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Governor's Johnston's honesty a refreshing change from Keating's disinformation



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FROM 3.30

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^ P A R L I A M E N T OP A U S T R A L I A

M O U S E OP R E P R E S E N T A T I V E S

30 March, 1989

GOVERNOR JOHNSTON* S HONESTY A REFRESHING CHANGE FROM KEATING' S DISINFORMATION

The statemente made last night by the retiring Governor of the Reserve Bank, Mr Bob Johnston, represent a damning indictment of the Government's economic strategy and of the Treasurer's long standing policy of disinformation on the economy.

As his speech was reported on Reuters this morning, the Governor made seven key points in his assessment of recent economic policy in Australia, all of which stand in sharp contrast to what the Treasurer has been telling us.

. The Governor said "growth has been so rapid as to be

seriously underestimated by the policy makers".

. The Governor said "economic policies were designed for a less exuberant situation".

. The Governor said on balance, an overblown economy

is just unsustainable".

. The Governor said "in broad terms we could say that the unexpectedly powerful economic growth has cost us a year in the strategy for winding down price increases and improving the balance of payments".

. The Governor said ". , . . we will just have to hold to the tougher policies until it is clear that the economy is r e s p o n d i n g " .... "this might well entail further

turbulence and take a bit longer than expected earlier".

. The Governor said "cooling the economy is an essential but non sufficient c o n d i t i o n " for ".....maximum non-

inf lationary growth".

. The Governor said "we need to press on with more

constructive policies - to switch investment growth into export and import-replacing industries, to sustain our international competitiveness and to raise productivity".

The Governor's assessment stands in sharp contrast to recent statements by the Treasurer. For example, when posed the question "is the policy response the correct one" during his

OR JOHN R. HEWSON, M.R. SHADOW MINISTER FOR FINANCE M EM BER FOR WENTWORTH^ "

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1989 1 2 i 1 5 P . 2 c2.3

PRESS RELEASE

4 F R O M 3.30.1 989 1 2: 1 6 P . 3

press conference on the January balance of payments on 16 F e b r u a r y , 1989 , his answer was "the answer to that is very

definitely in the affirmative". We might also recall what he said at the Tenth Asia/Pacific Foreign Exchange Assembly on 4 November, 1988 , "Frankly, we are at the point where there is nothing left to reform".

The Governor is also to be complimented for his honesty about the likely balance of payments outcome this financial year.

The Governor's statement that "every man, women and child" needs to reduce "their spending flowing through into imports by about one third.... that is, by about $300 per head" implicitly puts his forecast for the current account of the balance of payments

for this year at about $14.5 billion. (That is, $16,597,900 people at $300 per head over and above the forecast of $9.5 billion).

This stands in sharp contrast to the Treasurer who hasn't yet been willing to give us his revised forecast for this year's balance of payments outcome.

F i n a l l y , the Governor's performance last night strongly emphasises the need to have an independent Reserve Bank that can provide independent assessments of our economic situation free from the taint of political expediency and opportunism.

Against this background, the Treasurer's reported inclination to appoint one of his political mates as Bob Johnston's replacement should be a matter of considerable concern.

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