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Wednesday, 30 August 1989
Page: 599

Senator ARCHER —I ask a question of the Minister for Industry, Technology and Commerce? The Hughes report on Australian exports states:

The price of foreign exchange is the main policy determinant of the level of exports . . .

In view of the unsustainable level of our currency on a trade weighted index (TWI) basis, or as is demonstrated by the huge deficit between imports and exports, what measures in the Budget will work towards restoring our international competitiveness and our exporting capacity?

Senator BUTTON —I have to answer this question in much the same way as I did an earlier question today which relates more to the strategy of the Budget than particular measures. Of course, the strategy of the Budget is to continue the process of fiscal discipline for the time being, to continue present monetary policy with a view to reducing demand in the Australian economy and a range of measures which have been debated and discussed in the course of the Senate program since the Budget. Certainly Professor Hughes, in her review of the export market development grants scheme, touched on a number of issues which affect export propensity. She referred to a number of macro-economic issues of which the more fundamental ones, as I recall it, were monetary policy, the level of savings in the community and, of course, the issue to which Senator Archer refers, the level of the currency.

I do not know-I do not think anybody does-whether a particular Australian dollar rate can be described as the optimum rate in terms of export activity. Of course, the currency has depreciated by some 12 per cent since earlier this year, having been a year or two ago at a considerably lower level. Senator Archer couches his question in terms of the trade weighted index. Although the Australian dollar is generally measured against the United States dollar, except for a period in 1985-86, the currency has been pretty stable as against the trade weighted index.

Senator Crichton-Browne —Most of our contracts are written in United States dollars.

Senator BUTTON —I understand that, but Senator Archer knows what he is talking about. He asked his question in terms of the TWI and I am answering it.

Senator Crichton-Browne interjecting-

Senator BUTTON —Senator Crichton-Browne's learning is vicarious here. Senator Archer asked the question.

Senator Crichton-Browne —It is a very subjective judgment.

Senator BUTTON —I think the currency has been relatively stable in terms of the TWI. I think the discussion in the Hughes Review of Export Market Development Assistance on the export culture of this country is an interesting one and should be followed by other senators.

Senator ARCHER —I have a short supplementary question. In view of the fact that New Zealand is able to produce a trading surplus and has a currency value which is advantageous when trading with us and other countries in the world and intends to increase this, does it make it any easier for us to release the strings on our dollars a little bit to the point where we may be able to increase our trade, particularly our export trade, without running too much risk, as someone was bleating, to the unemployment question?

Senator BUTTON —It is important to remember that such successes, as the New Zealand economy has had, have been accompanied by enormous disruptions, distortions and difficulties for the New Zealand people.

Senator Alston —The OECD thinks it is good stuff.

Senator BUTTON —The Organisation for Economic Cooperation and Development commented on our economy this morning, and thought it was pretty good too.

Senator Alston —They think New Zealand is a lot better.

Senator BUTTON —I do not think the OECD has actually said that. The point is that I cannot speculate, on the basis of this question, as I said in my earlier answer, on what the appropriate dollar value would be. I do not think one can use the example of New Zealand very successfully here and say it is a success because this year it has a trade surplus and that is the be-all and end-all of the problem.