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No recovery joy in August Balance of Payments

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Senator Jim Short Deputy Leader of the Opposition in the Senate Shadow Minister for Finance & Assisting the Leader on Commonwealth/State Relations

No Recovery Jov in August Balance of Payments Today's lower Current Account Deficit - in line with market expectations - will pour cold water on hopes of any oarly economic recovery.

The lower figure, $903 m, down from $1.5 b in July, is due primarily to two factors.

One, the exclusion of the Optus satellite launch, worth about $250 million, which will appear in the November 1992 figures.

Two, the continued recession in the Australian economy. Endogenous imports fell by a substantial $600 m (11%).

Machinery imports - critical for rebuilding our economic base - contributed half of the import fall.

Of continuing concern was the further fall (2%) in exports in August.

Despite the large fall in imports, the trend estimate for the CAD remained virtually unchanged from last month, at $1.3 b.

Continued CAD figures in line with current trends would see the deficit exceed Budget expectations. Even this trend, however, will hold only if economic growth remains stagnant. Today's figures suggest this may well be the case. This would mean that even tho Budget's forecast 3% GDP growth this year, itself an unsatisfactorily low figure, may not be achieved.

Since the Budget, the estimates of inflation have also been undermined by the fall in the Australian dollar. The only way that the 2% annual figure will be achieved is if there is no domestic price rises at all - a situation that is only likely if the recession double dips.

Last week, the Minister for Finance, Mr Willis admitted that the sale of QANTAS may not bo completed in lino with the Budget timetable. Failure to receive the up to $1.6 b proceeds this year will leave the Government, on its own figures, with a $15 b deficit rather than the $13.4 b Budget estimate. Similarly, the Government's borrowing requirement would blow out to beyond $20 b, as

against the already huge $18.5 b forecast in the Budget.

The Budget figures are already under severe strain. Today's balance of payments figures only add to this strain, and suggest that there is no sign of sustained economic growth yet in sight.

29 September 1992 Contact: Senator Short (03)387-4177