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Wednesday, 17 November 2004
Page: 46

Senator SHERRY (11:36 AM) —We are speaking today on the motion for the adoption of the address-in-reply to the Governor-General's speech. The address-in-reply is a general debate where traditionally senators and members can speak on any particular issue of the day. I will focus on the outline of the Governor-General's speech, which took place in this chamber yesterday. I might just say that it is not the Governor-General's speech; he might read it, but it is written for him by the government of the day. I note with passing interest that there appeared to be some argument as to who would write the speech on this occasion. But it is certainly the government's speech and it outlines the general principles and direction, with varying degrees of detail, of the government over the next three years until the next election.

On the issue of the election, the Labor Party obviously lost. There have been four election defeats. The Labor Party accepts the will of the people. The people have made the decision. I might not agree with the decision that was taken, but the people have spoken. We now deal with a re-elected Liberal government. I am not going say a `Liberal-National Party government', because I do not think the National Party count very much these days in terms of their public clout and their real clout in the so-called coalition. I note they did not even have a separate National Party campaign speech in the election, Senator McGauran. They left it up to the Liberal Prime Minister to give the campaign speech on behalf of the National Party.

Senator McGauran —Have you read the Senate results?

Senator SHERRY —I have read the Senate results, but the real test for Senator McGauran and the National Party will be to see if their bite is worse than their bark! That will be the real test, and whether or not—

Senator George Campbell —If they've got any bite.

Senator SHERRY —Exactly—whether they have got any bite. They have got potential bite; it is whether they actually exercise it. What we have seen from Senator McGauran and his colleagues in the Senate and the other place, certainly in the last 14 years that I have been in the Senate, is a doormat approach. When it comes to the crunch, they just roll over to the demands of the Liberal Party. I did look at the Senate results but, when you look at the results in the House of Representatives, I am certainly not greatly thrilled by the Labor Party's results. But the reality in terms of the coalition is that the Liberal Party represents far more rural and regional seats in Australia than the National Party does. I have looked at the Senate results in Queensland. In particular, I looked at the stunt the Liberal Party pulled in Queensland in terms of the how-to-vote letter from the Prime Minister to National Party voters that managed to convince a significant number of National Party voters to switch to the Liberal Party in the Senate. But let us put all that aside.

Since the election, and since the election of a Labor shadow ministry, to which I was re-elected, I have had finance added to my previous responsibility of superannuation. In that capacity it will be part of my role to contribute to debate, representing the shadow treasurer, Mr Wayne Swan, and the shadow industrial relations minister, Mr Stephen Smith, in the Senate. In the election there was discussion of some economic issues. I want to make a relatively brief comment about that today and then focus on some other economic issues which did not gain very much attention in the election at all but which are of growing concern, certainly amongst the economic community and gradually amongst the broader community.

In terms of the election, there were two economic issues that received significant commentary. They were the level of economic growth that has occurred under the now re-elected government over the last 8½ years, and the linking of the issue of interest rates and the false allegation that a Labor government would mean a return to the interest rate peak of approximately 17 per cent. That was the allegation made. It was false. Nonetheless, I accept the will of the Australian people, and there were some people in the Australian community who were obviously convinced of the false argument that an election of a Labor government would mean a return to interest rate peaks of 17 per cent.

On this issue and on the issue of economic growth, there is an interesting publication just released by the Parliamentary Library which examines a range of economic indicators in the period from 1972 to the present. It is interesting reading and it is well-balanced economic research and data from an independent source. I will go to the issue of economic growth. I suppose it is not unreasonable that a sitting government, the Liberal-National Party government, would claim all the credit for the level of economic growth over the last 8½ years. It is not unreasonable that they would claim that, even if it is not correct. But when we look at levels of economic growth in the library's publication, the average economic growth by percentage in the Hawke-Keating years—from 1983 to 1996—was 3.7 per cent. The average level of economic growth under the Liberal government over the last 8½ years was 3.6 per cent. In other words, the average level of economic growth over the 8½ years of the Liberal government was a fraction lower than the average level of economic growth under the 13 years of the Hawke-Keating government.

The other statistic which is very interesting is the level of real housing interest rates. Of course, that is the level of housing interest rates after taking inflation into account. The level of real housing interest rate over the 13 years of the Hawke-Keating government was 6.9 per cent; the level of real housing interest rate under the 8½ years of the Liberal government was 4.6 per cent. So it is factually correct to say that the level of real housing interest rate is lower, but it is certainly substantially different from the frankly absurd claim being made during the election campaign that an elected Labor government would mean a return to an interest rate peak of some 17 per cent—a vastly incorrect and basically false claim made by the government. Nevertheless, I accept the will of the people—some people believed that false claim.

It is part of my role—and part of the role of all Labor senators and members, but I obviously have a level of responsibility—to draw to the attention of the Australian public the real economic facts and the real economic outcomes. As I said, there has been a substantial focus in recent times on economic growth and on issues relating to interest rates, particularly the household interest rate and housing mortgages. I want to draw the attention of the Senate to a number of other key economic indicators which the government invariably does not like attention drawn to. I think we are going to see a growing focus and public debate on a number of key economic indicators that this government does not like to talk about or, if it does get engaged in a debate on them, distances itself from any direct responsibility for.

The issues I want to refer to today are the current account deficit, the level of foreign and national debt, the level of national savings and the level of public and private debt in general. It is true that the level of economic growth in this country over the last 14 years, not just the last 8½ years, has been very solid and that generally—depending on the quarter-by-quarter release of these statistics—Australia has been close to or sometimes at the top of the economic growth league over those 14 years. When I talk about a growth league, I am talking about the comparison with 14 other major advanced economies around the world. But, if we look at the issue of the current account deficit and at where we are in that league of 15 advanced economies with respect to current account deficit, the sad fact is that we are very close to the bottom.

The current account deficit in 2003-04 on our balance of payments was some $47.4 billion—that is, 5.85 per cent of Australia's gross domestic product. That puts us at the bottom, and vying with the United States for one of the worst current account balance of payments records, of the league of comparable economies. Whilst terms such as `current account deficit', known as CAD, or `gross domestic product', known as GDP, are obviously not in everyday public discussion—or barbeque stoppers, as some issues have become known—this growing trade deficit does have significant long-term implications for Australia's economic wellbeing because it has to be funded. The deficit has to be funded by borrowings, which inevitably means the importation of capital into this country, and obviously that has to be paid for. Because of our reliance on imported capital because of the level of the current account deficit, a country such as Australia is exposed to much greater levels of adverse economic change should there be adverse economic circumstances in the rest of the world. Australia is exposed because we are so reliant on importing the capital to sustain the current account deficit.

It is true that from time to time there are factors that do blow out the deficit. There is no doubt that a drought affects the current account deficit. There may be changes in the circumstances of our trading partners. Currency variations, fluctuations and movements affect the current account deficit. But the sad fact is that under the Liberal government the current account deficit has in the long term got steadily worse and should be of significant concern to this country, particularly if there is a change for the worst in economic circumstances in the rest of the world. We are more greatly exposed in the event of those adverse circumstances. There is a whole range of activist policy interventions that a government can use to at least reduce the level of growth in the current account deficit but that the Liberal government has neglected—for example, industry policy development. That is not my area and I am not going to go into that today.

Related to the current account deficit is the level of foreign debt. Again, prior to the election of the Liberal government in 1996, they were very fond of drawing attention to Australia's level of foreign debt. In the year to June 2004, the level of foreign debt reached $393 billion. As a share of gross domestic product, foreign debt has steadily increased from 13.9 per cent to 48.5 per cent over the last 20 years. Foreign debt levelled off from 1992 through to 1998 but has since accelerated. Again, we have not heard very much from this government—in contrast to what we heard in the lead-up to the 1996 election—regarding concern, and there should be real concern, about the escalating level of Australia's foreign debt.

Linked to the issue of foreign debt is the issue of national savings. We heard a lot from the Liberal government when it was elected in 1996 about the level of government debt and the need to reduce it. But government debt is a component part of national savings. What makes interesting reading are the figures that show that, in contrast to the level of government debt—which we hear a lot about from time to time from the Liberal government—the level of household, private debt is escalating. If that is escalating then obviously at the same time the level of savings by households is in rapid decline. The level of savings by households in 1994-95, for which I have statistics, was 3.52 per cent. The level of savings by households in 2003-04 was minus 1.42 per cent. What does that mean? It means that in 2003-04 Australian households dissaved—they spent more than they earned—approximately $11 billion. That was funded by borrowing and increasing the level of personal household debt. This can have very serious consequences. Again, that was an underlying theme of the Liberal government's election campaign. Having presided over a massive increase in the level of personal and household debt in this country over the last eight—

Senator McGauran —Individual decisions.

Senator SHERRY —Sure, they were certainly individual decisions, Senator McGauran; I acknowledge the interjection. But if you are an active government and you care about the economy and about the future of individuals and households, there are still various active policies you can implement to lift the level of savings. It is simply unsustainable for the level of household savings to continue to be negative. It has significant economic implications for the future of this country. The current Liberal government rightly draws attention to the consequences of an ageing population. If Australians are dissaving, and in fact borrowing against their futures, the consequences will be very dramatic when they reach retirement, for example. With respect to funding issues like retirement incomes or health, continuing to dissave at the current rate will have a very serious and savage impact on the future of a significant number of individuals and households in this country. (Time expired)