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Wednesday, 16 August 1989
Page: 142

Senator STONE —My question is addressed to the Leader of the Government in the Senate. I refer to the Treasurer's claim last night that `the full force of the Government's resolve' will be directed towards reducing the current account deficit. If this is the case, and in light of today's disastrous balance of payments deficit figure of $1.7 billion for July, why has the Government brought down a Budget which does absolutely nothing in either direct or indirect terms to ease the current account crisis? In the absence of any action by the Government to increase productivity and international competitiveness, is it not a fact that the Government's only real hope now of reducing the current account deficit is through economic recession?

Senator BUTTON —There are a number of points made in Senator Stone's question. The first one I would like to refer to is that the Government strategy over the last few months, quite apart from anything in the Budget-this has been a matter of comment and discussion in the Senate-has been to reduce levels of demand in the Australian economy.

Senator Stone —Very high interest rates.

Senator BUTTON —Yes, everybody knows that. There is no secret about that. That has been pursued for several months now and I must say that there are a number of signs now of slackening in demand in the Australian economy. Slackening of demand in the Australian economy will mean fewer imports and should mean a growth of net--

Senator Stone —That is not what you forecast.

Senator BUTTON —I know that but Senator Stone understands-it is no good his pretending he does not-the purpose of the strategy. It is to reduce imports and to produce a growth in net exports. It is very easy to come in here and telescope timescales. In the absence--

Opposition senators interjecting-

Senator BUTTON —Senator Lewis, have a look back over the past few years. If there is a reduction in demand in the Australian economy a lot of it flows through into exports. That is a fact, and if we look at what happened in 1985-86--

Senator MacGibbon —Do you mean imports?

Senator BUTTON —No, I said that flows through into exports. I know what I mean; I am quite clear about that. Let me explain for the benefit of Senator Lewis. Let me give him a simple example which he might understand. In the last two years Australian exports of steel have fallen right away. Why? It is because there has been an enormous increase in domestic demand for steel which BHP could not satisfy. Not only could BHP not satisfy the domestic demand for steel; it actually imported steel on occasions to satisfy that level of domestic demand. Now if you reduce the domestic demand, that frees up BHP production for export purposes and it also stops it importing steel into this country. That is a simple example which the honourable senator might understand, I hope he does, I put it in those terms in order that there might be some understanding of this issue raised in Senator Stone's question. Senator Stone then goes on to ask: In the absence of anything being done about productivity in this country-and he knows he could get a pimple on his tongue for that one; it is an issue we debated yesterday-what is the Government doing about these issues? First of all, there is no absence of things being done. Everything which is talked about by his Party in this context is about long term measures which will not solve today's current account problem and he well knows that. It is totally specious to try to telescope all these issues by taking one month's current account figure, asking what we are doing about productivity and suggesting we provide some solution.

Senator STONE —I have a supplementary question, Mr President. I have listened with the greatest goodwill to the Leader of the Government's attempted response to the question but I have to put it to him again: when he has got the level of demand depressed by the high interest rates, as he has fallen back on once again in his answer, when he has got the level of growth in the economy down to zero, or something approaching zero, by the end of this financial year-he makes the point that there is a difference through the year compared to the year as a whole-what is he going to do then? Is he going to let the economy run along flat, with unemployment continuing to rise? Or is he simply going to resort to the same stop-go policies which 10 years ago he was criticising his predecessors for?

Senator BUTTON —I always thought that a lot of people in this country suffer from the problem of addressing the issues of the 1960s and the 1970s and I did not think the honourable senator was one of them. I must say that it requires a far better mind than mine to understand the supplementary question which the honourable senator asked me. Why does he not have a look at the Budget figures? A 2 1/2 per cent growth rate is forecast for next year. That is something which the honourable senator rarely enjoyed during his period of occupancy at the Treasury. The honourable senator talks about employment. He talks about people becoming unemployed. That is something that he knows all about because that is precisely what he and the Fraser Government did in 1982 to try to rectify these problems. It is not what this Government has presided over and it is not what it will preside over because we have had consistent employment growth during our period of government.