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Monday, 5 March 2001
Page: 24898

Dr SOUTHCOTT (1:05 PM) —Since the Standing Committee on Economics, Finance and Public Administration met in Wagga Wagga in December, the United States Federal Reserve cut interest rates by one per cent in January 2001 and our own Reserve Bank cut interest rates by 50 basis points. So the outlook for the world economy—although it was predicted in December—has changed somewhat. The economics committee provides important parliamentary oversight of the Reserve Bank of Australia. All countries have different central banking arrangements and each one believes that its is the best. The Australian Reserve Bank takes decisions independent of the government and aims to keep inflation within two to three per cent in the medium term. In the four years that I have been on the committee, it has largely kept inflation within that band. In the period of the review, the economy grew at 4.7 per cent over 1990-2000. The composition of growth has changed, with weak house building and very strong exports. There has been weakness in the building industry in other countries—New Zealand and Canada—with the introduction of a GST, due to strong demand prior to its introduction. We should also remember that housing is only five per cent of GDP while exports make up 20 per cent of GDP.

Australia benefits enormously from world trade. One in five Australian jobs is now linked to exports. A recent survey showed that Australian exporters pay their employees $14,700 more. In the area of foreign investment, for every dollar spent in Australia 96c stays in Australia. The Reserve Bank governor, when referring to the low Australian dollar, submitted to CEDA and said in evidence to the committee that there were three factors to consider: firstly, that there is a strong US dollar; secondly, that exchange rates tend to follow momentum; and, thirdly, that some people were influenced by this new economy/old economy distinction. I notice that the Reserve Bank governor said, and I agree with him, that the distinction there is superficial and unfair. If you look at Australia's record in IT and communications, we are among the top handful of countries by any measure you choose to look at. For example, an OECD survey shows, taking IT spending as a share of GDP and the per capita ownership of computers, that we are second in the world. The Australian IT and communications market is larger than that of the 10 ASEAN countries combined. We have the largest number of Internet service providers per capita in the Asia-Pacific. Sixty per cent of our businesses are online. We have had a higher rate of productivity growth over the last five years than have the G7 countries. Turning to specific exports, last year we exported something like $4.2 billion in automotive exports. We have also exported $1.5 billion in wine. These are examples of industries which are actually taking on competition and exporting and thereby creating Australian jobs. Australian wine is now poised to overtake France as the largest exporter into the United Kingdom.

Previous speakers mentioned fiscal policy. The Reserve Bank governor commented that the current fiscal policy stance is not imposing a contractionary influence on the economy at all; it is not leading to any rises in existing rates, and what we have seen is an interest rate fall. He also talked about income tax cuts. He said they were helping to keep the economy on a growth path. This is an important year: we are facing an election. We have globophobe parties such as the Australian Democrats and Pauline Hanson's One Nation who are against foreign investment. If they had their way, we would not see Australia exporting in the way we are. Our diversity, our use of English, our common law tradition, our flexible labour markets, our corporate law governance and our sophisticated IT and communications all give Australia a comparative advantage when competing in the world economy in the 21st century.