Craig Emerson (Rankin, Australian Labor Party) Share this | Hansard source

Far from it, Mr Deputy Speaker. I was praising the member for Went-worth for the contribution that he was making to the tax reform debate until he was so elegantly elevated out of it. Returning to our external accounts, because that is an area of potentially great pressure on the Australian economy, the Reserve Bank statement says:

While export prices have increased sharply, growth in the volume of Australia’s exports has remained lacklustre, with average annual growth over the past five years of only around 1½ per cent.

There is the Reserve Bank belling the cat, pointing to the lacklustre growth in export volumes. The statement goes on to say:

… recent business surveys report a pessimistic outlook for manufactured exports, and the Bank’s liaison with Australian manufacturers reports that producers are finding it difficult to compete with developing economies in Asia.

What is the government doing about the slump in the volumes of sophisticated manufacturing exports? Nothing at all. In the last 10 years of the Labor government, volumes of Australian sophisticated manufactured exports grew by 11 per cent per annum. Under this government, they have grown by one per cent per annum. Australian manufacturing is in deep trouble, and this government looks on and says, ‘Let the cards fall where they may.’ We have a situation where we have got the best terms of trade since 1974 and we have got Australian manufactured exports in real trouble. When the resources boom finally tapers off, Australia could well be in real trouble.

As a consequence of that vulnerability, we have now witnessed in Australia a succession of trade deficits—in the order of nearly 50 successive monthly trade deficits. The current account deficit, on occasions in the last year or so, has passed seven per cent of GDP. When Paul Keating warned of the dangers of Australia becoming a banana republic, the current account deficit was less than 6.3 per cent of GDP. Our net foreign liabilities, both debt and equity, have grown rapidly in the last few years and now total 60 per cent of GDP. As Treasury economist David Gruen has pointed out, we need to get the current account deficit down to about three per cent of GDP compared with the average of 4½ per cent over the last couple of decades and a much higher average over the last five years.

In order to stabilise our foreign liabilities at around 60 per cent of GDP, we will have to run a sustained trade surplus of between 0.5 and 0.75 per cent of GDP. That is a surplus, Mr Deputy Speaker. We have not run a surplus for almost 50 months. So the prospects of running a surplus on the trade accounts seem very remote. It is all very well for people to say, ‘Everything will fix itself; it’s not a problem to have massive foreign debt; it’s not a problem to have massive current account deficits.’ People are starting to get very worried about Australia’s current account deficits. If overseas money market operators become very worried about the size of our current account deficits and our trade prospects, there is a danger of a depreciating exchange rate. I am not predicting that; we don’t know. But there will be pressure, as the resources boom tapers off—it doesn’t fall away but tapers off—for there to be a depreciating exchange rate. The Reserve Bank statement shows that there is indeed very substantial pressure on the prices of non-traded goods. If there were such a depreciation, there would be great pressure on the Australian prices of traded goods—imports—into Australia, which would compound those inflationary pressures.

The government is ill-prepared for this and it has failed to invest in Australia’s future. It has failed to design and implement a new productivity raising agenda. As a result, productivity growth turned negative at the beginning of 2004 and it has remained stuck there ever since. We need a government that has a vision, that will invest in a new productivity raising agenda in this country and secure Australia’s future. That government is a Beazley-led government, and we can’t wait until we get the opportunity to throw this government out on the day of reckoning and restore economic stability and vision to this country.

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