Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Hansard source

I formally move:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading, the House:

(1)

notes that the bill will do little to correct Australia’s trade balance which:

(a)

has been in deficit for a record 57 consecutive months;

(b)

recorded a trade deficit of $11.7 billion in 2006;

(c)

is contributing to a current account deficit of $54 billion; and

(d)

is contributing to a record $0.5 trillion foreign debt; and

(2)

calls on the Government to take all necessary measures to address these failures”.

The point I was making before I moved the amendment was that we are paying more in interest rate payments than the rest of the world, and our massive foreign debt is a contributing factor. Australia’s high foreign debt also puts it at risk of a sudden loss of confidence in Australia as an investment destination. Such a sudden loss of confidence would cause depreciation in the dollar and an increase in the cost of imported goods, leading to inflation and leaving the Reserve Bank with no choice but to raise interest rates even further.

The fact is that this is a government that has racked up the worst trade performance in Australia’s history. I have mentioned the deficit figure from last week of $1.3 billion; that is for the 57th consecutive month. This is the longest uninterrupted period of trade deficit in the nation’s history. Each trade deficit adds to our current account deficit. In 2004-05, Australia recorded its worst current account deficit on record—$55.2 billion—with only a marginal improvement last year. What is more, this has happened at a time when Australia has been experiencing the best terms of trade in 50 years.

At other times in Australia’s history when we have experienced a resources boom, Australia’s trade balance has in fact gone into surplus, with the value of our exports exceeding the value of our imports. This is not the case with the current boom. As Access Economics points out:

Superheated commodity prices were meant to send our trade accounts whirring back towards surplus. Instead, the current account deficit is lingeringly large.

Instead of the surplus that should have been the story out of the resources boom, we have had an endless string of trade deficits. It did not have to be this way. What we have really had in this country, in my view, is a squandering of the nation’s prosperity. That has been contributed to by our poor trade performance.

I remind the parliament that Australia’s exports averaged annual growth of eight per cent a year in all of the years when Labor was in office. From 1983 to 1996 there was average growth of eight per cent per annum. How does it compare with the figure during this government’s 10 years in office? There has been average yearly growth of just four per cent per annum over the past 10 years and, over the last five years, just one per cent.

The point I make is that, had Australia maintained the rate of growth in exports achieved in the eighties and early nineties, Australia would now have an annual trade surplus of $14 billion rather than the actual outcome, which is a trade deficit of $12 billion. Not only would that have taken pressure off interest rates at home; it would have seen an improvement in the quality of job prospects in this country, an increase in the nation’s prosperity, stronger growth and, importantly, a rebalancing of the components of growth being driven and contributed to strongly by exports.

They were the overall figures—eight per cent being halved and then going down to one per cent. But let us look at manufactures. Elaborate manufactures exports have slowed to a crawl over the past five years. Between 1982-83 and 1995-96—again, under a Labor government—elaborate manufactures exports averaged 13 per cent per annum. Under this government, the figure is just three per cent per year. Is it any wonder that our manufacturing sector has lost 145,000 jobs—60,000 of them since the last election? It is a similar story when you talk about services. Export volumes in services averaged growth of 10½ per cent under Labor, but during the last five calendar years under this government they have averaged a decline of 0.3 per cent a year. I am talking about volumes.

I notice that the minister, in response to a piece that I had done in the Age last Wednesday, accused me of choosing selectively from history in making these comparisons and then went on, in the same breath, simply to talk about the last five months performance of his own government. Talk about selectivity, Minister! The real question that you need to respond to, it seems to me, is: why has Australia failed to take advantage of the current resources boom and why can’t we get our trade balance into surplus?

If we take an even closer look, disaggregating it by price and volume, we find some further interesting conclusions. It is not just manufacturing and services that have suffered; it is also the resources sector. I quote CommSec economist Craig James, who had this to say last week:

Australia is in danger of squandering the benefits of one of the biggest commodity booms ever seen. China and India can’t get enough of our iron ore, coal and metals, but Australia’s production and infrastructure aren’t able to keep up. Frankly, it must be regarded as a national embarrassment that Australia is still recording trade deficits of about $1 billion each month in a period of stellar global economic growth and soaring demand for mining and energy resources.

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