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Monday, 25 March 1985
Page: 699

Senator TOWNLEY —My question is directed to the Minister for Finance. I remind the Minister that the estimate at Budget time for interest on our public debt for this year was $5,600m, which is 20 per cent more than we spend on education and almost as much as we spend on defence, and that Australia already has a debt per head of more than Argentina, Brazil, Mexico, Poland or Chile-all of which we know are in extremely bad economic situations. Does the Minister agree that unless drastic action is taken this country could follow the same path as those countries? Finally, what will be the effect of the devaluation of the Australian dollar on our interest bill, and will the Minister advise the Senate, as he promised to do on 24 August last year, what percentage of the debt for public interest is paid to overseas banking organisations?

Senator WALSH —The figure of $5.6 billion interest on public debt which Senator Townley gave sounds correct, although I do not have the papers with me. It is quite a lot of money. It is over 9 per cent of total Commonwealth outlays and, being a charge which cannot be avoided short of repudiation of debt, it obviously gives governments a good deal less flexibility than they would have otherwise in making their expenditure decisions. Whether or not it is too much, it would have been a great deal more if the irresponsible and discredited former Treasurer, Mr Howard, had still been Treasurer in 1983 and actually had produced a Budget with a deficit of nearly $10 billion. That is the prospective deficit which this Government inherited from the discredited former Treasurer, aspiring Liberal Party Leader and certainly the Leader of the Sydney faction of the Liberal Party, Mr Howard. It would have been considerably more than it is had Mr Howard not been removed from Government early in 1983 and had he actually produced, as a real deficit, the prospective Budget deficit of nearly $10 billion which this Government inherited from him.

Senator Peter Rae —You know it is an absolute lie to say that he had that planned Budget deficit.

The PRESIDENT —Order! Senator Peter Rae will withdraw that expression.

Senator Peter Rae —I withdraw that it is an absolute lie that-

The PRESIDENT —Order! The honourable senator has withdrawn.

Senator WALSH —Whether Senator Rae chooses to recognise unpleasant truths or not, it is a fact which has been on the public record for more than two years that the prospective deficit for 1983-84 announced by the Treasury Secretary in March 1983 was $9.6 billion.

Senator Chaney —Mr President, I raise a point of order. It is not surprising that senators opposite the Minister make statements that have to be withdrawn when he persists with things which are known to be inaccurate and which have long been proven to be inaccurate. The fact is that his own Treasurer would not produce the forward Estimates.

The PRESIDENT —Order! I ask the Leader of the Opposition to relate his remarks to the point of order.

Senator Chaney —The point is that the Treasurer would not produce the forward Estimates on the grounds that they were not reliable. That is a similar comment to the one that is being made by the Minister for Finance.

The PRESIDENT —Order! There is no point of order. Might I suggest to the Minister that he is rather tending to debate the answer to the question asked by Senator Townley. If he could restrict his remarks to the question, the Chair certainly would appreciate it.

Senator WALSH —By all means, Mr President.

Senator Peter Rae —Tell the truth, too. Tell the truth.

Senator WALSH —I have already told the truth. The published forward estimate, on a no policy change basis, of the Budget deficit which this Government inherited immediately it assumed office was $9.6 billion. That is the truth. It may be an unpalatable truth, but it is still the truth. Senator Townley asserted that Australia's per capita debt was comparable to or more than that of Argentina and Mexico. I do not know whether that is correct, but I am certain that Australia's debt overseas, as a proportion of gross domestic product, is a great deal lower than that of either of those countries. The debt, as a proportion of GDP, is a more relevant figure than per capita debts, particularly when we are dealing with countries which have very low per capita incomes as against countries like Australia which, in spite of having had 25 years of tory government in the last 30 years-during which time it slipped down from third on the Organisation for Economic Co-operation and Development income scale to about sixteenth-still has, by the standards of Mexico and Argentina, a very high per capita income.

The effect of the recent devaluation of the Australian dollar will depend on the currencies in which the interest has to be paid for that proportion of the debt which is owed overseas. I apologise if I said on 24 August I would try to obtain some figures about the proportion of total Commonwealth debt owed overseas. Indeed, I think I can remember giving those figures in a subsequent answer in the Senate some time last year, but I will look that up. From memory, it is something like one-sixth or one-seventh, but that certainly needs to be confirmed. I will get those figures again.

Finally, the point should be made that debt owed overseas is something which any nation ought to be concerned about if it reaches a very high level. A debt owed internally-apart from the technical differences in it-is qualitatively very different from a debt owed overseas.

Senator Short —Why?

Senator WALSH —Why? Did that come from a Queensland senator?

The PRESIDENT —Order! I ask the Minister to ignore the interjections and answer Senator Townley's question. A lot of people want to ask questions today and time is running out.

Senator WALSH —Yes, Mr President. The reason why it is different, of course, is that both the people who must service the debt and those who receive the debt servicing costs for a debt owed within the country are all within that country. It is a question of transfer of payments within the one society or the one economy, compared with servicing debts owed overseas-a haemorrhage or a leakage, if you like, of income and wealth from one country to another country. That is the difference.

Senator TOWNLEY —I ask a supplementary question. Does the Minister agree that the amount of interest now being paid is 65 per cent more than it was in the previous Government's last Budget?

Senator WALSH —I do not know whether that is true. However, I can say that it would be a great deal more still if the discredited former Treasurer had remained in government and had actually produced a Budget with a $10 billion deficit.