Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Keating government's rhetoric fails to hide policy paralysis

Download PDFDownload PDF

«I .V

Senator Jim Short Deputy Leader o f the Opposition in the Senate Shadow Minister for Finance &

Assisting the Leader on Commonwealth/State Relations

SMF 127/92


The Keating Labor Government has finally responded to a detailed report on Australia's current account deficit and foreign debt — more than a year after the report was tabled in Parliament.

This unconscionably long delay highlights the Government's big problem — in a continuing state of policy paralysis, it simply didn't know what to say.

In the meantime, Australia racked up a further massive current account deficit of $14 billion in the year since the report was released, with foreign debt also breaking the psychologically significant $200 billion barrier.

In its response to the report by the Joint Committee on Foreign Affairs, Defence and Trade, the Government acknowledges that "net external liabilities have continued to rise in the past two years, both in dollar terms and as a percentage of GDP".

So Labor stands condemned by its own admission — full of lofty rhetoric but little substance.

The Government lauds the importance of government saving in stabilising net external debt:

"The Government's approach is ... to promote higher

domestic saving." ... - ..........

And in a characteristic boast, Keating said in January 1990:

"In three years there will be no Government debt, domestic or external. It's an enormous claim that I can make on

behalf of the Government of Australia".

But this year's Budget paper stated:

"For the first time since 1986-87 substantial net issuer of debt finance the Budget deficit. This in 1992-93."

, the Commonwealth was a in 1991-92 in order to

situatio COMMONV/EALT -p a r l i a m e n t a r y LIBRARY M1CAH

So much for "no Government debt by 1993". > o m m ONV/bALTH

In 1991 Keating said:

"... control of public outlays and the shift in the surplus is the primary change in offsetting the calling on overseas savings via the current account. It's the rock on which the whole structure is built".

Unfortunately for the Prime Minister, his rock has crumbled to sand. Debt continues to blow out and nothing can be done until there is a change of government.

This year's deficit is unlikely to come in under $15 billion!

With such a massive blowout staring it in the face, the

Government has the gall to say it agrees with the Joint

Committee's finding that "support for prudent fiscal policy as a means of contributing to domestic savings is appropriate".

If Keating really believes this, and acknowledges that debt is a problem, why is he running around claiming that surpluses are not "holy writ" (Lateline, 19 November 1992).

A notable omission from the Government's response to the report is in the section entitled "Saving and Taxation", which is remarkably silent on the issue of tax mix.

A key point canvassed repeatedly in respected analyses is that saving is boosted by placing greater emphasis on consumption taxes like a GST (which place only one tax impost on savings) rather than income taxes (which place a double tax burden on savings) — but not in the Government response.

It demonstrates yet again that while the Liberal/National Coalition has the answers, the Keating Government is left only with the problems it created but is incapable of solving.

Canberra 16 December 1992

Further information: Rod Woolley (06)277 3119 (w), 288 9355 (h)