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December balance of payments



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Leader of the Opposition

5 February 1991

TRANSCRIPT OF DOORSTOP INTERVIEW WITH DR JOHN HEWSON, MP LEADER OF THE OPPOSITION 70 PHILLIP STREET, SYDNEY

E & Ο E

SUBJECTS December Balance of Payments

HEWSON:

The December balance of payments data clearly suggests that the Australian economy is stuck in a debt trap. As every month goes by the debt continues to grow and even though there has been some improvement in the trade account, it is being fully offset

- much more than fully offset - by the deterioration in our net interest payments overseas.

Even though Mr Keating has thrown the economy into the deepest recession since the Second World War, there is very little sign of improvement and the current account deficit is stuck at about 4 per cent of GDP.

JOURNALIST:

When do you expect that there will be any sign of recovery?

HEWSON:

Well there has been some improvement on the import side but exports haven't been strong. As T say, the trade balance is fluctuating around the zero level but the whole current account outcome now is being dominated by interest payments on foreign debt which continues to grow, and will continue to grow, as long as the Government doesn't put in place the policies necessary to

improve our competitiveness and allow us to trade our way out of it .

JOURNALIST:

So recovery when?

Parliament House, Canberra, A.C.T. 2600 Phone 77 4022 COMMONWEALTH

PARLIAMENTARY LIBRARY MICAH

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HEWSONί

I don't think you will see any recovery of any significance in 1991 at all. Some items may pick up. Housing may improve for example. Stock building may start. Some of the national

accounts numbers might look a little bit better. But sustainable recovery isn't going to be there until 1992, maybe mid-1992 at the earliest.

JOURNALIST:

Are we going through a trough?

HEWSON;

It could easily get worse. I think we are in a situation of

rolling recessions. The period of flat activity started late 1989, we are now well into the middle of it I suppose, but the economy will go up and down with some negative, some positive quarters right through this year, through probably the middle of

next year.

JOURNALIST:

Should monetary policy be eased?

HEWSON:

I don't see any particular months' figures as a trigger one way or the other in relation to monetary policy. I would say though that monetary policy has already been eased quite significantly. Cash rates have come off 5 or 6 percentage points and that is in the context of a dramatic easing of fiscal policy. Mr Willis the other day admitted that this year's surplus will be less than half what was forecast and we know all of the States, or most of

the States at least, have seen a significant fall-off in their revenue bases while their expenditures have grown. Fiscal policy across both the State and Federal levels has been dramatically

eased and monetary policy has been eased.

The big danger now is if the Government goes for stimulus - tries to artificially stimulate the economy - all they will succeed in doing is boosting imports again, in the context of falling world activity, falling commodity prices, and they will blow our balance of payments out of the water.

JOURNALIST:

Any sign of an improvement on interest rates in the near future?

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HEWSON:

I think that interest rate falls that have been put in place so far are, in the judgement of the authorities, about what has been validated by the numbers. My fear is if they artificially

stimulate the economy the next significant move in interest rates could be up rather than down and that will simply flow from the fact that they failed to address the basic problem - improving our competitiveness.

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