are going to spend more than they have, then they have to borrow the money to make up the difference. It is true that the deficit is part of the money that the government has to borrow; but the truth is that, instead of having to borrow $11.7 billion this year, this government is going to have to borrow $20.4 billion this year—almost double what the deficit is. What is the reason for the government having to borrow $20,000 million this year? The reason why the government has to borrow $20,000 million this year is because a lot of the other money it has been borrowing over the past years is coming up for repayment, and this government is incapable of repaying the money it owes.

  What is it going to do? It is going to roll that debt over. That is why this government will be taking $20.4 billion out of the economy this year. That is the amount that it will be sucking out of the lending institutions in this country. The surprising thing is that the $20.4 billion that the government is going to borrow is going to be borrowed, principally, in three- to 10-year bonds. Anybody who knows anything about business investment or who knows anything about banking, will be aware that they are exactly the same sorts of maturities that the banks and the lending institutions need to finance business investment.

  Here is the government pinning all of its hopes of an economic recovery on a 14 1/2—probably now 16—per cent growth in business investment. To fund that business investment growth, companies need to borrow money, but the money that they need to borrow has already been borrowed by the federal government. It stands to reason that there are only two consequences: either that the growth in business investment will not occur because the money will not be there to fund it; or, alternatively, if businesses do go ahead and borrow the money that the government expects them to borrow and spend, the price of that money will go up.

  The price of money is interest rates. Just like any other commodity, if demand exceeds supply, the price goes up. If there are more people out in the economy wanting to borrow money than there are people wanting to lend, it stands to reason that interest rates, which are the price of money, will go up. That is why an inevitable consequence of this government's budget, the budget produced by, quite clearly, totally incapable economic managers, will be higher interest rates for all Australians—not just business borrowers, but also those who are borrowing for their own home mortgage.

  Now, of course, we come to the great deception. Now, of course, we see exactly how this government operates. To anybody with any knowledge of economics it stands to reason that this massive borrowing, combined with an increase in the current account deficit, will see an increase in interest rates. But the Treasurer (Mr Willis) reassures us, with his hand on his heart, that interest rates will not go up. The Prime Minister (Mr Keating) assures us, with his hand on his heart, that interest rates will not go up. When he was Treasurer, of course, he told us he had the recession in control, that he was pulling all the levers, that he had the Reserve Bank in his pocket, and that he had the financial institutions in his pocket. It is a shame that he had his hand in his pocket at the same time.

  The truth is that interest rates are going to go up, and that is why the Governor of the Reserve Bank, Mr Bernie Fraser, ran around telling banks that they had a responsibility to tell home buyers that interest rates were going to go up. But while the Treasurer expected banks to tell them that, he reserved the right as Treasurer of this country to tell blatant mistruths to the financial sector and to the mortgage borrowers, and to all of the other people in this country who owe money, not to worry because interest rates were not going to go up. What is going on in this country? Why is it the Reserve Bank is saying that interest rates are going to go up and that the banks have to warn their clients, and yet the Treasurer is saying, with his hand on his heart, `Look, do not worry, interest rates are not going to go up this year'? This is nothing but the most blatant, the most craven and the most dishonest deception that we have seen for quite a while. Yet these people say to the people of Australia, `Trust us. Put your life in our hands. Put your house in our hands. Put your family's future in our hands' because, they say, they are good economic managers.

  That mob on the other side could not even manage a cent auction and make a profit. They have failed lamentably year after year after year to bring the budget in on target. These are the people who, when they run a massive current account deficit, when this country bleeds $1 1/2 billion a month overseas, tell us that we have no reason for concern because, these people say, it is all on target.

  If I rang up my bank manager and said, `Look, the family business has lost $20,000 this month and we lost $20,000 last month'—I can see Senator Panizza and Senator Crane laughing—`and it is going to lose $20,000 next month, but do not worry because, although I do not have the assets and I do not have the capacity to repay it, it is all on target,' the bank manager would send the receivers around tomorrow. Yet there is a different standard that applies to this government from that which applies to the borrowers and the business people out there in our community. This government has no understanding of, and no respect for, ordinary Australians. That is why it flouts the normal conventions of this country's economy every single day.

  Any country that is as heavily in debt as this country is in serious strife. Before I came into this parliament, I wound up companies. Following that, I was an investment banker trading in Latin American debt. When I came into this parliament, all my friends said, `You went from winding up companies to winding up countries, to winding up our country.' Because one day that is what is going to happen. This country owes $210 billion overseas.

Senator Crane —Two hundred thousand million.

Senator O'CHEE —Yes, $210 billion is owed overseas, and what is happening is that this mob on the other side feel satisfied about it.

  The ACTING DEPUTY PRESIDENT (Senator West)—Order! Senator O'Chee, I believe there is an agreement that at 1.30 p.m. we move back to the print media committee report. Would you like to seek leave to continue?

Senator O'CHEE —I seek leave to continue my remarks later. I am sure honourable senators will be interested in them.

  Leave granted; debate adjourned.