Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Question to the treasurer (Dr Andrew Theophanous, Calwell)



Download PDFDownload PDF

TREASURER

EMBARGO

[PRESS (r e l e a s e ,

\

NO. 120

C O M M O N W E A L T H

P A R L IA M E N TA R Y LIBRARY M IC A H

EXTRACT FROM HOUSE OF REPRESENTATIVES QUESTION TIME, 8 NOVEMBER 1988.

QUESTION TO THE TREASURER (DR ANDREW THEOPHANOUS, CALWELL)

Will the Treasurer inform the House of the current strength of the Australian economy and the steps that the Government has taken to ensure that Australia continues to expand its productive base while curbing the growth in demand?

MR KEATING

Madam Speaker, the economy is currently showing considerable strength. The ANZ job vacancies series in October rose by 4.1 per cent, and was 21 per cent higher than a year earlier. Employment has grown by 315,000 over the past year

to September, which is an increase of 4.4 per cent. The trend level of unemployment has fallen to 6.9 per cent compared, with 8.0 per cent 12 months earlier.

This strength, Madam Speaker, is coming from rapid growth in private investment and expanding exports. Importantly, it is not coming from private consumption or from public demand. Indeed, retail sales fell by 0.7 per cent in August,

following a fall of 2.0 per cent in July, and public spending will fall again in 1988-89.

The Budget forecast for business investment was for an increase of 12 per cent in 1988-89, following an increase of 10 per cent last year. And industry surveys for the September quarter show that a major re-equipment and capacity expansion is under way in manufacturing. Investment in the

services sector is also very strong. Investment in residential housing has increased rapidly, growing by 11.4 per cent last year and will grow by 12 per cent or more this year.

2

ν'

Subdued private consumption, declining public demand, strong private investment and expanding exports have not come about by accident. We have reduced the net PSBR to zero through ^ cutting outlays and giving the private sector something to

allocate. We have made our trade sector highly competitive through a sensible wages policy and a market determined Exchange rate. And it is also because we have been willing to use monetary policy in its proper balancing role.

After the October Stock market crash, Madam Speaker, monetary policy was eased to help the liquidity of the financial system and to maintain confidence. Other countries took similiar steps. In the June quarter monetary policy was tightened as the economy weathered the crash and started to pick up speed. In this the Government responded more rapidly than Government's of other OECD countries.

Since then the Government has not stood in the way of market moves to further lift interest rates. The market has been responding to the general strength of the economy along with a higher then expected CPI and a temporary shortfall in

export receipts brought about by the diminished supply of some rural exports. In this way, Madam Speaker, monetary policy has tightened further and the Government has complied in this tightening because it would be foolhardy to allow an already strong economy to run ahead even faster.

If we are to build the productive base that we need to permanently repair our trade imbalance we have to proceed, of course, at a sustainable pace. In this way growth will not only be maintained this year, but we will have the basis of

further growth next year.

We are now in the very enviable position of having to manage strength, and that strength is beginning to flow right through the economy. Employment growth has been exceptionally strong. The participation rate is up, boosting

the income of individual households in a major way. Real household disposable income is likely to grow by something closer to 4 per cent, rather than the 3 per cent contained in the Budget forecast. Incomes are up because of strong

employment growth and higher farm incomes, and real wages will also increase this year.

Madam Speaker, the Government will continue with its policy framework, because it is working and because it is delivering benefits. We will continue to stop demand running too rapidly by keeping public spending tight and by also keeping monetary policy appropriately tight. We will continue to

keep the economy competitive while we boost our productive capacity through strong investment growth.

3

In short, Madam Speaker, we will make sure that we have a solid basis to further boost household disposable incomes next year through a properly structured wage tax deal which will cut inflation and deliver the benefits of the sharp

reduction in the size of the Commonwealth Government that we have achieved to date.

CANBERRA 8 November 1988