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Monday, 29 August 1994
Page: 480

Senator KEMP (3.19 p.m.) —I rise also to take note of Senator Gareth Evans's answer. One of the major constraints, if not the major constraint, in the growth of the Australian economy for a very long period has been the balance of payments. Every time the economy starts to gather a head of steam, we seem to be able to run into a balance of payments crisis.

  As honourable senators will remember, this is precisely what happened with the last recession: we ran into a massive balance of payments crisis; Mr Keating had to put the brakes on; the interest rates were raised to record levels; and we had the recession that we had to have.

  I thought Senator Evans was somewhat cavalier when he referred to the percentage size of the deficit in relation to GDP. The fact of the matter is that Australia has, arguably, the worst balance of payments deficit amongst comparative countries. In the back of each week's Economist there is a large number of tables that list inter-country comparisons. Compared with 14 other countries that we like to compare ourselves with—the UK, Canada, France, Germany, Sweden, Spain and so on—the balance of payments in Australia is the absolute worst. As Senator Evans said, the current account deficit represents 3.7 per cent of GDP.

  Another poorly performing country, for example, Britain has a comparative figure of 1.7 per cent. Only Canada comes near the Australian figure: Canada has a current account deficit of 3.5 per cent of the GDP. However, the difference between Canada and Australia is that the forecasts for next year show that the current account deficit in Australia will rise from 3.7 per cent to 3.8 per cent whereas in Canada, clearly, action has been taken and the deficit will fall to under 3 per cent.

  Ministers are very keen on standing up in this parliament and telling us how well the Australian economy is performing. But the one thing they never tell us—and Senator Evans did not do this today—is why our balance of payments is amongst the worst, if not the worst, amongst comparative countries. Another explanation Senator Evans again tends to skate over is why interest rates in Australia are amongst the highest compared with other countries which have a similar industrial structure to us.

  Probably the answer to that question is that the two are related: the appalling balance of payments performance in this country is keeping pressure on interest rates and will certainly lead, as it did in the last recession, to further interest rate rises. So I hope that in the coming days Senator Evans will get a brief from his department and/or Treasury or the Department of Finance and they will explain to Senator Evans and give him some reasons so that he can tell us why Australia's balance of payments on its current account deficit is the worst amongst comparative countries.

  Question resolved in the affirmative.