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Vaile fails to understand impact of his woeful trade policy.

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Federal Labor Shadow Minister for Trade 7 March 2005


Today in the House of Representatives I asked Minister Vaile a simple question:

Minister, isn’t it the case that the failure of your export policy has given rise to record current account deficits putting upward pressure on interest rates?

Minister Vaile’s answer of “no” indicates he has no comprehension of the impact of his failed trade policy on Australia’s current account deficit and interest rates.

Minister Vaile need look no further than the Prime Minister for advice on this matter. In March 1995, John Howard said in the House that:

“The reason why we have high interest rates in Australia is not only the size of the budget deficit but also that overseas lenders are charging a risk premium to lend to borrowers in a country whose current account deficit is the second worst in the OECD.”

John Howard’s point remains even more valid today. Largely as a result of Australia’s continuing woeful trade performance we have just recorded our largest current account deficit in history - $15.2 billion - equivalent to 7.1% of GDP.

The fact is this massive current account deficit puts upward pressure on interest rates as higher interest rates are needed to attract international capital to fund the deficit - a point which the Prime Minister agrees in the above.

Our continuing pathetic trade performance exacerbates this problem. Exports grew last year, but the fact is under the Howard Government exports have grown at only 5.3% - less than half the rate achieved under Labor - 10.8%.

If Labor’s trade performance had continued, Australia would have recorded a trade surplus last year of $12 billion, not a record trade deficit of $26 billion.

Minister Vaile must change tack and pursue a new trade policy that genuinely opens new export markets for Australia complemented by industry, education and innovation policies to enhance the competitiveness of Australian exporters.

Contact: David Garner 02 6277 4911 04 004 124 04