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Wednesday, 13 November 1985
Page: 2090


Senator BROWNHILL(4.34) —I begin by making reference to remarks of previous speakers in this debate. Firstly, I refer to Senator Maguire, who quoted from an article written by Ross Gittins in today's Sydney Morning Herald. I would say that when he read the report of Senator Walsh's remarks he lost a bit of concentration and did not read on further because the article continued:

The inflation rate has begun rising again-

. . .

Our overseas trade deficit is . . . getting worse.

Our foreign debt . . . is very high.

Real interest rates . . . are the highest they've been for 50 years.

That is a record. The article continued.

If the figures can be believed, the money supply is growing at a remarkable rate.

I make the point in relation to Senator Maguire's comments because I do not think he read the full article. Also I wish to comment about Senator Aulich, who said that this debate was a waste of time. I think that his contribution to the debate definitely was a waste of time. I think he was talking too much of the past and not of the present, such as the problems associated with the high interest rates, or even of the future. He was looking back into the past. I wish only that he had listened to Senator Michael Baume's speech and paid attention to the way he led this debate, because I think he would have been able to learn a little and thus be much the wiser when the debate has finished. I think Senator Short had a great contribution to make to the debate too. If Senator Aulich had listened to Senator Michael Baume and Senator Short he may not have thought that the debate was such a waste of time.

The disastrous policies that this Labor Government is foisting on the Australian people, despite the fact that very clearly such policies are wrong, are of concern to all people in the community. Time will not allow me to cover all the areas I would like to cover, so I will contain my remarks to what the appallingly high interest rates we are suffering at the moment are doing to our economy. I think this debate is about high interest rates and the problems they are causing to our economy. Just who in the community is being affected by high interest rates? If we were to listen to the Prime Minister, Mr Hawke, or the so-called most respected Treasurer since Federation, one would be forgiven for thinking that high interest rates are hurting very few people. The truth of the matter is that high interest rates affect everyone. I am quite sure they affect even Senator Aulich.

At the personal investor level high interest rates affect the hopes and aspirations of the majority of Australians who desire to own their own homes. Too often talk of borrowing and high interest rates revolves around international money market considerations only and people think only of companies such as BHP and Coles. Of course, the reality is that high interest rates affect most of all the people in the community, especially the average Australian family. Interest rates on most housing loans are variable and a small interest rate increase soon becomes a major burden on the average weekly wage earner. These are the people whom Senator Aulich and I represent in our States. If such people cannot get a loan from a bank or a building society they have to turn to unscrupulous money lenders. Already the New South Wales Department of Consumer Affairs has issued warnings about such moves.

High interest rates also affect the price of purchases that the weekly wage earner wants to make, such as motor cars and furniture for a house. What happens is that if the decision to buy a new car or refrigerator or to move into a new home is not made the ramifications are felt right along the line. They are felt from the car sales yard to the white goods manufacturers, the real estate agent who did not make the sale, the family which did not get to sell its house to move into something better and so on.

At the business investor level high interest rates have exactly the same stagnating effects. They attack those who have already bought and those who would like to buy. High interest rates result in the business suffering a squeeze on profitability because it needs more money to pay the higher interest or prevent the business operator from moving into a new business or expanding. However, honourable senators opposite would not have much interest in expanding businesses or in people owning businesses of their own. That is the part of the economy that is being slugged. One has only to travel through the country towns at present to see just what is happening there. Shops are closing down all over the countryside. I am referring not just to small shops. Retail chains also are cutting back because their operations are not making enough for them to pay the wages or interest rates. In many cases fewer customers are spending less money.

Of course, what is happening in the rural sector is even worse. Here it is not a case of just one government policy crippling rural Australia; it is a veritable truck load of inappropriate, discriminatory and economically destructive measures. Possibly the two worst are the disastrous current account deficit and the cost of money. Almost daily newspapers, not only in the bush but also in the city, are running stories of farmers who after generations of successful farming are being forced off their farms. I think that is something about which the whole community should be worried. The National Farmer magazine estimates that upwards of 5,000 farmers will move out of agriculture this year. Why? Is it because they are poor managers or inept at farming? Maybe in a small percentage of cases they are poor managers, but Australian farmers are considered the most efficient in the world. Therefore, one has to look at the reasons.

In the past week my office has been doing a survey among stock and station agents and rural property experts of what is happening in the market-place. Perhaps honourable senators opposite do not get out of their offices to visit the rural community. My office found that in every case high interest rates were blamed for a drop in inquiry for properties both small and large. Unfortunately for farmers, that is not the only government policy with which they have to cope. They also have to cope with the tax reform package which has started to affect rural property sales. The effect of this iniquitous additional capital tax on the community has not really started to be felt yet. For young people trying to get into farming or others wanting to increase and expand their holdings, the combined effects of that tax and high interest rates is taking all the investment attraction out of agriculture. Sadly, it is not just a few farmers who are feeling the crunch of this Government's economic strategies. Established properties needing to be upgraded, expanded or maintained are in a problem state. Every farm management decision is being affected because the cost of money is too high and is unaffordable. Of course, the two recent wage decisions will just about finish off the rural community.


Senator Walsh —The public sector is a net lender.


Senator BROWNHILL —I will quote that in a minute for the benefit of Senator Walsh. The 2.6 per cent increase, which is retrospective to April, for the farm earner and the 3.8 per cent national wage case increase are two other nails that are going into the coffin. Do not forget that farmers are price takers; they are not price makers. If the cost of borrowing money to buy cattle which will finish up in the fat stock market is too high, the farmer cannot make a return after paying interest and he will not buy the stock. If the return from crops does not cover the cost of borrowing to plant them they will not get planted. This is not a myth. It is not some phoney example being dreamt up to scare the rural community; it is a fact. It is happening right around the country now. It has already happened in Western Australia, where mortgagee sales are almost a daily occurrence. It is happening in Queensland, where sugar cane farmers are caught with falling prices for their product and soaring costs of finance.

The cost to farmers of loans from the Primary Industry Bank of Australia Ltd has gone from 12 per cent in 1979 to 19 per cent for loans of over $100,000. Trading bank interest rates have moved from 11.25 per cent in 1979 to 17.75 per cent in August 1985 for loans of over $100,000. The advice I get from the bank managers is that the rate today is 19.5 per cent but it is expected to increase in the next few days. For loans of under $100,000 the rate has gone up from 10 per cent in 1979 to 16.25 per cent in 1985. With all these sorts of increases how can anyone, be it a farmer, a small business person, a factory owner or a home buyer, manage? No wonder today's newspapers are saying that we have a crisis of confidence. What is really frightening is that this Government does not even realise what is happening. Let me quote a few comments made by members of the Australian Labor Party. The Minister for Primary Industry is reported in the Bulletin to have said:

. . . contrary to common belief, the rural sector was a net lender, that a large proportion of the farm sector has little debt and that agriculture was advantaged by high interest rates.

I would like honourable senators opposite to go out and tell the rural community that. It is a pity that Minister Kerin does not talk more often with his own Bureau of Agricultural Economics, which only this week announced a further slump of 26 per cent in rural profitability. Just in case he is wrong, the article continued:

While the average man in the bush feels he is being squeezed out of existence, Kerin infers that structural changes are ultimately good.

I wonder whether that statement would be very well received by people in the business community out in the country. I wonder how well those sentiments would be received by the 100,000 persons who protested early in July. I quote my very good friend on the opposite side of the chamber, Senator Cooney, who said only last week that the dollar had sunk and then tried to dismiss it by saying:

. . . it is but one element in a whole series of indicators about the economy.

Of course Senator Cooney is right. The collapse of the dollar is only one element. The others are high interest rates, a record current account deficit and a record balance of payments deficit. Senator Cooney, who is a learned barrister, also went on to say the other day:

If anything is going forward too rapidly, it needs the restraint of interest rates. If that was not so the economy would overheat.

What has Labor said about interest rates? From Australia's so-called most respected Treasurer since Federation we had the gem:

I stand by the remark I made in the election campaign that I think there is an interest rate step fall ahead . . . through 1985.

It is getting very close to the end of 1985. The Prime Minister has made a number of comments this year about interest rates. It is interesting to see how much he has changed his blind faith in his Treasurer (Mr Keating). On 20 November 1984 be said:

At present the outlook for interest rates is as bright as it has been for more than a decade.

Later he said:

Because inflation is coming down . . . interest rates will come down too.

In April this year a note of doubt started to creep in. He said:

We can expect through the period of this year that there will be, I would expect, a lowering of the interest rate . . .

By November 1985 the Prime Minister was saying:

High interest rates will have to be lived with for a time.

A report which I have just received from Australian Associated Press indicates that the Prime Minister said today that he admitted that his and his so-called most respected Treasurer's prediction that interest rates would fall had `not turned out precisely as we said'. What has the media said about it? In today's Australian Des Keegan said:

Nothing short of a major credit squeeze will plug our annual current account deficit and head off a $100 billion foreign debt.

Michael Stutchbury said in the Australian Financial Review:

The Hawke Government's much vaunted clean float of the $A is turning into a nightmare . . .

I could go on quoting from innumerable newspapers from all over the place. The most classic example, which appeared in the Australian Financial Review on Thursday, 7 November, stated-


Senator Aulich —That is not the Coonabarabran Times is it?


Senator BROWNHILL —The honourable senator has spoken so much in the past that I think we had better keep up with him. The article stated:

If our tunnel vision, ``she'll be apples'' conservatism continues to prevail, then we will only have ourselves to blame if we continue to fall further and further behind our trading partners and our dollar ends up as valuable as Monopoly money. That is the real message of the headlines about our dollar.

I ask the Government to take a little bit of notice of what is happening to the Australian economy with these high interest rates and the problems they are causing for the small people as well as the bigger people in the community. If it does not do so this great country of ours will not be a good place for anyone to live in.