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More record debt and deficits from Howard and Costello. \n



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Wayne Swan MP Federal Labor Shadow Treasurer

MORE RECORD DEBT AND DEFICITS FROM HOWARD AND COSTELLO 31 May 2005

The balance of payments figures released today are a damning indictment on the Howard Government’s complacency and short-sighted approach to our economy.

In the March quarter, Australia’s current account deficit reached $15.6 billion and around 7.25 percent of GDP - the highest in our history.

At the same time, foreign debt reached a record $424.6 billion - more than $21,000 for every man, woman and child in Australia.

There are worrying signs we are sliding into a debt trap - borrowing more every year just to pay interest on our debt, with nothing from the Government to fix the problem.

As our foreign debt spirals, so too do the interest payments to service it, with net interest payments climbing 30 percent year on year to $15.2 billion in the year to March 2005.

These figures jeopardise the living standards of all Australian families.

They put upward pressure on interest rates and they make our economy and our prosperity more vulnerable to shifts in international sentiment.

As a nation we’re living beyond our means - importing too much and borrowing far too much from the rest of the world.

John Howard and Peter Costello have been asleep at the wheel; content to let our situation deteriorate while they complacently ignore the problem.

When the Coalition came to Government in 1996 they promised to fix the foreign debt problem but instead it’s doubled under their watch (see attachments).

Australia can’t afford to ignore our massive current account deficit and alarmingly high foreign debt.

We can’t keep sucking in imports while our export performance languishes, and we can’t keep relying on overseas loans and investment to finance our prosperity.

Tuesday 31 May 2005 Contact Jim Chalmers 0417 141 676

ATTACHMENT ONE - HOWARD/COSTELLO QUOTES

Howard 1 February 1995:

! “6% is a very, very bad figure… it is an extremely bad figure and our foreign debt exposure is alarming. There can be no other description of it. It is alarming.”

Howard 10 May 1995:

! “If you really want to fix Australia's current account deficit problem over the long term, you have got to fix the supply bottlenecks in the Australian economy and make us more productive and competitive.”

! “But look, the Government has been there for 12 years, and they and they alone, have to wear the responsibility for the mess that the current account is in, and the fact that Australian borrowers pay the highest real interest rates in the Western world.”

Costello 30 June 1995:

! “A high level of foreign debt also makes Australia more vulnerable and increasingly at the mercy of international financial markets.”

! “One of the most pathetic arguments that the government is parroting—the most pathetic argument in relation to this current account deficit crisis that could be imagined—is that it is not their fault.”

Costello 20 September 1995:

! “Australia has high foreign debt, and because Australia has a current account problem, that puts premium on Australian borrowings, that flows through and every Australian pays for the consequences.”

Howard 20 September 1995

! “If it weren’t for the level of foreign debt, interest rates in this country would be much lower”

! “I can promise you that we will follow policies which will, over a period of time, bring down the foreign debt”

Howard 28 February 1996:

! “He’s began to enter the denial stage about foreign debt. He now says foreign debt - debt really doesn't matter. He said debt is not so bad as long as you can service it. I mean that is the classic response that somebody who has been there so long and has been so unable to find a solution to something. He thinks he will define the problem away by pretending that it doesn't exist.”

! “One of the reasons why high foreign debt matters is that it feeds directly into the level of interest rates in Australia. … The truth is that while we have such a high level of foreign debt we are going to continue to have an impact directly onto the level of real interest rates in Australia.”

! “With every extra dollar of foreign debt which accumulates, the economic sovereignty, the ability of Australians to choose freely and openly from every possible alternative which is before them, is diminished just that little bit more.”

ATTACHMENT TWO - GRAPHS

Foreign Debt Doubles

177,773

424,685

-10000

40000

90000

140000

190000

240000

290000

340000

390000

440000

490000

Mar.1994 Mar. 2005

$m $9,997 for every

man woman and child

$21,056 for every man woman and child

Worst Ever Current Account Deficit

7,605

15,648

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

Mar.1995 Mar. 2005

$m

"6% is a very, very bad figure" (John Howard, 1 February 1995)

7.25% of GDP

Living Beyond Our Means - Imports Swamp Exports

30000

32000

34000

36000

38000

40000

42000

44000

46000

48000

Dec.2001 Mar. 2005

$m

Goods and Services Credits Goods and Services Debits

Trade Balance -$408m

Trade Balance -$7,072