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Thursday, 23 June 1994
Page: 1966

Senator MINCHIN (11.03 a.m.) —I move:

  That the Senate take note of the answer given by the Leader of the Government in the Senate (Senator Gareth Evans), to a question without notice asked by Senator Minchin this day, relating to interest rates.

Senator Gareth Evans has two stock answers, or non-answers, to our questions about interest rates. First of all he seeks to attack us in order to avoid any discussion about the hopeless economic policies of the government, and that attack goes along two contradictory lines. In one breath he attacks us for having no policies whatsoever; in the very next breath he attacks us for having policies which he alleges will be too expensive and will run contrary to our position that the deficit should be reduced. His second stock response is that inflation is low and therefore interest rates can be kept low. This is a sort of mantra that the Labor Party has adopted to explain why it thinks interest rates can be allowed to be low.

  While Senator Evans has some reputation as a lawyer, he has absolutely no reputation as an economist, and his repetition of this mantra simply shows how little he knows about economics—as my good friend Senator Watson keeps saying when we hear these answers. There are a lot more influences on interest rates than the level of inflation. While we hope that inflation can remain low, there is no confidence in certain sections of the market that that will be the case.

  Putting that to one side, inflation is only one small factor influencing the level of interest rates. The Prime Minister and Senator Evans, in answering these questions, continue to ignore the fact that there are a whole lot of influences on interest rates. Interest rates are basically the price of money influenced and determined by the demand and the supply. There is an enormous worldwide demand now for investment capital. As a result of the Labor Party's policies, which Senator Carr would obviously object to, we have become part of the international economy. We have supported that. We are now out there competing in the world marketplace for investment capital. That demand obviously has an enormous influence on the price of money and, therefore, interest rates.

  The ALP cannot have it both ways. The ALP took us into the international marketplace. It deregulated the financial markets. We now have to conduct ourselves accordingly. Those moves by the Labor government, which no doubt the Left objects to, have meant an enormous imposition of discipline on our part as a national economy. We have to get the domestic economic settings right if we want to keep interest rates down and continue to attract investment capital to Australia. That is something the Labor Party continues to ignore. That has been the problem over its 11 years of government. It has sought to take us into the international economy but has not done what is required with the domestic economy to ensure that we can survive in that international marketplace and have interest rate settings which will not damage home owners, small businesses and everybody else.

  There are several things which the government simply has to do and which it has not done to ensure that the domestic economic settings are right in the international environment of a worldwide demand for investment capital, particularly with the booming Asian economies. As Max Walsh said the other day, there is a capital squeeze out there because of the enormous demand for capital. That is driving up interest rates and imposing the discipline on the Australian economy that this government is failing to provide. It means that we must improve the productivity of the Australian economy. That is not being done sufficiently fast by this government. It is tied to the ACTU. It is simply failing to respond by freeing up the labour market in ways that will increase our productivity and, therefore, make us an attractive place in which to invest money.

  The new Industrial Relations Act is an absolute disgrace to the Australian nation in preventing us from doing what is required to improve the productivity of this country and increase our living standards. The new act is a direct attack on the living standards of all Australians.

  If we are to compete in the international marketplace for capital without having high interest rates, we have to save more. As the Australian Financial Review said in its editorial this morning about the government, `It should increase public sector saving more quickly by cutting the federal budget deficit harder.' That is the Financial Review, an independent newspaper, saying that. It is not us; it is the most eminent financial paper in this country, saying that the federal government has to act on the deficit. It has been totally irresponsible. Its performance on its budget has been hopeless. We have to save more if we are to keep our interest rates down and prevent the damage that is about to be done to home owners and small businesses by this government's irresponsible budgetary policies.

  Question resolved in the affirmative.