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Tuesday, 15 October 1985
Page: 1209

Senator PARER —Does the Minister representing the Treasurer agree that yesterday's disturbing balance of trade figures underline the need for a continuing tight money policy and high interest rates to maintain support for the Australian dollar? Does he further agree that every home buyer is paying the price for this tight money policy through mortgage increases, such as the $60 a month increase in repayments on a $40,000 bank loan since the start of the year? How much longer will home buyers have to wait for the lower interest rates promised by the Prime Minister and the Treasurer, and more recently by the Minister for Housing and Construction?

Senator WALSH —If the balance of payments figures released yesterday had been unexpected the possibilities which Senator Parer foresees could well materialise. They were not, however, unexpected by the Government; nor should they have been unexpected by anybody who had taken the trouble to read the 1985-86 Budget Papers. It was forecast in the Budget Papers that the current account deficit would increase somewhat before the full effect of the devaluation which took place earlier this year was felt but that it would then turn around and decline.

It is true that interest rates are high by historical Australian standards; indeed, higher than they may have been at any time prior to the mid to late 1970s. They are, however, substantially lower than they were in the peak mid-1982 period under the previous Government when Mr Howard was Treasurer when, for example, 90-day commercial bills required an interest rate payment of 22 per cent in April 1982. It is also correct that--

Senator Short —That is not true in real terms.

Senator WALSH —Somebody said something about real terms. When the Liberal Party talks about real terms it is drawing attention to the extraordinarily high levels of inflation over which Mr Howard also presided.

The PRESIDENT —Order! I ask the Minister to ignore the interjection and get on to answering Senator Parer.

Senator WALSH —Certainly, Mr President. Nobody in this Government I can think of has attempted to hide the fact that Australia has a current account deficit problem. The devaluation of the dollar was an overdue market response to that fact, but it ought to be noted that, although the current account deficit as a proportion of gross domestic product was high in the last financial year and is expected to fall only marginally in this financial year, it is nowhere near as high as the record level in 1981-82 when Mr Howard was Treasurer, when the current account deficit as a proportion of GDP was 6 per cent. That was the extent of our trade, goods and services deficit with the rest of the world, a figure considerably higher than the 4.9 per cent recorded in 1984-85 or the 4.6 per cent anticipated for 1985-86.

Senator PARER —I ask a supplementary question. Does the Minister have a forecast figure for the trade deficit? He said that from reading the Budget figures it could be anticipated at this stage.

Senator WALSH —I could work it out if I could remember what the dollar GDP forecast is, but it is 4.6 per cent of whatever that is.