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Treasurer and Shadow Treasurer discuss December quarter current account deficit.



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PM

 

Tuesday 1 March 2005

Treasurer and Shadow Treasurer discuss December quarter current account deficit

 

MARK COLVIN: The worst current account deficit on record has revived memories of Paul Keating's "banana republic" warning in 1986. The deficit for the December quarter was more than $15 billion - six per cent worse than the previous quarter. The blowout has again underlined a central problem, that Australia's exports are struggling while imports continue to rush in. 

 

The Federal Government's blaming problems at the ports. The Treasurer Peter Costello says infrastructure bottlenecks need to be cleared. But he's under fire for failing to do enough to fix the causes of the sluggish exports. 

 

Louise Yaxley reports. 

 

LOUISE YAXLEY: The record current account deficit is now worse as a percentage of GDP than when Paul Keating said Australia was in danger of becoming a banana republic.  

 

The figure for the December quarter is a blowout and around a billion dollars worse than was expected. So it's left Peter Costello trying to fend off comparisons with Paul Keating. 

 

PETER COSTELLO: Our economy is in a much stronger position than it was back in the days of Paul Keating. We have a much lower inflation rate. We have much lower interest rates. And we have a much better Commonwealth financial position. So those indicators are much stronger than they were in the Keating days. But don't underestimate the significance of these figures. We need to lift our exports. 

 

LOUISE YAXLEY: When it was in Opposition to Paul Keating, the Coalition hammered the Government over foreign debt and drove a so-called 'debt truck' around the country to promote those concerns. 

 

Labor's Treasury spokesman Wayne Swan is happy to use Mr Costello's own words against him. 

 

WAYNE SWAN: Back in 1994, Peter Costello said a high level of foreign debt makes Australia more vulnerable. And it certainly does.  

 

LOUISE YAXLEY: Peter Costello says this deficit is caused by the problems getting the exports out. 

 

PETER COSTELLO: There are bottlenecks in the supply chain, particularly in relation to mineral resources. I've previously identified Australia's number one export is coal, 41 per cent of our coal trade goes out through Dalrymple Bay, Hay Point.  

 

There are 40 ships that are lined up that could take coal, but underinvestment in that port has delayed the volumes of Australian coal exports, and you see reflected in these figures the impact that has on the national economic effort. A very direct impact on the national economic effort. 

 

LOUISE YAXLEY: And Mr Costello's using the current account problem to repeat his push for more industrial relations changes. 

 

PETER COSTELLO: This should remind us of the importance of economic reform, reforming industrial relations, clearing bottlenecks at ports. 

 

LOUISE YAXLEY: This blowout comes as Mr Costello is in the midst of a bitter row with the state premiers over the way they spend revenue from the GST. 

 

PETER COSTELLO: The point I make is this, that the state governments now have more revenue than they've ever had before, because the GST is delivering in large sums. They have enough money now to run proper hospital systems, and proper educational systems. What we've got to make sure is that they use that money to run them properly. 

 

LOUISE YAXLEY: But the Australian Democrats Leader Lyn Allison says Peter Costello is whipping up that issue up as a smokescreen. 

 

LYN ALLISON: Mr Costello is just looking for a distraction for the Government's own economic problems, the most recent of which was the huge trade deficit. Again, figures showing that Australia's in real trouble when it comes to exports. 

 

What we've seen is too little spent on investment in infrastructure, whether that's public transport or ports or roads even. This Government has a lot to answer for in terms of supporting what needs to be done to pull our trade figures back into the black. 

 

LOUISE YAXLEY: Lyn Allison says the Government's contributed to the export blockages with its strategy of paying off government debt rather than investing in infrastructure. 

 

LYN ALLISON: There's been plenty of evidence that the Federal Government has not used very significant surpluses… in fact around $20 billion in surpluses, has been put into repaying debt, to the extent that Australia now has an extremely low level of debt, unusually low for OECD countries. And many of the states are taking that kind of action themselves. 

 

So I think rather than pointing the finger at the states, we want to see the Federal Government do something about the infrastructure problems in this country, and the research and development that leads to better economic returns. 

 

LOUISE YAXLEY: Labor's Wayne Swan too is accusing the Treasurer of failing to react to the warning signs, and he's quick to link the expected rise in interest rates to these figures. 

 

WAYNE SWAN: These figures today do put upward pressure on interest rates. And they put upward pressure on interest rates because they reflect the failure of Howard Government policies in those key areas I was talking about before, to put incentive in the tax system, to invest in skills development, to solve infrastructure problems, to really work for prosperity tomorrow rather than the short term objectives of the Howard Government today. 

 

MARK COLVIN: Labor's Wayne Swan.