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Government must help solve foreign debt problems



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GOVERNMENT MUST HELP SOLVE FOREIGN DEBT PROBLEMS

The O p p o s itio n L e a d e r , Mr Andrew Peacock, s a id to d ay t h e power was in th e

G overnm ent's hands t o p r e v e n t A u s t r a l i a ' s growing i n t e r n a t i o n a l d eb t and

ANDREW PEACOCK Leader of the Opposition

debt repayments becoming econom ically d e s ta b lis in g .

"The question r e a l l y is whether Labor has the p o l i t i c a l w i l l . t o take

actio n s n ecessary," he s a id .

Mr Peacock was commenting on the statements by the ANU's P rofessor Fred Gruen th a t A u s tr a lia had "one o f the highest c u rre n t account d e f i c i t s in the

Western world and t h is is something th a t i s n ' t s u s ta in a b le in the long r u n ." (1 )

He said the problems th a t had to be addressed by the Government included:

- F u rth e r reductions in government spending (and the d e f i c i t ) , p a r t ic u la r ly consumption e x p e n d itu re , to .

to reduce Government's take o f domestic savings.

- F u ll and permanent discounting o f wages f o r the p ric e

impact o f the d o lla r d e p re c ia tio n o f the d o lla r in

o rd er to enhance A u s t r a lia 's in te r n a tio n a l co m petitiveness.

- Ensuring th a t the government does not "crowd-out" p riv a te

secto r borrowing on the lo cal market - the lower d e f i c i t

in the Budget being a step in the r ig h t d ir e c t io n .

- Addressing the need to ensure th a t borrowed funds are

d ire c te d to productive investments to enable A u s tr a lia

to s e rv ic e e x is tin g debt and h a lt the p resent growth

in balance o f payments d e f i c i t s .

- Encouraging a m ajor d riv e to improve A u s t r a lia 's

exports o f goods and services to b o ls te r the balance ■ ‘ o f payments and reduce the tra d e and B.O .P. d e f i c i t .

Mr Peacock said the Government had not been w ith o u t warnings on the growing

problems in A u s t r a lia 's e x te rn a l tra d e account. " I t has sim ply refused to

acknowledge th a t they are th e r e ," he said .

"As I said in my re p ly to the T re a s u re r's Budget speech l a s t Thursday:

’ ( A u s t r a lia 's fo re ig n debt) is out o f co n tro l and a

th r e a t to A u s t r a lia 's economic s t a b i l i t y . Yet th a t d eb t, '

th is dangerous development, did not even r a te one word .

in the T re a s u re r's Budget speech. ' (2 )

"In such a s it u a t io n , i t is good to see a former Labor Government a d viser

and w ell-known economic commentator such as P rofessor Gruen attem p tin g to a l e r t the Government to the problem ," Mr Peacock s a id .

. . . / 2

Inquiries: 0 6 2 -7 2 6 9 9 4

- ' 2 -

" B u t i t i s a l s o a l a r m i n g t o s e e t h e T r e a s u r e r , Mr K e a t i n g , s t i l l p r e p a r e d

t o d i s m i s s t h e e x t e r n a l d e b t p r o b l e m so p e r f u n c t o r i l y a s he d i d on t o d a y ' s

' W o r l d T o d a y ' p r o g r a m on t h e ABC.

" I t j u s t shows t h a t w h i l e t r u m p e t i n g a b o u t i t s s o - c a l l e d s u c c e s s e s i n t h e

e c o n o m y , t h e L a b o r G o v e r n m e n t i s n o t p a y i n g a n y a t t e n t i o n t o p o t e n t i a l

l o n g e r t e r m p r o b l e m s t h a t a r e now e m e r g i n g , " he s a i d .

Mr P e a c o c k p o i n t e d o u t t h a t t h e G o v e r n m e n t had b e e n r e c e i v i n g p u b l i c w a r n i n g s

a b o u t t h e d a n g e r o u s r a t e o f t h e g r o w t h i n f o r e i g n d e b t as f a r b a c k a s l a t e

1 9 8 4 when t h e S e c r e t a r y o f t h e D e p a r t m e n t o f T r a d e , Mr J ohn M e n a d u e , w a r n e d :

" W e . n e e d t o g e n e r a t e mor e e x p o r t i n c o me t o s e r v i c e o u r

g r o w i n g f o r e i g n d e b t b u r d e n . . . U l t i m a t e l y we m u s t s e r v i c e

t h e s e d e b t o b l i g a t i o n s o u t o f c u r r e n t f o r e i g n e a r n i n g s . . . " ( 3 )

" A t t h e t i m e Mr Menadue was s p e a k i n g o u r f o r e i g n d e b t was some $ 4 1 b i l l i o n , "

Mr P e a c o c k s a i d . "As P r o f e s s o r G r u e n has p o i n t e d o u t i t has now r i s e n t o

$ 5 2 m i l l i o n a nd i s s t i l l r i s i n g .

" I n a d d i t i o n , A u s t r a l i a ' s i n t e r e s t o b l i g a t i o n s a nd i n t e r e s t r e p a y m e n t s on

t h i s f o r e i g n d e b t now amo un t t o 3 3 . 6 p e r c e n t o f g r o s s d o m e s t i c p r o d u c t . "

Mr P e a c o c k a d d e d t h a t i n h i s De c e mb er 1 9 8 4 s p e e c h , Mr M e n a d u e , had go ne

on t o w a r n - a nd he was t a l k i n g a b o u t a $ 4 1 b i l l i o n d e b t t h a t : „

" T h e s e f i g u r e s a r e u n p r e c e d e n t e d i n r e c e n t A u s t r a l i a n

e c o n o m i c h i s t o r y . I t i s n o t s u r p r i s i n g t h e r e f o r e t h a t

some q u e s t i o n t h e p r u d e n c e o f such b o r r o w i n g . T h e y a r g u e o m i n o u s l y t h a t A r g e n t i n a , B r a z i l and M e x i c o

h a v e d e b t c o m m i t m e n t s n o t much g r e a t e r t h a n o u r s . " ( 4 )

The O p p o s i t i o n L e a d e r s a i d t h a t i t was n o t t o o l a t e t o r e v e r s e t h e p r e s e n t

p o s i t i o n and g e t A u s t r a l i a ' s e x t e r n a l a c c o u n t s b a c k t o a h e a l t h i e r

s t a t e t h a n t h e y h a v e been i n f o r some t i m e .

" B u t i t w i l l t a k e g r e a t e r r e s o l v e f r o m t h i s G o v e r n m e n t t h a n i t has shown

i n t h e p a s t , p a r t i c u l a r l y i n e n s u r i n g t h a t t h e new c o m p e t i t i v e p o s i t i o n

o f f e r e d by t h e d e p r e c i a t i o n o f t h e d o l l a r i s n o t f r i t t e r e d a w a y , " he s a i d .

" N o t h i n g l e s s t h a n f u l l and p e r m a n e n t d i s c o u n t i n g f o r t h e d o l l a r d e p r e c i a t i o n

w i l l do i n t h e wages a r e a , and t h e r e m u s t be a c o n t i n u a t i o n - e v e n a s p e e d i n g

up - o f t h e G o v e r n m e n t ' s own s p e n d i n g r e s t r a i n t . .

" I t m u s t a l s o e n s u r e t h a t i t c o n t i n u e s t o b r i n g i t s own d e f i c i t down,

e n c o u r a g e A u s t r a l i a n e x p o r t e r s t o s e e k o u t new and mo re l u c r a t i v e m a r k e t s

and e n s u r e i n v e s t m e n t i n A u s t r a l i a i s more p r o d u c t i v e , " he s a i d .

" I t i s o n l y i n t h i s w a y , A u s t r a l i a can be p u t b a c k on t h e r o a d t o s u s t a i n e d

and r e a l e c o n o m i c h e a l t h . "

N o t e s : 1 . P r o f e s s o r G r u e n , "AM" 26 A u g u s t 1 9 8 5

2 . A n d re w P e a c o c k , " B u d g e t R e p l y " , 2 2 A u g u s t 1 9 8 5

3 . J o h n M e n a d u e , " S p ee ch t o t h e E x p o r t D e v e l o p m e n t Gr ou p o f NSW",

5 De c e mb er 1 9 8 4 .

4 . i b i d ■

26 AUGUST 1 9 8 5