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Tuesday, 5 November 1996
Page: 5063

Senator CRANE —My question is to the Assistant Treasurer. Minister, statistics published by the ABS show that, under the previous Labor government—that is that lot over there—Commonwealth debt increased by more than $8 billion last year to a massive $101 billion. By contrast, state and territory were able to significantly cut their debt. What impact will the passing of the coalition's budget have on government debt and, in particular, the outlook for interest rates?

Senator KEMP —Yesterday, the ABS did in fact release figures showing the financial assets and liabilities of the Commonwealth and state governments for the year to 30 June 1996. It represents the final report card on Labor's record on government debt and, therefore, I would have thought it would be of interest to the senators opposite. The figures do confirm that the net debt of the Commonwealth government rose from $92.7 billion to $101 billion during the year to 30 June 1996—a rise of more than $8 billion.

Looking at the general government sector, which excludes public trading enterprises, there was a $10 billion rise in net debt to $93 billion. Since June 1990, Commonwealth general government debt has risen from $16 billion to $93 billion, principally through big deficits year after year. In contrast to the continued rise in Commonwealth debt, state and territory governments reduced their debt levels last year. In aggregate, state and territory governments have cut their debt by around $15 billion through a mix of responsible, prudent fiscal policy and privatisations. General government net debt fell in six of the eight states and territories.

The effects of passing the first Howard budget can be seen from the consequences of Labor's fiscal legacy over the 1990s. The policies followed by the Labor government led to a rapid build-up in government debt, continued pressure on the current account deficit and pressure on interest rates. Over the last 2½ years, under Labor, official rates went up. In general it was up and up. They climbed 2¾ percentage points over this time.

In contrast, passage of the first Howard budget will allow the rapid build-up of Commonwealth debt under Labor to be turned around. It will allow the budget to be brought into balance within three years.

Senator Schacht —Are you supposed to be attacking us, Elmer?

Senator KEMP —Senator Schacht is calling out—obviously worried by the fact that the massive build-up of Labor debt occurred under the Keating government.

I wonder whether Senator Schacht has had a chance to read the recent book on Keating, written by Edwards, and to look at the attitude of the Labor Party towards the rise in interest rates. If you have not, Senator Schacht, I will read an extract from page 376 of that book. Edwards wrote:

They had been fighting now for eighteen months, raising interest rates half a per cent, 1 per cent, 2 per cent, 3 per cent—pushing them up and up as month by month the current account deficit got worse and worse . . .

He went on to state:

`Don and I did it together', Paul would later say, to a table of economists in Indonesia and to President Clinton and his advisers over lunch in the White House. The two of them were proud of the way they had withstood the squalls and strains within the party, shouting down Graham Richardson, who was forever running around to see Hawke and telling him housing should be exempted, that it was all too much and Labor was gone for sure.

The reality is that there were a few people in caucus who worried about Labor's approach to interest rate rises. Nowhere was it mentioned that Senator Cook was worried about the rises in interest rates. Nowhere was it mentioned that Senator Schacht was worried about the rises in interest rates. Nowhere was it mentioned that Senator Faulkner was worried about the rises interest rates. There are many more quotes like that if you want to ask a question. (Time expired)

Senator CRANE —Madam President, I ask a supplementary question. Minister, could you also outline the benefits which will flow through to Australian businesses, particularly farmers, miners, et cetera, et cetera, as a result of lower interest rates?

Senator KEMP —Madam President—

Senator Faulkner —Madam President, I raise a point of order. Would you believe that Senator Kemp would be capable of interpreting a supplementary question that included the words `et cetera, et cetera'?

The PRESIDENT —There is one minute in which to find out.

Senator KEMP —It is very easy to interpret the question because people on this side of the chamber are concerned to ensure that we have a low interest rate economy. That is why we have enjoyed strong support for the budget and that is why in the community at large there is strong support for the budget. Passage of the budget will help us take pressure off interest rates. We are already seeing that good fiscal policy and competition within the financial markets are effectively delivering big benefits to home buyers, farmers and the other people that Senator Crane is worried about.