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Wednesday, 1 December 2004
Page: 72

Senator SHERRY (3:00 PM) —My question is to Senator Minchin, the Minister representing the Treasurer. In light of today's national account figures showing yet another quarter of negative household savings and the recent warning from the Organisation for Economic Cooperation and Development about the dangers and threats posed by soaring household debt in Australia, is the minister aware that the liabilities of Australian households have skyrocketed from $267,000 million in 1994-95 to $797,000 million in 2003-04? Is the minister also aware that current liabilities as a percentage of household income have almost doubled, from 82 per cent to 153 per cent, over the same period? Why have the liabilities of Australian households increased so dramatically, and what action does the Howard government propose to take to address this unsustainable growth in debt?

Senator MINCHIN (Minister for Finance and Administration) —The national accounts were released today and they do show some moderation in the rate of growth of the national economy—growth of 0.3 per cent for the September quarter, giving three per cent over the year to September. The government welcomes these figures. It is a welcome moderation in the rate of growth against a backdrop of an economy that is still fundamentally strong, still displaying low inflation, low interest rates and low unemployment, and built on the basis of high levels of domestic confidence in particular.

Senator Sherry asks why liabilities at the household level are relatively high. That is a function of the strength of the economy, and the enormous confidence that Australians have in their ability to borrow and service their borrowings in a climate of low unemployment, strong economic growth and low interest rates. I do not want to delay the Senate but I would refer Senator Sherry in particular to a piece by a respected commentator on the economy, one Alan Kohler, in today's Age and other Fairfax newspapers in which he makes it quite clear that `in short the idea that the country is living beyond its means is a myth'. I would encourage the opposition—and Senator Sherry in particular—to study Mr Kohler's piece, which is a very good analysis of the situation facing Australian households, whose balance sheets—and I made the point in the last sitting week that Senator Sherry needs to look at the balance sheets of Australian households—have record assets.

The net worth of Australians is something like $250,000 per person, or $500,000 per household. Australian households, after nearly nine years of our government, are in extraordinarily good shape. The wealth of individual Australians has never been higher. Their capacity to service their debts has never been greater. They have expressed their confidence in the management of the economy both at the election, as we demonstrated, and by their confidence to borrow against their asset base to fund their investments. We have always cautioned Australians to be careful in their borrowings. We would do so again as we approach Christmas. Yes, certainly they should be cautious but they have good reason to demonstrate the underlying confidence, which they do.

Senator SHERRY —Mr President, I ask a supplementary question. Isn't it true, Minister, that not just the OECD but also the Reserve Bank and other reputable and leading economic organisations have examined the balance sheet and they have concluded that the dramatic increase in household debt, which has been growing at 14 per cent per annum, is simply unsustainable? Why is it that after 8½ years the Howard government have failed to heed these concerns and actually develop policies and do something about this unsustainable debt level?

Senator MINCHIN (Minister for Finance and Administration) —The only thing I would add to my previous answer is that we will not do what the previous Labor government did: they crushed the economy by raising interest rates through the roof, bringing on a recession, destroying the livelihoods of thousands if not millions of Australians, destroying small businesses and putting thousands of people out of work. It was a disgraceful period of economic management which we will not repeat.

Senator Hill —Mr President, I ask that further questions be placed on the Notice Paper.