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Thursday, 26 February 1987
Page: 879

Dr HARRY EDWARDS(10.50) —As part of an answer to a question from the right honourable member for New England (Mr Sinclair) last week about Australia's vast and crippling overseas debt, a gross $101.4 billion last September and rising every day or every hour or every minute, the Prime Minister (Mr Hawke) said that of the net overseas debt of $80 billion `a mere $8 billion' is Commonwealth Government debt and the rest is private debt largely. Since that day I have been endeavouring to get the call at Question Time to ask the Prime Minister- so what?-what significance does he seek to attach to the point that the Commonwealth overseas debt is-I quote him again-a mere $8 billion with the balance, non-official, mainly private debt?

I can only presume that he would like to convey the perception that it is somehow not his Government but rather those greedy private borrowers who are the culprits in all this and are responsible for our huge, crippling overseas debt. That is absolutely a wrong perception. The primary focus of attention in all this, as we have all come to know, is the yawning gap, the massive deficit situation, in the balance of payments on current account.

Mr Beale —Is that how the debt arises?

Dr HARRY EDWARDS —That is how the debt arises, indeed. It comes from the vast excess of what we have to pay for imports plus the vast payment for interest overseas, on the one side, over what we earn from exports, et cetera. The deficit was, in 1983-84, $7.2 billion; in 1984-85, $10.8 billion; in 1985-86, $13.7 billion. It is on course this year, 1986-87, for almost $14 billion again.

This external deficit situation is largely the result of the Government's policies of, firstly, the profligate overspending of the Hawke Government reflected in its vast Budget deficits and this `spilling over', as it inevitably does, as deficit in the balance of payments and, secondly, the effects of maintaining standards of living of the Australian people generally via, until recently, indexed money wage increases where the nation could not afford this. Both these factors result in this nation living beyond its means with the situation exacerbated-I do not put it higher than that-by the adverse change in the terms of trade.

The right picture over this period is that, as a result of Government policy largely, there has resulted this sustained external deficit situation which has to be paid for somehow-namely, by overseas borrowing. I come back to what the Prime Minister said and put to the House: What significance is it whether the necessary overseas borrowing is done directly by the Commonwealth Government or with the domestic Australian loan market crowded out just because of the Government's excessive domestic borrowing, or whether the necessary overseas borrowing is done by someone else, private persons or corporations?

Mr Beale —If the private sector borrows it, it may not spend it on consumption.

Dr HARRY EDWARDS —That is just the effect of all this; in effect the nation is spending on consumption and not on investment. In this whole context, if others did not borrow, say for a takeover bid in this country, the Government would have to or would have to borrow much more than the `mere $8 billion' to which I have referred, or it would have had to use up reserves or further depreciate the Australian dollar. Whoever actually does the overseas borrowing, the Government, whose policies have largely brought on the yawning balance of payments deficit, is in that way responsible. Even more, it must accept responsibility for that part of the growth in the debt-in its very large proportion-due to, as the Prime Minister put it, the devaluation effect of the depreciation of the Australian dollar the way, say, with a 20 per cent depreciation a $50 billion debt becomes $60 billion overnight. The Treasurer (Mr Keating) has laid claim to this responsibility in claiming, as he is fond of doing, that the depreciation of the Australian dollar has been a matter of `purposeful policy'. Only he, perhaps, would believe that.