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Hawke and Keating incapable of recognising economic storm clouds



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T O R S H O R T

T t L N Ο . Ο o i v i

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HAWKE AND KEATING INCAPABT.R OF RECOGNISING ECONOMIC STORM CTODDS^-Extracts from an address at a Ballarat College of Advanced Education Faculty of Business Dinner, 24 June 1988

The rising level of interest rates in Australia is an inevitable result of the failure of the Hawke Government to pursue a sufficiently tight fiscal policy.

Our interest rates are already amongst the highest in the industrialised world. They are certain to go higher while this Government continues to refuse to take the necessary hard decisions to curb its own spending excesses.

The Hawke Government has asked wage earners and families, particularly in the middle and lower income brackets, to tighten their already tightened belts.

They have seen their standard of living deliberately and savagely eroded by the Government. They will be further hurt by the interest rate rises.

The Government has also placed severe financial restraints on State Governments.

Yet it has demonstrated a lamentable failure to impose the same discipline on itself.

As a result, the whole weight of economic management is being thrown on to monetary policy.

Monetary policy is a singularly crude, inadequate and inappropriate tool to use as the sole weapon against inflation, a continuing huge balance of payments deficit, and disastrously high level of external debt, The high interest rates inherent in this use of monetary policy actually exaccerbate most of the problems.

It is like pouring petrol on a fire.

The Australian economy is on a knife edge. There are major storm clouds ahead, on both the domestic and external economic fronts.

The arrogance and the insatiable egos of the Prime Minister and his putative acolyte have rendered Mr Hawke and Mr Keating incapable of recognising the existence of these clouds.

The Government must take immediate steps to get its economic policies into proper balance. Essentially, this means a much more responsible fiscal policy stance. This in turn requires much greater restraint on its own spending.

If the Government fails to act on fiscal policy in the August Budget, or before, the storm clouds facing the Australian economy could become a deluge.

Ballarat, 24 June 1988

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