Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Hansard source

I rise to speak in support of the appropriation bills. Appropriation legislation is traditionally an opportunity to speak on any particular issue that a senator wishes to focus a policy speech on. I want to speak tonight on some economic issues. Last Friday week we learnt that Australia racked up its 46th consecutive trade deficit in January, at $2.7 billion, which is the highest on record. Our trade balance is the ultimate barometer of Australia’s capacity to compete in the world and to sustain our prosperity into the future. The trade balance in our case is a trade deficit—that is, a deficit of imports over exports—and one that, as I said, reached $2.7 billion in January. And a trade deficit ultimately leads to an ever increasing national debt—a debt that the Australian economy and Australian citizens owe to the rest of the world.

Persistent deficits are a consequence of a number of factors. Firstly, there is the issue of productivity. Our productivity, which was fast approaching the US levels in the 1990s, has subsided substantially in recent years. Tonight I want to touch briefly on some of Labor’s plans to reverse the decline in our productivity and competitiveness and turn around our trade balance. The trade balance, the deficit itself, of course, and the national debt have to be funded. That is done through the importation of capital or foreign investment from overseas. The reason that occurs is because Australians at the present time are dissaving. For the last three to four years in the Australian community, household savings have been negative. As a consequence of that, we need to import the capital to sustain the trade balance and the trade deficit and in order to contribute to economic growth. There is no option. I am not a person who is opposed to importing capital. It is a necessity. Australia has done that for I think almost all of 200 years since European settlement. But we could do far better in respect to national savings in order to fund a larger proportion of that trade deficit.

Australia over the last 14 years—and I do emphasise 14 years, not just the 10 years under the Liberal-National Party rule—has enjoyed great prosperity and uninterrupted growth. The economy has been resilient in the face of a number of economic shocks—for example, the Asian crisis and the dotcom meltdown. The Australian economy was remarkably resilient when those economic shocks occurred. The Treasury Secretary, Mr Henry, recently explained this resilience as a result of three key developments in the 1990s. He attributed it to the floating of the Australian dollar, the increased emphasis on the supply side of the economy and the adoption of a medium-term framework for economic policy.

Speaking on behalf of the Labor Party, the Labor Party was a significant contributor. In terms of the floating of the Australian dollar, Labor in government took that decision. It was a significant contributor to the increased emphasis on the supply side of the economy. So Labor does claim ownership of and was the architect of certainly the first of those key factors. It is largely responsible for the second of those key factors. Labor is proud of the economic reforms that it undertook during its 13 years in government. They have greatly assisted our recent economic prosperity, as I said, over 14 years.

We have recently seen the almost seamless shift in the economy, underwritten by record house prices, to record commodity prices, which are assisting to keep our economy buoyant. However, there are some issues beneath the buoyant surface which concern the Labor Party. I have already referred to one, which is the very significant trade deficit at a time of record commodity prices. If it were not for the record commodity prices, we would be facing a New Zealand type meltdown on our current account deficit and our national debt.

But Labor recognises that Australia does need a long-term plan to lift our competitiveness and sustain our prosperity into the future. The central issue is why, when commodity exports are earning their highest prices in a generation, is Australia not running a trade surplus? It is running a massive deficit. Unless we can lift our export performance, the very good economic growth rates over last 14 years will be things of the past. Unless we can turn our trade deficits into surpluses, our foreign debt, which reached $473 billion in 2005, will continue to climb.