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Wednesday, 9 February 2005
Page: 88

Senator FIFIELD (3:28 PM) —I rise to take note particularly of Senator Hill’s outstanding answers today in relation to the economy and some of Senator Stephens’s comments. Why is it that the Labor Party never like to talk about net government debt? They only ever want to talk about foreign debt; they only want to talk about current account deficits. It is really quite odd, because there is a direct relationship between government debt and foreign debt. One almost gets the feeling that Labor have a little something to hide, something that they are uncomfortable talking about. It is very instructive to look at the relationship between foreign debt and net government debt to see why Labor are so shy.

Let us remember that when the coalition came into office net government debt was $96 billion. We have reduced net government debt from $96 billion to $25 billion. It is a reduction from about $5,200 per person in Australia to about $1,200 per person. As a government, despite what Senator Stephens said, we are clearly living within our means. We do not need to borrow to fund our families package. We do not need to borrow to fund defence. We do not need to borrow to fund our health policies. We do not need to borrow to fund education. We do not need to borrow to fund infrastructure. As a government, we have not borrowed one dollar in net terms since we ascended to office.

We have among the lowest levels of general government net debt in the developed world. Our net debt to GDP ratio is among the lowest in the OECD. We are lower than Germany, lower than the total OECD, lower than the EU, lower than Japan, lower than the US. We as a government are determined to maintain those low levels of net government debt. Why is this important? What does this have to do with the current account deficit and foreign debt? The answer is pretty simple: the more government borrows, the less money is available to borrow in Australia. That means that people have to go overseas to borrow to invest in Australia. So there is a clear relationship. We know that Labor cannot be trusted with the budget. We have seen that before. I have with me what I think is my all-time favourite press clipping, from 1 February 1996. It is usually tucked away in my coat pocket. It is one of our favourites on this side of the chamber. It quotes Mr Beazley, the then Minister for Finance:

We’re in a position where we’ve got no plans to increase taxes ... Why would we? We’re operating in surplus, and our projections are for surpluses in the future.

We all know the reality: it was a $10 billion deficit. It is breathtaking that Mr Beazley and his team opposite seek to take the government to task on interest rates and foreign debt. Under the previous Labor government, of which Mr Beazley was an integral part, the debt servicing ratio rose as high as 20 per cent. We heard from Senators Hill and Minchin that that is now down to about nine per cent. It is instructive to look back at what senior figures opposite said in times past. Listen to this quote from 1995:

The best way of understanding the size of the foreign debt is to compare it to the size of the economy. Since September 1993, the size of foreign debt relative to the size of the economy has decreased. In other words, the economy has increased faster than the debt ... Debt is not a bad thing as long as you can support the debt, as long as you can repay it, so long as the borrowings are going into the economy and producing productive investment, producing jobs. Look at our record on ... growth.

That was from Senator Sherry in 1995. So in 1995 Senator Sherry was saying: ‘Foreign debt is okay as long as it’s serving a purpose. As long as it’s helping the economy, it’s not a problem.’ But he was not alone. There was another very substantial figure of Australian politics who had something equally interesting to say in 1995:

We have always been a country that has been heavily dependent on foreign capital. We are now even more attractive to that capital because we are a well managed economy. Foreign capital does not chase badly managed economies. Get that fairly clear in your head. Foreign capitalists or money lenders do not wander around the place looking for poorly managed places upon which to dump money. That is not their way. They lend money to people who look as though they will be capable of sustaining it. They look at countries like ours and the way that they are managed. They come to the conclusion that we would be capable.

That was from Kim Beazley in 1995. (Time expired)