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Australia's foreign debt continues to climb



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AUSTRALIA'S FOREIGN DEBT CONTINUES TO fT.Tim

The Balance of Payments figures released today confirm that the Hawke Government has failed to bring Australia's foreign debt under control.

The current account deficit for the 1990-91 financial year of $15.3 billion is better than forecast.

The yearly result is also a marked improvement on the

$22.3 billion current account deficit recorded in 1989-90.

But the simple truth is: the amount of money Australia owes the rest of the world is still rising at an alarming rate.

The Hawke Government has engineered the worst recession Australia has seen in sixty years specifically (we were told) to bring the current account under control, but the Government has failed.

The Hawke Government has crippled businesses, left thousands of people out of work, and caused enormous personal hardship for families all over the country supposedly as a means of ensuring the country didn't slip further into the red.

And what did the Government achieve on the current account front in 1990-91?

T h e t h i r d w o r s t d e f i c i t o n r e c o r d .

This Government has given Australia the second worst current account deficit in the developed world. (See attached chart from the July issue of the "Economist")

Even the improved result for 1990-91 has added another

$15.3 billion to Australia's debt.

The current account is a massive problem for this country, and it will continue to be until the Government makes the necessary structural reforms to the economy that will bring about

substantial increases in production, and exports.

Without the necessary structural reforms, Australia is in danger of facing a significant blow-out in the current account.

What all this means, in the most basic terms, of course, is that the living standards of our children is under serious threat.

Forecasts from several leading economists suggest that the Government is not even close to stabilising Australia's foreign debt.

COMMONWEALTH

PARLIAMENTARY LIBRARY MICAH

SUPPORTERS OF A GOODS AND SERVICES TAX

Following is a list of individuals and organisations that support significant tax reform in Australia, including the introduction of a goods and services tax.

Confederation of Australian Industry Queensland Confederation of Industry Business Council of Australia Australian Chamber of Manufactures Victorian Employers Chamber of Commerce and Industry Australian Chamber of Commerce

NSW State Chamber of Commerce ACT Chamber of Commerce National Farmers Federation Tasmanian Farmers Federation Taxation Institute of Australia The Institute of Chartered Accountants in Australia Australian Society of Certified Practising Accountants

Council of Small Business Organisations of Australia Australian Mining Industry Council Pharmacy Guild of Australia

Printing and Allied Trades Employers' Federation of Australia Chemical Federation of Australia Retail Traders Association of Australia __

Australian Friendly Societies Association of Australia The Australian Institute of Company Directors The Tasman Institute

Tony Cole, Secretary, Treasury Dr John Bell, Deputy Secretary of the Department of Industry Technology and Commerce David Morgan, Managing Director, Westpac Financial Services,

(former Deputy Secretary, Treasury) Don Pfitzner, immediate past president, United Farmers and Stockowners, SA Bob Oser, National Tax director, Price Waterhouse David Vos, National Indirect Taxes Partner, Coopers and Lybrand John Freebairn, Monash University

Editorials in every major newspaper in the country at some stage in the past 12 months.

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Indeed, Professor Peter Dixon, from Monash University, believes the current account deficit could deteriorate to a massive $25.3 billion, or 6.4 % of GDP, in the current financial year.

Even the Treasury forecast for 1991-92 has the current account in deficit to the tune of 4.75% of GDP, or about $18.8 billion.

Dr Chris Murphy of the Australian National University has an even more alarming prediction.

The former head of economic modelling in Treasury, Dr Murphy has forecast that if current trends continue foreign debt will climb to $217 billion by 1994-95.

Coming back to the figures released today we find that in June the current account deficit rose by 12% seasonally adjusted.

Merchandise exports rose my a meagre 1.0%, while merchandise imports rose by 4.0% in seasonally adjusted terms.

The Government will try to present the decline in the current account deficit as a significant achievement, but by world standards these figures are mediocre at best.

GLADSTONE

30 July 1991

Contact: David Turnbull 06 277 4277

D98/91

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EconomistJULY 13TH-19TH 1 9 9 1 ■ EXTERNAL BALANCES The huge cur­ rent-account imbalances of the big three economies that so recently worried gov­ ernments are shrinking fast, helped by ex­ change-rate movements and the slow­ down in America’s domestic demand. The o e c d forecasts a western German surplus of just 0.7% of g n p in 1992, down from 4.1% in 1987. Japan’s surplus is ex­ pected to have fallen from 3.6% of its g n p in 1987 to 1.5% next year. America’s deficit should fall as well, from 3.6% to 1%. Smaller countries’ imbalances, however, are getting bigger. Switzerland is forecast to have the biggest surplus next year, at 5.5% of g n p , up from 4.4% in 1987. Ice­ land is expected to have the biggest defi­ cit, of 43% of g n p . Norway’s external bal­ ance shows the biggest about-turn, swinging from a 1986 deficit of 4.9% of g n p to an expected 1992 surplus of 4.4%.