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Wednesday, 9 March 2005
Page: 60


Senator SHERRY (2:01 PM) —My question is to Senator Minchin, the Minister representing the Treasurer. I refer the minister to his answer to my question yesterday seeking an explanation of the dramatic increase in Australia’s foreign debt to historic levels, which he explained was due in part to Australia’s high growth rate relative to its trading partners. How can he claim this when Australia’s growth rate of 0.1 per cent in the fourth quarter was amongst the lowest in the developed world? In relation to his other excuse that high foreign debt was the fault of a strong Australian dollar, is the minister aware that the value of the Australian dollar, as measured by the Reserve Bank’s trade weighted exchange rate, was actually unchanged over the year 2004? Given that these two attempted excuses have bitten the dust, does the minister have any other explanation for Australia’s ballooning foreign debt?


Senator MINCHIN (Minister for Finance and Administration) —It is remarkable that Senator Sherry should purport to have a much greater insight into the state of the Australian economy and the causes of our current account deficit than the International Monetary Fund. What I relied on yesterday was a reference to the IMF’s recent article IV report on Australia, which said that the widening current account deficit mainly reflects ‘the sharp appreciation of the Australian dollar and the relatively strong cyclical position of the economy’. That is what I relied on. I would much rather rely on the IMF than on Senator Sherry or anybody else in the opposition. For the opposition to be credible on economic matters, surely they must recognise that the build-up of a current account deficit and foreign debt is over a long period of time. It is ridiculous to suggest that, because the national accounts for the September to December quarter showed 0.1 per cent growth, therefore an argument put by the IMF and every other single expert commentator about the relatively strong cyclical position of the Australian economy does not have foundation. That in itself is laughable.


Senator SHERRY —Mr President, I ask a supplementary question. Minister, the reasons you advanced yesterday in other answers, which I have referred to, were just plain wrong. Given that both your explanations yesterday were wrong, how can the Australian people have any confidence in the Howard government’s ability to develop policies to reduce Australia’s record high foreign debt?


Senator MINCHIN (Minister for Finance and Administration) —I do not want to go on repeating myself, but I do rely on the IMF and others to demonstrate that the critical reasons why the current account deficit is growing do relate to the appreciation of the dollar, especially vis-a-vis the United States dollar and the countercyclical position of the Australian economy, which has been growing faster than most other economies. In fact the growth in the Australian economy from 1991 to 2004 was the highest in the OECD. That is a recognised fact, and it is the fundamental basis for our current account deficit position.