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Wednesday, 30 August 1989
Page: 619

Senator MICHAEL BAUME(4.35) —The concluding remarks made by the Government senator who has just resumed his seat demonstrate the lack of concern the Government has about the issues in this debate. This kind of personal nonsense across the chamber is taking place during a debate on a matter of immense significance. The matter presented for discussion by the Opposition deals with the further blow to Australia's standing in the world arising from the further downgrading of our international credit rating by Moody's Investors Service Inc.

There can be very few more serious matters before this chamber at this time, because it is this matter which hangs over this nation. It is destroying the fabric of our society. It threatens our economic future and the standard of living of all Australians. For this debate to be taken as lightly as this Government has taken it says an immense amount about this Government's failure to address the problems behind this crisis.

The Minister for Finance (Senator Walsh) went so far as to describe this matter as absurd, based on a ridiculous assumption, of hardly any relevance and said that the Moody's survey was inconsequential. That is not what all the other critics of this Government think about the issues raised by Moody's. It is certainly not what the Reserve Bank of Australia thinks. It is not what a leading economic advisory group, under Professor Hughes, apparently thinks, judging by the report that came out earlier this week. It is not what the major newspaper commentators think, judging by the editorials and the other comments in the major Australian newspapers that have come out since the disastrous news this week not only that Moody's has downgraded Australia yet again, but also that our foreign debt has risen yet again under this Government and will continue to rise, and our debt burden will continue to get worse, directly because-and this is the important point-of the policies and incompetence of this Government.

There is no point looking around, as the Government used to do in previous years, and saying, `It is not really our fault that we are having such a disastrous balance of payments figure. It is not really our fault that interest rates have gone up to the extent that people are being priced out of their homes. It is not really our fault that all these terrible things are happening to Australians and the standard of living is falling. It is not our fault because there were terrible terms of trade. We were not getting as much on the overseas markets for our exports and were having to pay more for our imports'. That has simply not been so in the last year. Our terms of trade have massively improved and our economy has gone down. Our balance of payments has worsened. All the key forecasts the Government made in its last Budget have been proved wrong. Now, of course, Moody's is being abused by this arrogant Treasurer (Mr Keating) and his equally arrogant partner the Prime Minister (Mr Hawke) for being the messenger-only the latest messenger-bringing the story of reality. That is the reality that Australia's economic policies are leading this nation more and more into economic disaster and more and more down the Argentinean road.

Today's debate was not helped much by the usual enormously intellectually curious approach of the Australian Democrats. Senator Janine Haines said that the trouble with our debt is that this stupid Government and previous stupid governments are allowing an enormous tax benefit so that greedy capitalists can keep borrowing from overseas. Let us put that nonsense to rest. The fact is that the great bulk of Australia's increasing debt is due to one thing only and that is the need to pay for our annual continuing and increasing deficit, because we keep having to pay overseas far more than we earn.

Senator McMullan —All of it.

Senator MICHAEL BAUME —No, not quite all of it.

Senator McMullan —By definition.

Senator MICHAEL BAUME —No, not necessarily. There are things like currency variations and other things. I thank the honourable senator for acknowledging the point. The fact is that the total current account deficits under the Hawke Government-they are the current account deficits that we have had to find the money to pay for-have totalled $75 billion. Our net external debt has risen by $85 billion. How, possibly, can Senator Haines find the intellectual capacity to argue that that is simply not so; that we have gone into debt not because we have had to pay our bills and we did not have the money to do it; we have gone into debt because some greedy Australian businessman has taken advantage of a tax deduction in order to borrow from overseas? What Senator Haines confuses is the make-up of the debt, not the reality of the debt itself.

We have politicians in this country, particularly from the Australian Democrats and the Government side, pretending that the facts do not exist, pretending that everything is fine, it is going on track, there is no need to worry and it does not matter if we have a massive overseas debt which is worsening. I must say that Senator Walsh does not share that view; he apparently regards any discussion of it, such as today's, as a matter of no consequence. When we have politicians in positions of power deceiving the Australian people into believing that this is not a matter of major moment, that this is not a matter which is of immense concern and which will affect and is affecting the living standards of all Australians, then we have, I believe, politicians who, for short term political gain, are seeking to mislead the Australian people. I believe that is totally dishonourable. The reality of what has happened-this is pointed out by Moody's and, as I said, Moody's is simply being supported by the very same thing being said by the Reserve Bank and by Professor Hughes-is the enormous increase in our indebtedness and the failure of this Government to do anything to bring an end to it.

This Budget has done nothing-and Moody's points it out-to correct the worsening trend. It has done nothing to stop us going more and more broke. It has done nothing to stop the enormous interest rates that we will continue to need simply to borrow the money to pay our bills overseas. We can see this very simply. The balance of payments figures that came out earlier this week showed that from the time this Government came in, back in 1983, our income debits-that is the amount we have to pay overseas-have jumped dreadfully from making up only 14 per cent of exports to 30 per cent of exports. In other words, we have to export twice as much now, simply to pay our interest bill, as we did before this Government came in. We have to run twice as hard simply to stand still and we are not achieving it. We are going further and further into debt with no real indication of when we are going to stop.

The Budget says we will go further into debt this year. There will be another major current account deficit. We are looking into the mid-1990s before we see any prospect of any kind of improvement. Yet this Government, in this Budget, has done nothing to resolve those problems. The Reserve Bank says inflation is the key. Under this Budget inflation does not improve at all. The Reserve Bank says micro-economic reform is essential. The Reserve Bank says nothing is being done about that. The Reserve Bank report clearly demonstrates, as does Moody's, what this Government should be doing and it is not doing it. The quotes are quite clear. Moody's says:

. . . Australia's relative external debt position will probably worsen before it stabilizes in the mid-1990s.

Who will pay for that? The Australian people will pay for that in lower standards of living and massively high interest rates as we have to borrow the money to meet our bill. Moody's continues:

The Budget fails to decisively address the issues of external imbalance and productivity.

It says it considers that the matters that are crucial to its rating action include the following:

(1) the government's inability to control excessive domestic demand growth . . .

(2) insufficient progress in generating additional export-earning capacity and in restructuring industry to achieve productivity gains . . . and

(3) the continued slow pace of structural adjustment, which makes Australia ill-positioned to weather the next downturn in the global business cycle without further large increases in foreign-currency debt.

The rating agency also pointed out that the downgrading reflects several other considerations such as the persistence of structural weaknesses embedded in Australia's domestic and international positions, such as intransigent rigidities in the local labour and transport markets, and stated that these constrain international competitiveness. That is almost word for word what the Reserve Bank said here last week. It is certainly what the media are saying, and it is no wonder then that Moody's has reduced our position to the bottom of the pile. Who are we with? We are now equal with Spain as a credit risk, according to Moody's. New Zealand is a little bit behind us-just a fraction behind us-and yet New Zealand at the moment has a far better set of basic economic statistics available than we have. All the current figures which are pointing so badly for us, so downhill for us, are in fact on the improve in New Zealand because they have bitten the bullet far more seriously than Australia has. Underneath us, all we have is Portugal, Hong Kong, India, South Korea, China, Malaysia, Venezuela, Brazil and Argentina. What a great collection of people we are now heading! And above us, of course, are all the really developed nations of the world.

Senator Alston —We are in manana country.

Senator MICHAEL BAUME —We are in banana company rather than manana company. This Government and this Treasurer have spent their time attacking the Moody's report because it is not the news they want to hear. They should be embracing it. They should be saying, `Look, this Moody's report demonstrates-as does the Reserve Bank-the seriousness of the situation we are in now'. This Government should be saying to the unions, `Look, Moody's has told us what a serious situation must be countered, and how it must be countered by serious measures'. The Australian Council of Trade Unions must abandon some of its more absurd objectives. There must be restructuring without the sort of nonsensical resistance from the Waterside Workers Federation, for example, to the Inter-State Commission's report on how to fix up the economics of our transport system-particularly our sea transport system.

The Government did not do that. It did not embrace this report and say, `Look, this is why there have to be tough measures.' Instead of that this Government spent its time Moody-bashing. It has no answers and it simply attacked Moody's in exactly the same way it has attacked every member of this Opposition who has pointed out the error of its economic ways and the consequences of this Government's continued economic failures. It is not only ridiculous for the Government to attack Moody's; it is disastrous. But by doing so it will give heart to those people who say Australia is not in such a bad position and let us go for the doctor; let us get what pay rises we can; let us make certain we do not improve productivity; and let us maintain our old work practices that are destroying this country. The Government, by its actions, is giving heart to those people; it is giving support to them. This Government has missed an opportunity here, not only of reforming itself and its policies but also of encouraging the rest of Australia to increase its productivity and make the great moves forward that are desperately needed.

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