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Tuesday, 30 November 2004
Page: 33

Senator CONROY (2:31 PM) —My question is to Senator Minchin, the Minister representing the Treasurer. Given the current account deficit reached a record $13.7 billion in the September quarter and Australia's overseas debt ballooned to a record $406 billion, what action is the government taking to end the massive run of 29 consecutive Australian trade deficits? Why should Australians have to suffer a current account deficit that has soared from $18 billion in 2000-01 to a dangerously high level of $47.4 billion in 2003-04, an amount close to six per cent of GDP? How does the government respond to reported comments from credit rating agency Standard and Poor's saying Australia's foreign debt posed a big risk to international investors and that they were rattled by the fact that most of the foreign debt was being funnelled through the banks to prop up the housing boom?

Senator MINCHIN (Minister for Finance and Administration) —It is a great pleasure to welcome back Senator Conroy to the field of policy while he takes a short break from his jihad against the dead parrot. Mind you, he is not asking a question about his own portfolio responsibilities. Apparently he cannot think of any questions in his own responsibilities, that of communications, but he now wants to express an interest in being shadow Treasurer. We are very pleased that Senator Conroy and the opposition are finally taking an interest in the economy. We only wish they had done so for the last eight years. They have basically wasted the last eight years avoiding any discussion of the economy, and now they have found a latter-day interest in that subject, which we welcome. We welcome their constructive participation in ensuring that this economy continues to perform, instead of them spending the last eight years obstructing every measure that we have tried to introduce to improve the flexibility and performance of this economy.

The Treasurer has made it quite clear that we of course pay attention to the foreign debt situation. The Treasurer did make a point yesterday in his answer to this question in the House of Representatives. While the senators opposite have been too busy muckraking over our support for investment in regional Australia, at least in the House of Representatives they were focusing on the economy. Now, a day later, Senator Conroy gets up to ask a question which was asked yesterday in the House. The Treasurer did make the point that the current Leader of the Opposition pooh-poohed this very line of attack in 1994, when he said that a current account deficit of the nature that we had was actually a vote of confidence in the Australian economy. Those are the words that the Leader of the Opposition, Mark Latham himself, expressed in 1994. So he completely undermined the attack brought on yesterday by Mr Swan and the attack brought on today by Senator Conroy on this subject.

The main driver of the current account deficit, as they well know and as economists well know, is the relative strength of the Australian economy compared to that of our trading partners of the world. The Australian economy continues to outperform most of the developed world. Therefore, by definition, with our domestic growth, we are going to be sucking in more by way of imports in investment flows than we are able to export. The strength of the Australian dollar of course has been a factor and is a function of the decline in the US dollar. The Treasurer also made the point that we think a greater range of countries should bear the burden of the decline in the value of the US dollar, other than simply Australia. But the Australian dollar is very strong, some 10c above its long-term average since the dollar was floated by those opposite when they used to take an interest in good economic policy.

The way in which we deal with this is to make sure that the Australian economy is flexible, productive and competitive. One of the most important ways to do that is to ensure we have the most flexible possible workplace relations. It is this opposition, which have the gall to raise the question of our current account deficit, that have been blocking every attempt that we have been making to free up industrial relations. They have a massive problem. They know that, if they are to become economically credible, they have got to address this issue of flexible industrial relations. Senator Conroy, to his credit, I think understands that, but the troglodytes like Senator Campbell and others opposite will not allow this opposition to escape from the stranglehold that the trade union movement has over them.

The PRESIDENT —Order! Senator Campbell!

Senator MINCHIN —They will never achieve economic credibility, because they will never escape the burden they bear as a product, as a wholly owned subsidiary, of the trade union movement. They will never become relevant to the economic debate. (Time expired)

The PRESIDENT —Order! There is far too much shouting from the left.

Senator Ian Campbell —Mr President, on a point of order: when you are quite properly calling the other Senator Campbell to order, could you please use his first name to distinguish the lowland Irish from the Highlands Scot.

The PRESIDENT —There is no point of order.

Senator CONROY —Mr President, I ask a supplementary question. How can the minister possibly claim that Australia's poor trade deficit performance, which has placed the country last of the 15 advanced economies, is not a risk to the Australian economy? Didn't the Treasurer, Mr Costello, identify in the 1996 budget paper overview a current account deficit of four per cent of GDP as a risk? If four per cent is a risk, isn't six per cent a disaster waiting to happen? As Australia draws on foreign savings, as represented in the current account deficit, doesn't the Australian economy become ever more vulnerable to external financial shocks outside our sovereign control?

Senator MINCHIN (Minister for Finance and Administration) —Senator Conroy ought to understand that the principal difference between 1996 and now is that we as a government are contributing to national savings by the string of surpluses that we continue to produce, despite the opposition of the Labor Party to our good policy. Therefore, the current account deficit is a function of the workings of the private part of the economy. The government, by ensuring that we are producing surpluses, are contributing to national savings. What we are seeing is the workings of the private economy. Our economy, of course, is in extraordinarily good shape compared to the rest of the world, is outperforming the rest of the world and is therefore producing the sort of current account figures we have had. What we need to do is ensure, as I have said, that we have a productive, competitive and flexible economy, which will be a product of the sorts of the policies we will be able to produce and implement after 1 July next year.