Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Hansard source

Yes, I hope they are coming, as I have indicated. I think I have made my best efforts to answer every question posed; it just takes a little time to get the answers. I am providing a rolling series of answers to questions that were put an hour or two ago in some cases.

I can provide some additional information about this crowding-out issue, Senator Joyce. It is Treasury’s view that there is little risk of Australian government borrowing crowding out private sector investment, because it will remain relatively small when compared with the GDP and the overall size of Australian credit and financial markets. I am just thinking about this issue, Senator Joyce. The argument is that the level of government debt or borrowing will crowd out private sector investment and therefore interest rates will be higher. That argument is not accepted by Treasury. I referred earlier to the levels of government debt in a range of overseas countries. Many of those countries have lower interest rates than Australia at the present time although they have a higher government debt—and they had that higher government debt even before the financial crisis. They had higher debt as a proportion of GDP than Australia and they had lower interest rates, so there are other economic factors. There is little risk of Australian government borrowing crowding out private sector investment, because it will remain relatively small when compared with the GDP and the overall size of Australian credit and financial markets.

The Australian government has a AAA credit rating, and our Treasury bonds are high quality and attractive to investors. That is another factor, Senator Joyce. If a country does not have a AAA credit rating, for a whole range of reasons—not just their budget deficit but other factors—it would stand to reason that that would impact on the borrowing rate. Despite the rise in borrowing, our net debt position will remain strong relative to many other countries that are currently enjoying a AAA credit rating. The borrowing is only a short-term measure which is necessary to finance a temporary deficit and, as I have indicated, once the budget has returned to surplus, additional borrowing will no longer be required and debt can be repaid. I have already alluded in some detail in previous answers to the issues you raised about the repayment of debt, and the parameters I pointed to are the parameters by which that will occur.