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Thursday, 22 May 1980
Page: 3140

Mr HOWARD (Bennelong) (Treasurer) - I would like to reply very briefly to the speech of the honourable member for Parramatta (Mr John Brown), a member of the Opposition who, if I may say so, always makes thoughtful and intelligent contributions to debates in this House. When he dealt with foreign borrowings tonight he rather spoilt his record a little. He did a bit of a Rip Van Winkle. He said that he made a speech on foreign borrowings 18 months ago. I can only conclude from what I heard tonight that he has been asleep on the issue for the past 18 months because he said that the position has worsened over the past 18 months. He could not have been paying any attention at all to what has happened to our external account if he really believes that it has worsened over the last 18 months. In the financial year 1979-80 the total official borrowings of Australia to supplement our international reserves were about $ 1,650m. This year, with only six weeks of the financial year to run, the total borrowings by the Government for the same purposes are less than $500m.

As a result of two things- firstly, a strengthening in export performance and, secondly, an improvement in private capital inflow into Australia- our external account has improved enormously. As a percentage of gross domestic product the external debt of Austrafia now is less than what it was 10 or 1 1 years ago. As one of the gnomes- perhaps the principal gnome in the exercise- I should like to say to the honourable member that we do spend a great deal of time trying to make sensible judgments about what are appropriate currencies in which to borrow. Our overseas debt is in a mixture of currencies which most people believe is a sensible hedge against violent fluctuations in one particular area. We have, of course, endeavoured to mix exchange risks and low interest rates to achieve the best possible overall situation.

On any fair analysis of the situation there might be other areas of economic debate where strong arguments could be put by both sides. But I do not believe, when it comes to the external account, that anybody can deny that there has been a tremendous strengthening of this country's position over the last 18 months. Nowhere is it better illustrated than in an examination of our overseas borrowings and the borrowing program that was announced by my predecessor in September 1977 when, on behalf of the Government, he said in effect that we would go on borrowing overseas until capital flows resumed their traditionally higher levels. This has been 100 per cent vindicated by what has happened over the last 1 8 months. We have returned to our traditional position where the current account deficit is very significantly financed and compensated for by large private capital inflow. That results from the heightened preception of the strength of the Australian economy and, of course, from the enormous potential project development in our resource industries.

Mr John Brown (PARRAMATTA, NEW SOUTH WALES) - Do you deny those figures?

Mr HOWARD - Of course I do not deny those figures. They are correct. They are figures that have been used in earlier debates in this House but there is nothing per se wrong with oveseas borrowings through orthodox channels on official account. That was said by a very respected Treasurer in the Labor Government, the former honourable member for Melbourne Ports, late in 1974. He said that the Australian Government ought to remain a cautious official overseas borrower on orthodox account. He, of course, was drawing attention then not to the concept of overseas borrowings by the Labor Government but to the unorthodox methods that were then in contemplation by some of his colleagues.

Mr SPEAKER -It being after11 p.m., the House stands adjourned until Tuesday, 19 August 1980, at 2. 1 5 p.m., unless I or, in my incapacity or absence from Australia, the Chairman of Committees shall by telegram or letter addressed to each member of the House fix an alternative day or hour of meeting.

House adjourned at 11.5 p.m.

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