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

I move:

That the Senate take note of the answers given by the Minister for Finance and Administration (Senator Minchin) to questions without notice asked by Senators Sherry and George Campbell today relating to the economy.

The Labor Party posed two questions—as it did yesterday—about disturbing and worrying aspects of economic trends and development in this country, and again we saw from the Minister for Finance and Administration, representing the Treasurer, an arrogant, lazy and very complacent attitude towards what are significant economic issues and dark clouds on the economic horizon for this country.

In terms of today’s national accounts, while the minister was keen to trumpet and draw attention to issues such as economic growth and other matters, what he did not want to deal with until it was drawn to his attention by the Labor Party in question time were the three years of negative household savings by Australians. At the present time, as disclosed by the figures, in the calendar year 2004-05, Australian household savings were negative 3.5 per cent. In other words, Australian households are spending and consuming more than they are saving. That does have significant long-term implications both for households and the Australian economy.

What is very worrying is that that is not the first year that household savings have been negative. In fact, for the last three years household savings have been negative—and the level has grown. The level of dissaving in 2003-04 was minus 3.2 per cent and in 2002-03 it was minus 2.2 per cent. So the level of dissaving by households is getting worse and worse each year. Compare that to the record in 1995-96—10 years ago—when the Liberal government was elected. At that time, household savings were positive in Australia—by 6.4 per cent.

The minister apparently does not believe that this is a significant problem long term for the Australian economy. But one should relate the negative household savings to a number of issues that we referred to yesterday, particularly Australia’s quarterly current account deficit—that is, the deficit on imports and exports. Imports over exports for the last quarter of last year had grown to almost $14½ billion. In the last three months of last year, we were importing almost $14½ billion of good and services more than we exported. Put that together with the increase in national debt. Australia’s national debt has now reached the truly staggering figure of $473 billion. That is up $22 billion on the last calendar year. That $473 billion is now more than half the total value of the Australian economy. Of all the goods and services we produce, over half the value is represented by that $473 billion in national debt.

These economic statistics do matter. They have very important implications for the long-term development of the Australian economy because, given that Australian households are dissaving, we have to pay for the exploding national debt in some way. Clearly, if Australian households are not saving, we have to import capital in order to cover the ballooning national debt. There is nothing wrong with importing capital. I do not have any particular philosophical disagreement with that, but the consequence is that the more capital you import to cover that ballooning national debt, the more exposed Australia is to changes in the international economy. If there is a downturn in China or the United States or adverse happenings overseas, because we are importing increasing amounts of capital because Australian households are not saving, it will hurt Australia much more. (Time expired)

George Brandis (Queensland, Liberal Party) Share this | Link to this | Hansard source

The government welcomes this debate which invites a comparison between the economic position of Australian households today and the economic position of Australian households 10 years ago today, on the last day of the last Labor government. How remarkable it is that Senator Sherry, one of the—if I may say so—more economically articulate Labor senators, could give a five-minute speech about household debt without once mentioning interest rates. How extraordinary.

As all Australians know from their hip pocket, there is more prosperity in Australia today than there was 10 years ago, largely because interest rates are so low. Today, the average standard variable lending rate is 7.3 per cent. In historical comparative terms, that is a low figure, which has been a low and stable figure for several years now. But on this day 10 years ago the equivalent indicator was 10.5 per cent—and that was the best performance the former Labor government recorded. We all remember that, at their zenith during the former Labor government, housing loan interest rates rose to 17 per cent, while interest rates on business loans and loans to farmers were as high as 22 and 23 per cent. It would be interesting for Senator Sherry to tell us what the net household debt position was under the last Labor government, with interest rates on housing loans at 17 per cent, on business loans at 22 per cent and on farm loans at 23 per cent. But he did not tell us about that. That is the first point to be made—that the debt service ratio of Australian households today is much lower than it was 10 years ago today because interest rates are so low.

As well, Senator Minchin, in answer to questions from Senator Sherry, informed the Senate of the national accounts figures. The most significant of the results in the national accounts published today was the fact that over the last 10 years the growth in real wages has been 16.8 per cent. Over the 13 years of the previous Labor government, growth in real wages was negligible. I heard the Prime Minister say in House of Representatives question time earlier that it was 0.2 per cent over that 13 years. Over the 10 years of coalition government there has been a 17 per cent growth in real wages.

Australia is better off today than it was 10 years ago. You take any indicium of economic prosperity you care to name—whether it be interest rates, home mortgage rates, growth in real wages or the unemployment rate, which 10 years ago on this day was 8.2 per cent but today is 5.3 per cent. Ten years ago on this day the aggregate net household wealth of Australian households was $1.7 trillion, but today it is $4.5 trillion. Net household wealth has almost trebled in the last 10 years, while the stock exchange index has more than doubled from what it was on this day 10 years ago. So I say to my Australian Labor Party colleagues: any time you want to take us on in a debate about economic management, you feel very free. Please bring it on. Because on any indicium of economic prosperity you care to name Australia is a wealthier, better employed, more prosperous, more secure nation today than it was on this day 10 years ago, when your period of economic stewardship came to a very timely end.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I also want to take note of the answers by the Leader of the Government in the Senate, Senator Minchin, to questions asked in question time today. And I will take up, in part, the challenge issued by Senator Brandis, because people on the other side of the chamber are very fond, when we talk about economic figures, of going back 10 years and quoting what happened under the last Labor government.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

Why wouldn’t you?

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Let me enlighten you, Senator Joyce, as to what the Hawke government took over from the current Prime Minister when he was Treasurer of this country in 1983.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

I was about three.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Well, you’re happy to go back to 1991 and talk about interest rates; what were interest rates when John Howard was Treasurer of this country? In 1983 interest rates were 12.5 per cent. What was the unemployment rate when the current Prime Minister was Treasurer of this country? On 5 March 1983 unemployment was 10.7 per cent. What was the inflation rate when John Howard was the Treasurer of this country? On 5 March 1983 inflation was 11 per cent. What was GDP growth when John Howard was the Treasurer of this country? It was minus 2.6 per cent. That is the legacy that he left the Labor government in 1983. So we set about correcting the economic mess that was left to us by the current Prime Minister.

Of course, there were ups and downs over that period. In 1985 we had to confront—as you should well know, Senator Joyce—a collapse in our terms of trade. There was far too much of an imbalance in our economy. What did the Hawke-Keating government set about doing? It set about broadening the base of the Australian economy by promoting and encouraging the growth of our manufacturing sector and, in particular, growth in the trade of elaborately transformed manufactures. And it did that—between 1986 and 1996 it doubled the growth in the trade of elaborately transformed manufactures, which went from about eight per cent to 18 per cent. That growth has declined under this government.

It is true that currently, in terms of exports, we are going through a boom period. But if you look at the figures you will see that they are primarily in primary products and minerals. That is what is holding up our export performance. Despite that, we still have a trade imbalance of $14.5 billion. As Senator Sherry said, foreign debt has grown to $473 billion—over half of our GDP.

It is interesting to note the response of those on the other side when the question of foreign debt is raised. In 1996 we saw the current Prime Minister and Treasurer driving around the country in a debt truck, telling people how bad foreign debt was for the economy and the country—the fact that it was equal to $10,000 for every individual. Well, it is now equal to $22,000 for every individual. That is how much foreign debt has grown under those opposite during their 10 years in office.

We have been wondering where they have hidden the debt truck. We have been looking in some of the garages around Canberra. But we have suddenly realised, having seen the figures published today, that they would need to hire the MCG to hide it—that is how much foreign debt has grown over the period of their stewardship. These chickens will come home to roost because this economy is like a meringue—it looks solid on the outside, but put your finger in it and it will collapse. (Time expired)

Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

I wish to contribute to this debate relating to household debt. The previous speakers, Senator George Campbell and Senator Sherry, could not have been more shrill in their presentations. Both of them have been here for the full 10 years that this government has been in office. Both of them have seen the creation of a most stable and solid economy—an economy that has been backed by the public at every single election during that time. That is why, as the years go by, each time they stand up and talk about the economy they become more shrill.

We welcome the fact that, for once, the Labor Party—it is quite a momentous occasion—have raised the matter of the economy during question time. They have spent year after year, term after term of this government, avoiding a discussion on the economy. So, unlike my colleague Senator Brandis, I welcome a discussion on the economy.

With respect to this idea that dark clouds are forming over the economy, that it is very feeble and fragile and that it is about to fall over, nothing could be further from the truth. Quite frankly, it can be put down to this: the environment that Australian households are operating in gives them the economic confidence to invest and to go into debt. You only do that if you have confidence in the economy, and Australian households have that confidence.

Opposition Senators:

Opposition senators interjecting—

Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

Senator Minchin explained it to you but you refused to listen. It is not to your advantage to listen. The fact that Australian households have gone into debt by borrowing is because their ability to pay back those borrowings has increased. They can meet those debts because those borrowings are backed up by their net tangible assets—there is greater value in their households. And how has this come about? Through a growth economy. How has a growth economy come about? How has their confidence in the economy come about—a confidence that has allowed them to invest and borrow? It has come about by this government’s determination 10 years ago to lay the foundation stone for a reliable, steady economy, taking the boom-bust cycle out of the economy. And we did that from our very first budget.

Tomorrow we celebrate and commemorate this government’s 10 years in office. I would like to point out one landmark. Many will discuss the highlights of that period and some of the difficult decisions we had to make—some of the very hard and unpopular decisions. But one of the first things we did for the sake of the Australian economy was that we decided to make the hard decisions, not to blink, and to see them through, and that set the pattern for the party room and the government. In the 1996 budget we were faced with a $10 billion budget deficit and a $96 billion debt left by the previous government. From our first day in government, we had to turn that around. That was the foundation stone—we had to turn it around into a surplus budget, leading to the zero debt that we have today.

That was the foundation stone we built this economy on. By the way, we have gone to each election with that foundation stone and have gained the confidence of the people. More than anything else, that has been the hallmark of this government. And it all began in 1996, when we had the determination, after 13 years in opposition, to put down one of the toughest budgets known from any government.

We spent 13 years in opposition and we had an idea of exactly what we had to do and what we were going to do when we came to government. We did not just sit over there. Now you are into your 10th year without a plan, without a policy and without a determination. We knew exactly what we had to do when we came into government. The first thing we had to do was tackle the economy—the mess that we had been left with. Today we see, after 10 years in government, that Australian households have the confidence to borrow and take out debt because they know that their employment is in great demand, their wages have gone up, they are capable of meeting that debt and the economy will remain strong.

Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I rise this afternoon to take note of answers that Senator Minchin gave earlier today in question time. You probably would agree with me, Mr Deputy President—I know some of my colleagues over here do—that one of the things Senator Minchin is noted for is that he will actually answer a question. The direct question asked of Senator Minchin this afternoon by Senator George Campbell was about a statement made by Dick Warburton in relation to the superannuation guarantee levy. In that question, Senator Campbell specifically asked Senator Minchin what his views were on the comments made by Dick Warburton. Senator Minchin answered that he thought the statement made by Mr Warburton was ‘rather surprising’. I do not see why the government thinks that that is rather surprising.

Mr Warburton is the Chairman of Caltex. He works for a company that is probably one of the wealthiest in this country. He works in an industry that is one of the wealthiest in the world and is probably making some of the most significant money in modern capitalism. So why would we be at all surprised that someone like Mr Warburton would have no clue about what ordinary men and women in this country are feeling in relation to tax? It is the same with Mr Hendy, who was one of Peter Reith’s henchmen when he worked here. Now he is on the teat of the Chamber of Commerce and Industry. He is probably someone who has never worked outside a protected environment in his life. He has always been on some organisational or parliamentary payroll. He, equally, is going to give the Treasurer some advice about taxation. Why, again, would we be at all surprised that they come out with some stupid or nonsensical comments in relation to the taxation system?

I want to get back to the questions that Senator Campbell and Senator Sherry asked of Senator Minchin. As I said, in my opinion and in the opinion of a number of my colleagues, Senator Minchin does attempt to answer a question. He does not obfuscate or dance around corners or get advice from Senator Ferris or Senator Heffernan, like Senator Coonan does when she does not know the answer. He will give it to us. You should have seen his face when we asked him about the level of household debt and foreign debt in this country. Senator Minchin looked worried—and why wouldn’t he look worried? The level of household debt in this country is increasing. Where I come from in Western Sydney, people are spending $126 a week but they are only earning $100. That is what is happening now. The level of household debt is in the negative, as Senator Sherry said. I will go back and quote you figures on that. People saved 11 per cent of their income in the 1960s. In the mid-seventies they saved 18½ per cent of their income. In the 1980s they saved 13 per cent of their income. In the 1990s it was three per cent. We have been told this afternoon by Senator Sherry that the level of household debt is now minus 3½ per cent. How long can this go on?

You would not have seen it, Senator McGauran, but Senator Minchin looked worried because he is someone who will give us the answers. He is someone who will at least try to be honest in his approach to the opposition in saying what is going on. I tell you what: we know what is going on. We know that there is a crisis looming. No matter what Senator Brandis or Senator McGauran say, we on this side know that the crisis is looming and is going to occur at some point in the near future because we cannot maintain this level of household debt or the foreign debt that we have in this country and still try to maintain our standard of living. It will break at some point. We are asking the government to do something about it and to give us some indication of what their policies are, rather than let the households of this country continue in this false nirvana that will inevitably stop. When that occurs, there will be a lot of dislocation and heartache in this country. I ask you, Mr Deputy President, to make sure that that is rammed home in this country. (Time expired)

Question agreed to.