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Tuesday, 23 May 1989
Page: 2464

Senator STONE (Leader of the National Party of Australia)(4.29) —We are debating the Appropriation (Parliamentary Departments) Bill (No. 2) 1988-89 cognately with five other Bills-the Appropriation Bill (No. 3) 1988-89, the Appropriation Bill (No. 4) 1988-89, the Supply (Parliamentary Departments) Bill 1989-90, the Supply Bill (No. 1) 1989-90 and the Supply Bill (No. 2) 1989-90. At the outset I wish to foreshadow, in respect of Appropriation Bill (No. 3), an amendment to the second reading motion. The amendment, which is about to be circulated, reads as follows:

At end of motion add:

``, but the Senate condemns the Government for its failure to pursue policies which will address the twin evils of a dangerous level of foreign debt and declining living standards, leading to a growing loss of control over the future of Australia, and notes:

(a) that in the first ten months of 1988-89 Australia's deficit on the current account of our balance of payments has already reached $14,000 million, compared with the Treasurer's budget forecast of $9,500 million for the year as a whole, and that many forecasters are now predicting a total 1988-89 deficit as high as $17,000 million;

(b) that these external deficits can only be financed either through further borrowings by Australians from foreigners, or by further sales of Australian land or other assets to foreign owners and there is growing public unease at the speed and extent of the continuing growth in foreign ownership of Australian land and other assets;

(c) that at end-December 1988 Australians' net foreign debt was already $95.5 billion, and that since then that figure will have been significantly increased both by the succession of monthly external deficits and by the now significant fall in the value of our dollar;

(d) that the consumer price index (CPI) has risen by 6.9 per cent during the twelve months ended in the recent March quarter, that this inflation rate is now expected to increase further in the current June quarter, and that last week the Treasury forecast that during the twelve months ended in the March quarter next year the CPI will rise by a further 6.9 per cent;

(e) that despite the present extremely high level of interest rates, the Treasurer has now stated at his media conference on 16 May 1989 that if necessary he will raise interest rates further;

(f) the sharp cuts imposed by the Government at last week's Premiers Conference and Loans Council meetings in the funds available to the States in 1989-90, and that the Government should be condemned for its expressed intention to refrain from applying the same budgetary medicine to the spending excesses of its own Ministers in Canberra; and

(g) the utter failure of the so-called Accord between the Labor Party and the Australian Council of Trade Unions to promote the productivity increases which will provide real wage increases, with consequences for living standards, our international competitiveness and the value of our dollar which are plainly evident in the financial markets''.

The Appropriation Bills before the chamber are to appropriate moneys to meet essential and unavoidable expenditures which are additional to those authorised by the Parliament in the Appropriation Bills for 1988-89, now Appropriation Acts Nos 1 and 2, and the Appropriation (Parliamentary Departments) Act which were passed by this Parliament in the latter part of last year. These additional appropriations are required to meet commitments that have been approved by the Government since the Budget, and which were therefore not taken into account in the drawing up of the original Appropriation Bills, now the Appropriation Acts, as well as additional requirements of an ongoing nature. The principal factors underlying those requirements include certain-no doubt believed by the Government to be unavoid- able-cost and price increases and other parameter changes which have occurred since the Budget was prepared and since therefore the original Appropriation Bills, now Acts, were drawn up.

Of the additional appropriations in the three additional estimates Bills which we have before us and which total $683.9m, some $5.7m is sought in the second Appropriation (Parliamentary Departments) Bill which is presently before us; some $609.9m is sought in Appropriation Bill (No. 3); and some $68.4m is sought in Appropriation Bill (No. 4). It should be noted in passing that these amounts are offset in part by savings in the appropriations which are already made by Appropriation Acts Nos 1 and 2 and by the Appropriation (Parliamentary Departments) Act. Those savings are estimated by the Government to amount to $425.7m. So the appropriations now sought represent a net increase of $217.8m in expenditures to be financed from annual appropriations.

As I mentioned at the outset, we are in addition debating cognately the Supply Bills. These three Bills, Supply Bills Nos 1 and 2 and the Supply (Parliamentary Departments) Bill 1989-90, seek interim appropriations for the ongoing services of the Government and the Parliament during the period from 1 July 1989-the beginning of the next financial year-to 30 November 1989. By that latter date it is expected that the equivalent Appropriation Bills, which will form part of the 1989-90 Budget, will have been enacted by the Government.

I will just very quickly mention the significant aspects of those three Bills. Supply Bill (No. 1) seeks appropriations which total some $9,948m for the ordinary annual services of the Government. That is about 14.5 per cent greater than the equivalent amounts which were provided in the corresponding Supply Act (No. 1) at this time last year. Supply Bill (No. 2) seeks appropriations totalling some $3,013m, that being for expenditure on capital works and services, payments to or for the States, the Northern Territory and the Australian Capital Territory and certain other specified services, again for the same period from 1 July to 30 November of this year. That amount is about 46 per cent more than that which was provided for in the corresponding Supply Act (No. 2) 1988-89. In fairness to the Government I should say that a significant part of that apparently very sharply increased provision reflects revised funding arrangements for hospital grants in the portfolio of community services and health, which were funded last year under standing legislation-under special appropriations. Finally, the Supply (Parliamentary Departments) Bill 1989-90 seeks interim appropriations for the ongoing requirements of the parliamentary departments during the five-month period from July to November of this year totalling some $46.3m, which is 9.7 per cent greater than the amount provided for in the equivalent supply Bill last year.

The amendment which I have foreshadowed to be moved to the second reading motions of Appropriation Bills Nos 3 and 4 1988-89 condemns the Government for its failure to pursue policies which will address the twin evils of dangerous levels of foreign debt and declining living standards, both of which are leading to a growing loss of control over this country's future. I, as I am sure do most other honourable senators, move around this country speaking to meetings of one kind or another. I am continually struck, as I am sure you are, Madam Acting Deputy President, by the extent to which people in those assemblies get up in Question Time and express their concern and dismay at the manner in which they feel the future of this country is being taken out of their hands and out of the hands of Australians generally. They are bewildered, confused, concerned and increasingly resentful of the policies of this Government in Canberra which are leading to and have led to that situation developing. It is bewildering in one sense to know where to start in addressing that situation, because wherever one looks one finds evidence for the proposition which is put to one at meetings of that kind by ordinary Australian citizens.

Let us take a very recent example-I think statistically it is the most recent example-of the balance of payments figure for April which was published on Tuesday of last week-just a week ago today. As honourable senators will recall, that figure for April alone was a deficit on the current account of the balance of payments of $1,191m. That brought the deficit for the first 10 months of this financial year, as noted in the foreshadowed amendment, to just over $14 billion. That compares with the original estimated by the Treasurer (Mr Keating) at Budget time of a deficit figure of $9.5 billion for the year as a whole. It does not require much understanding of these matters to see that we will be very fortunate indeed if we run out this financial year as a whole with a deficit figure of much less than $17,000m-$17 billion, approaching almost double the Treasurer's original estimate.

What can be the reason for this extraordinary error on the Treasurer's part? Can it be that during the time since the Budget was brought down our export prices have slumped and world markets have gone into decline, and that because of that the forecasts made by the Treasurer have naturally not stood up to examination? So far from that being the case, it is precisely the reverse. In fact, the Treasurer assumed in his Budget Speech that there would be a further improvement this year-in addition to the significant one that occurred last financial year-in Australia's international terms of trade. In fact, not only has that occurred, but the improvement has been significantly greater than the Treasurer assumed. We have had an improvement in our terms of trade this year in the order of 15 per cent. The Treasurer assumed that it would be 9 per cent. That should have improved our balance of payments and reduced the Treasurer's forecast of $9.5 billion to some lesser figure-to something in the order of perhaps $7.5 billion to $8 billion or thereabouts. Instead, we now look as though we shall be running out the year with a figure of about $17,000m.

I point out to the Senate that in May and June of last financial year Australia recorded a deficit of just under $2.4 billion. If we add that to the deficit for the first 10 months of this year, we finish with a deficit of almost $16.5 billion. But to achieve that we have to have figures no worse in May and June this year than we had in May and June last year. Certainly, that has not been our experience in the first 10 months of this year-quite the contrary. As the Opposition's foreshadowed amendment says `many forecasters are now predicting a total 1988/89 deficit as high as $17,000m'.

Indeed, let me turn to the view of Mr Nobby Clark, the Chief Executive of the National Australia Bank, who is not a negligible figure, despite the public ridiculing of him in which no less a figure than the Treasurer of the Commonwealth of Australia indulged himself on the Sunday television program last Sunday. Mr Nobby Clark simply revealed to the viewing public that his own bank at least is estimating or forecasting a deficit in May alone which could approach $2 billion. I am sure that Mr Clark would not want to be held to that particular forecast, any more than the Treasurer obviously would want to be held to his Budget forecast of last August. But the Treasurer indulged himself in this splenetic attack on Mr Clark:

. . . the best thing Nobby could do would be to give his shareholders a break and get back behind his desk . . . And do a bit of banking, instead of trying to be an economist and a media personality.

That was what the Treasurer of the Commonwealth of Australia had to say about the Chief Executive of one of our major banks. I hold no personal brief for Mr Clark, but for the Treasurer to let himself go in that way is to lower the standard of public debate. The Treasurer ought to be encouraging people like Mr Clark to get out there and be willing to subject themselves to public debate on a television program such as Sunday or any of the other major current affairs programs. He should be encouraging such people instead of taking a club out of the cupboard and, merely because somebody happens to disagree with him about something, battering that person around the head and frightening him off. I think that that is a sign-not the only sign, I might say-of a Treasurer who is losing his grip. He is flailing around trying to hit any head that is raised above the parapet and directs a shot or two in his direction.

Senator McKiernan —The Treasurer has got in a few shots in the last few days.

Senator STONE —I must say in response that the shots that the Treasurer has been subjected to in the last few days have left him a very wounded Treasurer indeed.

As the Opposition amendment goes on to say, the fact is that these enormous deficits on our balance of payments can be financed only-and I underline the world `only'; there is no other way of financing them-through further borrowings by Australians from foreigners or by further sales of Australian land or other assets to foreign owners. Without in any way wishing to contribute to some kind of xenophobic debate about Australia being taken over by foreigners and things of that kind, nevertheless I share to a degree the concern being increasingly expressed by more and more Australians about the fact that that is happening. It is one thing to say that we welcome foreign capital in this country to help us to build a bigger, better and faster developing Australia, which used always to be said by coalition governments in the past and which has been said by the present Government, but it is quite another thing to say that we are prepared to go on living beyond our national means in this way-living beyond our productive capacity to finance by our own endeavours and basically doing so by either borrowing or by selling off Australia. That is a quite different process. While I would be the first to agree that it is not possible to define precisely where one process stops and the other beings, nevertheless the fact is that they are different. If the Government cannot recognise the difference between them, I warn it that the Australian people are beginning to do so.

Senator Tate —Would not the Foreign Investment Review Board help to discern the difference?

Senator STONE —We will have more to say about that in due course, I suspect, and I thank Senator Tate for his interjection. In general terms, these deficits can only be financed in that way because, to take the more favourable theory, after approximately six years of this Government, until the end of the last calendar year our net debt to foreigners grew from about $22 billion or $23 billion to $95.5 billion. The Treasurer finally seems to have understood that we have a problem. In the media conference he gave last Tuesday afternoon, following the release of the balance of payments statistics which I referred to earlier, he stated:

. . . the problem is that even off this year's current account we'll be looking at something like $2 billion worth of interest payments-

I think he really meant interest payments and other forms of property income-

next year just off this year's alone.

He went on to say:

. . . so the trade accounts have got to run $2 billion faster just to stand still.

The Treasurer became tied up in that quotation. I have quoted him exactly; his syntax was a bit confused. What he really meant-he did not spell it out-was that if we ran a deficit this year of $16 to $17 billion and if we calculate an interest rate on that of only 12 per cent-one would probably get less than that on the non-debt financing component-clearly, income payments to foreigners in the next financial year would have to be about $2 billion higher than they are this year. As the Treasurer also pointed out last Tuesday at a later stage of his media conference, in the first 10 months of this year those income payments to foreigners-to foreign creditors and to foreign owners of Australian assets-have already exceeded $10 billion, which is roughly $1 billion a month. On that basis, those payments will be roughly $12 billion for this financial year, so the Treasurer is saying that next year that figure will be $14 billion; that Australia has to keep running faster and faster on the trade account to pay interest and service the property that it is selling to foreigners, just to stay in the same place.

Mr Acting Deputy President, I do not know whether you have ever had the interesting experience of trying to chase one of your children down an escalator. It can be done if one is in good wind, and is young, hale and hearty. But if one keeps doing it for too long and runs out of puff, after a while one finds that one is not making any progress, the escalator goes up just as fast as one goes down. I can see Senator McKiernan has obviously had a similar experience; we all know the problem. The point I am making is that that is the situation in which Australians collectively find themselves, or almost find themselves, today. I repeat: our international terms of trade, on last reports have never been better since the March quarter of 1977. In this year alone our international terms of trade have improved by almost 15 per cent. What if we get a slowdown-not a recession, but a slowdown-in the world economy?

Senator Boswell —It is happening now. Wool is going down.

Senator STONE —As Senator Boswell quite rightly points out, it is happening now. The Treasurer, at another point in his remarks, seemed even to be conceding that that might be the case. I may not be able to find the precise quote, but at one point he was asked about the present situation of commodity prices and he agreed that commodity prices seemed to have peaked. He expressed the hope that they might plateau for a while longer. I hope he is right.

This Government has been dicing with financial death, in this sense, for so long now that it has forgotten that that is what it is doing. This year we will finish with a recorded deficit of $17 billion. The additional income payments and interest payments next year alone would raise that to $19 billion, other things being equal. If, in addition, we have a fall back in our terms of trade, we could be looking-we could be; I am not making this prediction-in the next financial year at a prospective deficit of $25 billion. That is not a fanciful figure. The only way in which that would be significantly reduced would be if this country were to fall into the kind of recession for which it is undoubtedly heading under the policies of this Government. This fact was very well recognised by Mr Michael Stutchbury, a journalist with whom I do not always agree. Mr Stutchbury and Mr Tom Dusevic wrote an article in the Australian Financial Review of last Friday entitled `Keating flinches as debt trap bites'. They referred to the most recent report by the State Bank of Victoria, which showed that that bank's leading index of economic activity fell in May for the sixth consecutive month, suggesting that the economy would decelerate in the second half of this year. They concluded by saying:

If this is correct, the foreign-debt trap is forcing the Government to hit the economy with high interest rates when it is about to turn down, anyway.

That is the situation we now have in this country. Mr Keating is driving us inexorably towards a recession, not necessarily because he understands that that is now the only way in which he can reduce that enormous balance of payments deficit-given his Government's policies and in particular its failure to handle the problem of wages policy-but simply because he has run out of options. He has run away from real policies throughout the life of the Government since the last election and certainly since the last Budget. He has resorted to higher and higher interest rates which he told us, only last month, would not rise any higher. However, this month, at the same press conference I referred to earlier, he told us he was prepared to see interest rates increase further if necessary and to tighten further all the other arms of government.

Of course, we saw the first evidence of that other tightening in the Premiers Conference and Loan Council meeting here last Thursday, when the State governments were sent packing with a cut of $550m in their financial assistance grants and a cut of $1 billion in their global borrowing limits. The Commonwealth accepted a cut of $1,150m in its semi-governmental borrowing limits, although that last figure was somewhat cosmetic. The States have been significantly affected. We will now see whether the Commonwealth will take the same medicine in its own Budget.

The ACTING DEPUTY PRESIDENT (Senator Crichton-Browne) —Order! The honourable senator's time has expired.