Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Australia has been likened to a drunk that keeps winning the lottery - not any more:



Download PDFDownload PDF

.. J « 9

press release press release

DR HARRY EDWARDS MP MEMBER FOR BEROWRA

ACTING SHADOW TREASURER FAX 02.476.6462 PH. 02.476.3675

AUSTRALIA HAS BEEN LIKENED TO A DRUNK THAT KEEPS WINNING THE LOTTERY - NOT ANY MORE!

Not even the Government itself was prepared to claim the slight dip (0.1 percent) in the seasonally adjusted unemployment rate in last Thursday's figures, as any sort of turning point for the economy.

Virtually every other indicator - including the severe downturn' in employment vacancies, reduced overtime working, sluggish retail sales, the slump in credit growth, the NAB survey evidence of deteriorating business expectations, the 'devastating' corporate damage reported in the recent Monash study, and so on - confirmed the reality of the recession and a further weakening of the economy.

These indicators should be read along with last week's balance of payments data.

Taken together, they underline the point that the Hawke

Government's legacy of economic failure is two-fold:

. There is the Keating-engineered recession shaping up as the most severe for the last 30 years. (The recorded fall in total national production to the end of September was already a cumulative 2%. That would amount to $8 billion

on an annual basis - about the same as a year's spending on defence!)

. There is the large persistent balance of payments deficit resulting in the burgeoning OVERSEAS DEBT - undermining living standards, constraining future development, and making us vulnerable to external shocks.

The two outcomes are of course related.

The main cause of the recession was the 18 months of sustained very high interest rates - superimposed on the fundamental lack of international competitiveness of the Australian economy.

The same lack of competitiveness is the root difficulty with the balance of payments - lack of competitiveness in the production of goods to replace imports (eg. motor vehicles), or in exports of manufactures and services in addition to our traditional rural

(currently weak) and mineral exports.

COMMONWEALTH PARLIAMENTARY LIBRARY MiCAH

L

IA*.

2

And meanwhile the other main elements in the overseas payments, interest on the overseas debt and other income payable to

foreigners, mounts inexorably - as with any profligate spender and debtor.

Currently the interest bill is of the same order - $1.3 billion for November - as the overall balance of payments deficit, so the country is in the unenviable position of borrowing further at the rate of about $50 million extra into hock every day, just to pay

the interest on existing borrowings!

In sum, the external deficit is stalled at the still much too high level of about $1.3 billion a month or upwards of 4 percent of GDP (albeit reduced somewhat from the cyclical high of 1989­ 90) .

What should the Government do?

As far as the recession is concerned, the damage has been done. „ There is not too much the Government can do in the short term - certainly not tinkering at the margin with selective export incentives and such-like proposals.

What the Government should do is to tell it as it is, and to

concentrate on getting the 'fundamentals' right to ensure that sustainable gain can come from all the recession pain.

The essence is to get inflation down, and investment and

productivity up - and in particular, to see this reflected in a sustained increase in exports ahead of imports of at least the order of 4 percentage points per annum (say, exports up 6 percent and imports no more than 2 percent) over the next five years, while simultaneously the nation restrains its own domestic use of resources especially public and private consumption.

This is the only route to stabilise - let alone reduce! - the burgeoning overseas debt and reduce our great vulnerability to international shocks, in peace or war.

Specific measures to address the 'fundamentals' include the following:

. For all its pain and loss the recession is an opportunity

to encourage enterprise bargaining for deals to increase productivity.

The Government as a matter of urgency should make the legal and institutional changes necessary to facilitate this process.

Rort-like extra pay arrangements (such as the "shiny

allowance" at SPC, of recent fame - to compensate for the glare of the cans!) and restrictive production practices (two men to do the work of one, and such like) are rife in workplaces around the country.

3

Australians working harder and smarter for their increased pay would contribute much to achieving the quantum increase in productivity the country urgently needs.

. Implement a broad-based goods and services tax as part of a reshaping of the tax system for greater incentive, no taxes on business inputs (which directly assists

competitiveness), nil tax on imports.

A recent Monash-Melbourne University study found that the replacement of the distorting and unfair wholesale sales tax by an equivalent goods and services tax would increase national production (GDP) by $4 billion.

. Further lift national productivity by pursuing with a real sense of urgency the vital micro-economic (structural) reforms that have been clearly and widely identified.

For example, the waterfront. Over the past 18 months New Zealand has lifted productivity on the waterfront 100 percent. In Australia the target set by the Government in 1989 was a 30 percent improvement over 3 years - and even that tortoise-like progress has lagged!

. Legislate for a more narrow charter (the primary objective - combating inflation) for an autonomous independent Reserve Bank.

. Rework the Budget, ideally in co-operation with the States, to implement a structural tightening of fiscal policy (cyclical spending, such as unemployment benefits, will increase with the recession), as a key component of

containing the domestic usage of resources over the long haul.

To achieve sustainable economic growth with a reducing current account deficit and a stabilising of Australia's vast overseas debt will involve a disciplined long haul.

But there is no other way.

In the past Australia has been likened to a drunk that keeps winning the lottery.

Not any m o r e !

****

20 January 1991