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National accounts highlights need for budget to boost national savings

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Senator «Î¤Î¯Ï„η Short. S hadow M inister for Finance and Shadow Minister Assisting the Leader on Commonwealth/State Relations

15 August 1991

SMF 61/91


The collapse in national savings and investment is the most serious trend revealed in the National Accounts for the June Quarter 1991.

Profits have been declining for well over a year and so have household savings. Indeed, the National Accounts show that national savings fell by 62 per cent in the year to June 1991. That is catastrophic.

With such a collapse in profits and savings there has been inevitably a massive drop in investment. Total fixed capital expenditure has declined in 6 of the most recent 7 quarters. Investment in plant and equipment has declined in 8 of the last 9 quarters.

There could be no more telling statem ent of the deterioration in investment than the fall of 19 per cent in investment in plant and equipment from June 1990 to June 1991.

Here is the clear link between profits, savings, investment and jobs.

Gross Domestic Product, after adjustment for terms of trade, has now recorded 6 quarters of nil or negative growth in the last 7.

It is no wonder that the underlying rate of unemployment is over 12 per cent and rising. The loss of jobs is an unavoidable consequence of the collapse in savings and investment engineered by Labor.

In light of what has to be done to correct the Government's mismanagement of the economy and set Australia on the path to recovery, it is perfectly clear that the fiscal requirement is to increase national savings. This coming Budget is no time to embark on new expenditure programs or to cut taxes without corresponding cuts in outlays. To do so would be grossly irresponsible.

This Budget will be the test of the Government - whether it tries to buy short term electoral popularity or whether it is prepared to provide responsible government and an environment for sustained job growth.

(For further information, contact Senator Jim Short on 06-277 3119)