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Wednesday, 24 May 1989
Page: 2596

Senator MAGUIRE(4.46) —This afternoon we are debating a matter of urgency moved by Senator Stone on behalf of the Opposition which claims that the Australian economy has a fundamental lack of competitiveness and that there is an Australian balance of payments and debt crisis. In the motion Senator Stone calls for immediate action to deal with these problems. Of course we have a balance of payments problem in Australia. Nobody is pretending there is no such problem. The Government is not denying it, that is for sure. Of course we are concerned about the growth in Australia's external debt. The Government has taken action by way of a range of measures to deal with these problems that have been mentioned in the motion.

I oppose the motion which has been moved by Senator Stone. After all, there is nothing new about balance of payments problems in Australia-nothing new at all. Historically, Australia has always had balance of payments problems. Those problems have not just emerged under a Labor government in recent years. Australia has always had an overseas deficit except for a few years in the early post-war period. That deficit typically has been funded by a capital inflow because Australia is a developing country, a capital-scarce country.

Today I was reading a paper by perhaps Australia's greatest ever economist, Professor Trevor Swan, who recently passed away. In 1955, in a major article, Professor Swan diagnosed the balance of payments as the major constraint on growth in the Australian economy. He diagnosed it as the external constraint on economic growth in this country, the real constraint on expansion of our economy. That documentation was done in 1955, over 30 years ago, by Australia's greatest economist. It was a documentation of a balance of payments problem under a Liberal Government, not a Labor Government. This problem existed at the time under the Menzies Liberal Government.

There is nothing new at all about balance of payments problems in our nation. This motion is the biggest dollop of Opposition hypocrisy I have seen in the last several weeks in this Parliament. It is the biggest load of hypocrisy I have ever seen on economic questions in this place by this discredited Opposition, this disunited, disorganised rabble which claims to be Her Majesty's Opposition in this place.

Let us look at the Opposition's record on economic management when it was in government. Let us look at its record of destroying competitiveness in the Australian economy and bringing the Australian economy to its knees in 1982. Look at its record under Senator Stone, who was the first speaker in the debate, the person who initiated the debate. He was the architect of the economic policies of the previous coalition Government in Australia. Under that Government we had a massive wages blow-out, with huge double-digit increases in wage costs in Australia.

This morning I was looking at an economic report of the Parliamentary Library. In 1981-82 average weekly earnings grew by 14.6 per cent in this country under the coalition Government. Double-digit wage rises were followed by an increase of 11.4 per cent in 1982-83 under the coalition Government led by Mr Fraser and Mr Howard. Senator Stone was their chief economic adviser. These double-digit wage rises and double-digit cost increases for Australian industry made our industry less competitive overseas.

Look at the broad cost increases. Let us go beyond the wage rises that occurred under the Liberals. Look at the deflator for Australia's gross domestic product, the broadest inflation measure we can find. In 1981-82 there was an 11.6 per cent increase in costs in Australia, followed by 11.4 per cent in 1982-83. There was double-digit inflation under the Liberals. In fact, for the two financial years compounded, Australian costs rose by almost a quarter under the Liberal Government. Senator Stone, who will not cop the replies to his motion, has left the chamber again. When he was at the Treasury and pressing the economic buttons, costs rose by almost a quarter in two financial years-despite the avowed policy of the present Opposition, then in government, to fight inflation first. They were the avowed policies of the Opposition. Look at the record: Australian costs rose by almost a quarter in two financial years. That was the result.

Senator Stone has made great play today of the balance of payments problem. I have already put that into some historical perspective. The point I am making is that Australia has always had one. Senator Stone is now the Leader of the National Party in the Senate. So these points should be raised because, if he gets the chance again, presumably we will see the same policies put into operation. When Senator Stone was at the Treasury, Australia had a balance of payments deficit on current account of $9 billion in 1981-82. The reality was a deficit of $9 billion under the Liberals in their last full financial year in power. These things have to be kept in perspective. Senator Stone today glossed over the reality that economic variables must be seen in many cases in relative terms. They have to be related to the size of the economy.

Opposition senators interjecting-

Senator MAGUIRE —I can see that I am scoring the points here because of the disruption by the rabble on the other side of the chamber.

Senator Lewis —On a point of order: Senator Maguire says that he has scored a point. The truth is that he has told an untruth to the Senate. He said that there was a $9 billion deficit under the Fraser Government. That is not so at all. If he looks at the trade deficit of the Fraser Government in that year, he will acknowledge that it is not so.

The ACTING DEPUTY PRESIDENT (Senator Burns) —There is no point of order.

Senator MAGUIRE —We now have the Deputy Leader of the Opposition in this place-the man who went along to Mr Howard with a dagger in his hand and said that he had to go-not even knowing the facts of history. The facts are that in 1981-82, under the Fraser-Howard Liberal Government, the Australian balance of payments deficit on current account was $9 billion. It is in the historical record.

Senator Alston —You said $9.5 billion about a minute ago.

Senator MAGUIRE —I said $9 billion. That is the reality. Let us relate that to the size of the economy. It is all very well for the Liberals and the Nationals to run around throwing figures into the air. They have to be related to the size of the capacity of the economy to service things like that. The reality is that in 1981-82 that $9 billion deficit, which Senator Lewis was clearly ignorant of-and I wonder how long he is going to survive in his job if he does not know something like that-was on a gross domestic product, Australia's gross national income, if you like, of $150 billion. That deficit was 6 per cent of gross domestic product in 1981-82. That is the fact; that is the reality; and that is what happened under the Liberals. Those opposite have gone quiet all of a sudden because they know they were wrong.

The gross domestic product for 1988-89 is likely to be in the vicinity of $325 billion. Basically, the size of the economic cake in Australia this financial year will be about $325 billion. If we were to take that 6 per cent figure that applied under the Liberals and apply that to our gross domestic product this year, the equivalent deficit this year, to match the $9 billion deficit in 1981-82, would not be $14 billion or $17 billion but in fact $19.5 billion. In today's dollar values, the balance of payments on current account deficit in that year was $19.5 billion. That is the figure; that is the fact; and that is the reality. Senator Stone today was trying to pull figures out of the air. He was talking about a $17 billion figure. He said it might even get to $17 billion this financial year. Senator Stone was trying to think of the worst possible figure. He was trying to exaggerate it up to $17 billion. But if one relates it back to 1981-82, back to the sorts of figures that applied when the Opposition was in office--

Senator Alston —What do you think it will be?

Senator MAGUIRE —This is really hurting Opposition senators. Relating it back to when the Opposition was in office, it would be $19.5 billion. I was hoping that Senator Stone would be in here to hear this point because I know that he would understand that he had made a mistake. What he is saying is that our deficit proportionately is going to come in lower than the Opposition's figure. Based on the 1981-82 figures and applied to the cost levels of this financial year, the figure will be $19.5 billion. He said that it might get to $17 billion. That is as far as he could go. He was trying to exaggerate the figure up. That demonstrates the lack of understanding that we in this Parliament face from the other side of the chamber on economic matters. The Opposition is scraping the bottom of the barrel.

Opposition senators interjecting-

The ACTING DEPUTY PRESIDENT (Senator Burns) —Senator Maguire, will you please be seated. Honourable senators on the Opposition side of the chamber are entitled to interject properly, but speakers are entitled to be heard. People who are out there listening to the broadcast might also like to hear. Would you please be reasonable?

Senator MAGUIRE —Contrary to this motion, the Hawke Government has acted on the economic matters contained in this motion. It has contained the growth of costs in the Australian economy through the accord with the Australian Council of Trade Unions. It has implemented an incomes policy which has led to a managed economy. It has held down incomes growth despite very strong growth in the economy. That is an unusual result. When there is rapid growth in production and in economic output there tends to be rapid growth in wages. That has not been the case with the accord with the trade union movement.

I would now like to look at some of the data on the growth of costs in the Australian economy-provided not by the Prime Minister (Mr Hawke) or by the Treasurer (Mr Keating), and certainly not by me, but by the Department of the Treasury. It is a very interesting concept. This material has been provided by the independent Treasury. It looks at the index of unit labour costs in the non-farm part of the Australian economy from 1973 to 1983. In that period the average indexed number of costs was 107, but by 1987-88, under Labor, the cost level had not gone up but had gone down-and gone down significantly. In the last financial year, 1987-88, the index had fallen from a figure of 107, before we came into power, to 98.5. So there has been a terrific reduction in unit labour costs of production under this Government, something that Senator Stone, when he was at the Treasury, was never able to achieve. When we read that advice which has been put forward by the independent Treasury-not by the Prime Minister or the Treasurer-we see that it says that by 1987-88 there had been a 9 per cent reduction in unit labour costs compared with 1982-83. Of course, we know who was in government in 1982-83 and who was the architect of the economic policies of that Government. It was Senator Stone, who is not in the chamber to debate this matter. There has been this terrific reduction in unit labour costs. The Treasury Department concludes, as a result of its own calculations, that `the unwinding of this fundamental imbalance has contributed importantly to job growth in the last five years'. That is the result of the policies of this Government in effect, while the Opposition claims that there have to be immediate measures to deal with it.

I turn to broad cost measures in the economy. As I mentioned before, the broadest measure is the deflator for gross domestic product in the non-farm sector. In 1982-83, the last year that the Liberals were on the treasury benches, that deflator, that broad measure of inflation, rose by 11.6 per cent. There was double digit inflation in 1982-83 under the Liberals. In 1987-88, the last financial year, we did not have double digit inflation, we did not even have 9 per cent inflation, we had a rate of 7.5 per cent. Despite the carping of the two lawyers across the chamber, who have absolutely no grasp of economic matters, despite the protestations of the Deputy Leader of the Opposition (Senator Lewis)-who clearly was wrong, as he did not know that the Liberals had a $9 billion balance of payments current account deficit in 1981-82-there has been a 4 percentage point reduction in the broad-based indicator of inflation in the Australian community. They are some of the measures that have been put in place by this Labor Government. That is what we are doing to improve the economic fortunes of Australia. That is the reality, that is how we will boost the economy. Labor's policy on economic matters is responsible, unlike the Opposition's pie in the sky policies. They failed once before, seven years ago, and Australia cannot afford to try them again.