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Wednesday, 16 October 2002
Page: 5292

Senator BRANDIS (3:18 PM) —I wish to take note of answers by Senator Minchin, as Minister representing the Treasurer, to questions directed by Senator Conroy concerning the Commonwealth's foreign debt portfolio. Whatever Senator Conroy lacks in intellect he more than compensates for in sheer effrontery. Because to hear Senator Conroy, of all people, attacking the Treasurer and the Howard government for their management of the economy on this issue in particular—the issue of the management of the Commonwealth's debt portfolio—is indeed an extraordinary piece of barefaced cheek.

The foreign currency holdings are a management tool for the management of the Commonwealth's debt portfolio. Fifteen per cent of the Commonwealth's debt is held in foreign currencies. That was the case until December 2000, when the Treasurer took a decision to wind back the foreign currency holdings. But of course that begs the question: where did the debt come from? The only reason the Commonwealth holds 15 per cent of its debt in foreign currency is because there is a debt in the first place. Where did the debt come from? We all know where the debt came from: it came from the Hawke and Keating Labor governments and particularly the Keating government. It is not to be forgotten. It ought never to be forgotten that by the time the Keating government was thrown out of office in 1996 there was $96 billion of public debt in this country: $96 billion, which constitutes an average of some $5,240 of public debt for every man, woman and child in Australia—$96 billion of debt!

The amount of interest that the taxpayer had to pay on that debt, which was not spent on social services, on defence and on beneficial public policy, was extraordinary. It has never been so high. Of that $96 billion of Commonwealth debt run up by the Hawke Labor government, and in particular the Keating Labor government, 15 per cent was held in foreign currencies. That was a policy adopted in 1988 by the Hawke government when Mr Keating was the Treasurer. It was at the time a prudent policy. It is a policy that we do not criticise. I cannot tell you off the top of my head what the Commonwealth debt was in 1988 when a decision was made by Treasury to hold 15 per cent of that portfolio in foreign currencies, but what I can tell you is that by 1996 the 15 per cent that was held in foreign currencies constituted almost $15 billion, in Australian dollar values, of debt held in foreign currencies because of the deficit clocked up by the Hawke and Keating Labor governments.

What happened? The Howard government under the economic leadership of the Prime Minister and Mr Costello has reduced that indebtedness by $57 billion. So the 15 per cent of the Commonwealth debt portfolio held in foreign currency has gone down to some 15 per cent of $36 billion, not 15 per cent of $96 billion. That is the first difference. The second difference is that in December 2000, in view of the reduction of the necessity to hold Commonwealth debt in foreign currencies because of the reduction in the Commonwealth debt itself, the Treasurer made a decision to instruct the Australian Office of Financial Management to review that debt management strategy, which was, because of the economic management of the Howard government, becoming increasingly unnecessary. And that is what was done. In June 2001, the AOFM completed the review and recommended that the amount held in foreign currencies be wound down. That is progressively what has happened since June 2001. When you hold debt in a foreign currency, it is a running account: you trade in foreign currencies. There will be times when the value of the foreign currency depreciates and times when it appreciates, and we have heard from Senator Minchin that in the last year it has appreciated by $1.2 billion. (Time expired)