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Tuesday, 9 May 1989
Page: 2048

Senator STONE —If I may bring the Senate back to serious matters, I address my question to the Minister representing the Treasurer. I preface it by referring to the mounting concern among Australians about the sharply rising level of our foreign debt and also the growing concern about the large and rising level of foreign ownership of Australian assets including, but not only, land. I ask the Minister: Firstly, is it a fact that both these developments result from the need to finance the continuing massive deficits on the balance of payments which, for six years now, Australia has incurred under this Government's policies? Secondly, is it also a fact that the magnitude of our foreign debt and indeed the Australian dollar cost of paying interest on it will be increased even further by any fall which there may be in the value of the Australian dollar? Lastly, what is the Government doing even to halt, let alone reverse, the growth in the level of our debts to foreigners and/or the process whereby Australian land and other assets are continuing to fall into the hands of foreigners, or does the Government simply not care?

Senator WALSH —Unlike Senator Stone, I regard leadership changes in the Opposition as quite serious matters. I do not think they are frivolous at all, although I suppose anybody who has been watching the attempt by the Opposition to turn such matters into a comedy over the last few years could be forgiven for believing so. The foreign debt, by definition, is the accumulated current account deficits, net of any current account surplus-and they have not happened too often in Australia's history. Off the top of my head I can think of only one year when we had a current account surplus, but there may have been others.

As Senator Stone knows very well, and as anybody else who bothers to listen to what I say in Question Time or other public fora will know, I certainly regard the current account deficit as a serious matter. Senator Stone, however, seeks to put all the blame clearly on the present Government. The root causes of it, as Senator Stone knows very well, go back at least several decades to when the structural inefficiency of the Australian economy was being concreted by John McEwen and Senator Stone's other National Party predecessors with, of course, the supine acceptance of the majority Liberal Party in coalition governments of the day.

In 1982-83, the then Government managed to run up a current account deficit in excess of 4 per cent of gross domestic product in the middle of the deepest depression that we had seen for 50 years. It is clearly correct also that the current account deficit in this year will also be greater than 4 per cent of gross domestic product-and it is the proportion of gross domestic product (GDP) which is the more valid measure of a debt problem over a period of time, of course, than the absolute amount of the debt. The 4 per cent plus of GDP which this year's current account deficit will equal is incurred at a time of the biggest investment boom that we have ever recorded, and, while that is not the only factor, it is very clearly the major factor in increasing the current account deficit of the Budget forecast levels. It is relatively easy to incur a fairly big current account deficit when one is having an investment boom-the biggest investment boom on record, I believe-but it is pretty difficult to incur a current account deficit of that size when one is having the biggest recession for 50 years. But that is what the previous Government managed to achieve.

In regard to foreign ownership of land, I am surprised that Senator Stone has moved so far from, I would say, his intellectual integrity and rigour of his Treasury days. That statement does not mean that I have often agreed with a lot of the conclusions that he reached, because he was very dogmatic and had a very certain view of the world. But I am amazed and disappointed that he has moved so far from his attitude of rigour as Secretary to the Treasury towards the cheap populism of the National Party of Australia that he now represents.

Senator STONE —Mr President, I ask a supplementary question. I ask the Minister whether he will not agree that his initial response to my question was in error when he said that the level of net foreign debt represented the accumulation of balance of payments deficits and that, presumably, what he meant to say was that the net level of foreign debt plus the net level of foreign ownership represented the accumulation of balance of payments deficits. Having got that point established-and I hope the Minister will agree with the correction-could we also get it clear whether the Minister agrees that, if he is in fact comparing the policies of the present Government with those of its predecessor, we are looking at a situation in which foreign debt has risen from something like $22 billion when this Government took office to $95 billion at the end of last December? I am talking in net terms, of course. If he wants to have those figures in terms of percentages of GDP, to which I think he also referred, will he also agree that the figures also represent a rise from something like 10 per cent of GDP to something more than 30 per cent of GDP? Finally, will the Minister respond to the final part of my question, which was: What is the Government doing to stop the headlong growth in both the rate of our foreign debt and the rate of growth of foreign ownership of Australia?

Senator WALSH —I do not want to get engaged in pedantry about jargon, but I think Senator Stone quoted me as allegedly having said that the foreign debt, by definition, was the accumulated balance of payments deficits. But I do not think I said that. I may have done. If I said `balance of payments deficits' I was certainly wrong, because, the balance of payments, as one of the honourable senator's former deputy secretaries once pointed out to Senator Messner at a Senate Estimates committee hearing, is always, by definition, in balance. If I did say `balance of payments' I should have said `the accumulated current account deficits'.

I think that Senator Stone then went on to refer to accumulated balance of payments deficits, or current account deficits-I am not sure which one it was that he used-plus foreign ownership. That is not counted in foreign debt. Equity in Australia owned by foreigners is not counted as part of our foreign debt. The honourable senator knows that very well. But Senator Stone did point, of course, to another important variable which has emerged in the last few years, and that is that the amount of equity investment in other countries undertaken by Australians and Australian companies has grown enormously. I have forgotten the precise figures but particularly around 1986-87 there was a huge increase in the ownership of foreign assets by Australians. Had that not taken place one would have expected the current account deficit, and therefore what is recorded as Australia's debt, to have reduced commensurately. Having said all that, I do not pretend, and I never have pretended, that I do not see our foreign debt and our continuing current account deficit as very serious problems.