Federal Economic Statement: Impact On New South Wales
FEDERAL ECONOMIC STATEMENT: IMPACT ON NEW SOUTH WALES
Matter of Public Importance
Mr LONGLEY (Pittwater) [3.12]: I move:
The economic statement made by the Prime Minister will be of great significance to both Australia and New South Wales. It is of great concern, however, that the consensus of opinion is that it is a gamble, a risk, in other words, a statement made for short-term political gain which will result in long-term pain or cost to the economy and employment. It is of great concern also that the significance of such an important statement is not the positive benefits to Australia and New South Wales but rather the great cost. Our State and nation are not known, of course, for media headlines which favour the coalition side of politics. Yet with regard to the Prime Minister's economic statement a selection of headlines such as the following appeared: in the Sydney Morning Herald, "It's a $2.3 billion gamble"; in the Canberra Times, "Keating spends and hopes"; in the Australian, "Prime Minister's jobs and votes grab"; in the Australian Financial Review, "Labor's clever risky play"; and so it goes on - "Keating's great giveaway", "Who is going to pay for it?", "What about when the bill's due?", "To buy an election", and "An unashamedly political pitch for votes". These sorts of one-line epithets all too appropriately characterise what is contained in the economic statement made by the Prime Minister.
It is perhaps useful to review briefly some of the major elements of the statement to refresh the memories of honourable members, especially as perhaps not all members were paying the close attention to the details of the statement that they ought to have done. The grand plan, of course, is to create 800,000 jobs. The measures to revive the economy will cost $2.3 billion. The overall cost for the full time frame within the economic statement is substantially larger, indeed in excess of $16 billion. For the benefit of those members opposite who are economically illiterate, $16 billion is a sixteen followed by nine zeroes - $16,000,000,000. The statement contained a large number of expenditure items, significant tax changes and important items of structural and microeconomic reform. I will briefly summarise the statement in those three categories.
Within the main expenditure items are included a national railway gauge which will finally extend from Brisbane all the way down the east coast and through to Perth at a total cost of just under $500 million over two years; improved road network expenditure of approximately $600 million over three years; extra funds for the textile, clothing and footwear industry amounting to approximately $30 million in the 1992-93 year and $10 million in the following year; additional funds for JobSkills and JobStart; the establishment of the Australian technology group at a cost of $30 million in the next financial year; a one-off lump sum payment to all families entitled to the family allowance of $125 for a family with one child, rising to $250, at a total cost of more than $300 million; a $3 permanent increase in family allowance supplements at a total cost of an additional $240 million; and increased Federal Government support for technical and further education at a cost of $35 million in the next financial year, rising to $210 million by 1995-96. They are the main expenditure items. The statement contained also reference to a significant number of important tax changes. Those which have been most highlighted were the personal income tax changes - but we all know they are political promises on the never-never.
Mr Chappell: We would just get back to bracket creep anyhow.
Mr LONGLEY: As the honourable member has commented, that will just get us back to bracket creep anyway. Other important tax changes were the acceleration of rates of tax depreciation; an investment allowance of 10 per cent for major projects; tax preferred bonds to encourage private companies to invest in infrastructure; a concessional tax rate for offshore banking units; an increase in the depreciation on new factories, hotels and tourist buildings - likewise for structural improvements; capital gains tax exemption and other concessions for pooled development funds; clarification of the rules on partial debt write-offs, which will be a significant boost for banks and will, I hope, flow through to the lending market; an increase in goodwill capital gains tax exemption to help small business; a cut in the sales tax rate from 20 per cent to 15 per cent for new cars - it is interesting to note that the Prime Minister chose the figure of 15 per cent, which is the same as the goods and services tax rate; and deferment of the initial payment of company tax to 28th September, 1992.
The third major category contained those elements which are important for infrastructure and microeconomic reform: a tenfold increase to $50 million in the value of projects exempt from Foreign Investment Review Board scrutiny and the abolition of the 50 per cent equity guideline for new mines; a reduced liability for smaller information technology companies competing for government contracts; streamlined approval of projects in relation to environmental and Aboriginal issues; changes to the aviation industry with Qantas being able to carry domestic passengers and domestic airlines such as Australian and Ansett being able to fly internationally; more foreign bank licences; a commitment from the unions to a wage outcome consistent with current low inflation; and amendments to industrial legislation to encourage workplace bargaining.
That is a brief outline of the elements of the package. They will have a significant impact on New South Wales but nothing like the negative impact that will flow from that statement. What is of particular concern is that no consideration has been given to the costs associated with these elements. If anything else has to be said about this statement it is that the costs will be high and horrific. What has not been taken into account is that implementation of the elements will almost certainly involve a higher level of inflation. Mr Keating talks about the current low level of inflation; what he forgets is that the current inflation rate is not the underlying inflation rate, which in Australia today, is still solidly in the 3 per cent plus area. It is not the 1.5 per cent which we are
being told it is at present. But perhaps even more important is the impact this statement will have on the current account deficit, and that will impact directly on Australia's overseas debt. This is exactly the problem Mr Keating faced throughout his time as Treasurer of Australia. In the economic analysis prepared by Price Waterhouse - which I commend as a useful and helpful document to honourable members - it is interesting to find the following statement:
That this House notes as a matter of public importance the Prime Minister's economic statement of 26th February, 1992, and its impact on the State of New South Wales.
The Prime Minister's economic statement will ensure that Australia will be faced with those two problems. What we found during Mr Keating's time as Treasurer - and he boasted loudly of it - was a great increase in employment creation. It is true that under his treasurership, employment creation increased dramatically. What he did not say was that for every job created under his treasurership Australia incurred $75,000 in overseas debt. A similar situation will be the result of this package. It is significant that Ross Gittins, economics editor for the Sydney Morning Herald wrote an article precisely on this aspect. The article, entitled "Debt out of sight and out of mind", states:
The big surprise in last night's forecast is the strength of the recovery which Mr Keating believes can be sustained without a blowout in inflation or a widening of the current account deficit on the balance of payments.
Among documents tabled by Mr Keating during his speech was the following statement:
Read the fine print of Paul Keating's One Nation papers and you discover a startling fact: concern about the current account deficit has been pushed into the background and the goal of stabilising the foreign debt is no more.
We have in Australia today a Prime Minister who is not only responsible for Australia's phenomenally high and debilitating foreign debt; he is also prepared to add to that level of foreign debt, irrespective of its impact on Australia and the fact that we are mortgaging our future as a nation. Mr Keating, having made that statement, is culpable. He knows that we are mortgaging our future as a nation. He talks about increasing the growth of our economy, yet he makes no allowance for its impact on our current account deficit, which feeds straight into our foreign debt. He is aware of the consequences. By 1995-96 - the time frame of his statement - our current account and overseas debt problems will be worse than they are today. How can anyone claim to be a responsible Prime Minister and leave us in that situation? Ross Gittins's final comment in his article in the Sydney Morning Herald is very salutary. He said:
High levels of external debt leave us more exposed to external developments, such as slowing world growth and falls in commodity prices, that could set in train processes leading to sharp reductions in national wealth and living standards.
The Prime Minister's economic statement is a frightening portent of the future of our nation. It will have a number of significant impacts in New South Wales. A number of one-off fiscal stimuli - by way of Federal financing of projects for New South Wales and other Australian States - were referred to in the statement. The Premier has said, and rightly so, that he will be monitoring carefully the amount of money flowing from Canberra to make sure that, for once, New South Wales gets its fair share. That is very critical. But all the benefits that could flow from this statement will be wiped out because of the size of our foreign debt. This statement seems to mortgage the future of New South Wales and Australia. I commend my motion.
Mr BOWMAN (Swansea) [3.27]: The honourable member for Pittwater regaled us with a disaster scenario, yet he failed to tell us why he is so gloomy. He asserted that the degree of additional growth that the One Nation economic statement seeks to promote will be extremely bad for us, and that we should be happy to stay in the economic doldrums. The honourable member for Pittwater would then be glad because, as he has worked it out, that would have a beneficial effect on the state of our overseas debt. I emphasise that our overseas debt is not the debt of the Australian Government or the New South Wales Government, although they are components of it. Overseas debt is the debt of the economy. It should be noted - and often it is not - that as well as being partly owned from abroad we also own part of abroad. Nevertheless, I concede that it is important to bear in mind in any kind of economic plan that the level of our overseas debt must be reined in. For the life of me I cannot understand why we should persist with concerning ourselves - as the honourable member for Pittwater would have us do - with overseas debt without worrying about anything else. It seems to me that he is seeking, by implication, a do-nothing strategy, except for the imposition of a consumption tax which, miraculously - in a way which is not clearly specified - it is presumed will do all things bright and beautiful for the Australian economy.
Many people in Australia, including the Premier, believed that the Australian economy would have a softer landing. It is a matter of regret to me, and to honourable members in this House, that we had a hard landing. The assumption of most of the economic commentators quoted by the honourable member for Pittwater was that we would probably have a soft landing, or at least a very much softer landing than we had. Professor Hughes, now at the University of Newcastle, when asked at an economic breakfast of the Hunter Valley Research Foundation, "Do you think we will have a soft landing or a hard landing?" said, in the colloquial, "I'm stuffed if I know." I turned to those at my table and said, "Do any of us know for sure?" and various answers were forthcoming. The Premier of New South Wales - and umpteen others - felt quite a degree of confidence that we would have a soft landing. As it happened, we had far too hard a landing, and the drop in the level of economic activity has not only been tremendously painful for many Australians - whether business proprietors, employees, or those in the professions - but it has gravely imperilled our opportunities to rein in the overseas debt.
It is all very well to say there is a risk in this strategy. There is no absolutely riskless economic strategy for Australia. If any one were to pretend that there is, that would just show abysmal economic ignorance. I wish that there could be a no-risk strategy but there is not. We must make the best of our circumstances. In a deregulated environment that means we must take some risks. It is amazing to me that honourable members opposite - who are wont to praise entrepreneurial attitude and entrepreneurial achievements - should, rather contradictorily, yearn after some kind of no-risk strategy and say, "Look, there are some risks. There is not absolute certainty in this. We cannot get back into the womb with the One Nation statement, and therefore it is a bad thing". It is fatuous; it is crying for the moon. I certainly do not agree, however, that although the strategy is audacious it is by any means foolhardy or formed by the kind of economic ignorance of which it is accused.
Surely to heaven the infrastructural improvements, for example, will do a great deal to improve the efficiency of the Australian economy and to increase our opportunities to process materials, manufacture goods, transport our primary products and the products of our mines to ports and from State to State and, in effect, export more effectively. It is only by achieving a greater exporting capacity and by effective import replacement that we will deal effectively in the long term with our overseas debt. We cannot just sit at the bottom of the business cycle, wring our hands and say, "Gee, it's
awful but we must not do anything that has the least risk or we will be sunk". I waited in vain for some ray of hope, or at least some suggestions as to what course might be followed by the Australian Government in order to facilitate our struggle to maintain our living standards and, in particular, to lift the Australian economy from the bottom of a recession and, with it, all of the people - and it is a considerable number of people - who are suffering very greatly because of the depth of the recession.
I wish the honourable member for Pittwater had been able to say something about what might be a better alternative. I presume that alternative is the kind of Fightback package we have heard about - the quaintly titled package which certainly would fight back effectively were it to be implemented against any kind of egalitarian ideal or any sense that the burdens of taxation ought be shared reasonably fairly in this State. It was the Federal Opposition that asked, in its quest for freedom of information, for the Treasury figuring about the distribution of taxation if the goods and services tax parcel were to be implemented in Australia. Now it is finding fault, and the Deputy Leader of the Federal Liberal Party was very much affronted that the answer was not what he desired; that his reading of the figures - and I do not believe he can do any figuring for himself - was contradicted by the information provided to him. He was quite at a loss. All Australians know that the argument that John Hewson hopes to put to middle Australia is not, "The nation will be better off" but, "You will be better off. We are fighting back against those insidious ideas about a fair distribution of taxation in Australia. We are going to work the pea and thimble trick with the 15 per cent impost, sure, and we are going to make some readjustments in transfer payments and so on in order to allegedly square things up". But in fact - and the Treasury figuring demonstrates this quite clearly - the distribution of taxation will be transferred downwards.
That is a great way to discourage the working men and women of Australia upon whose enthusiasm and effort, and in many cases pain, we must depend if we are to increase the productive capacity of this country in such a way as to maintain a low level of inflation - and it is the lowest it has been in Australia for a couple of decades - increase our exporting capacity and our import replacement capacity, and really fight back. The real fight back is the program that goes under the heading of One Nation. I give credit to the honourable member for Pittwater - and I hope the following speakers deal as honourably as he did with the distribution of the $2.3 billion between the States - who seemed to accept, and I acknowledge his reasonableness on this point, that the distribution of funds is a pretty fair. There was an accusation - or perhaps there was a genuine fear on the part of the Premier - that the States which have Labor governments would be looked after and New South Wales would be dudded. That did not happen and, consequently, I will not talk at length about it, except to remind honourable members that the infrastructural improvements in rail and roads will benefit New South Wales and the other States in such a way that must make many Ministers in New South Wales very happy because they know the tremendous economic benefits that could flow from these infrastructural improvements. It is only by improving our training system that we can increase the level of productivity in such a way as to succeed in the task of reining in our foreign debt and achieving a reasonable equilibrium in our trading relations with the rest of the world. This expenditure, amounting to an infusion of $2.3 billion, is by no means a madcap burst of Keynesianism. In comparison with the size of the Australian economy it is a very responsible boost.
In light of the lack of confidence among consumers, and especially among investors, it is absolutely essential that there be a degree of confidence in investing and working in Australia, both by native Australians and potential suitable overseas investors. I am amazed that such a modest fiscal infusion should be looked at askance by the
honourable member for Pittwater, who seemed to fear that Australia's foreign debt would blow through the roof, that inflation would go sky high and that all sorts of nasty things would happen. It was a mad sort of gamble, as he saw it, without any sort of substantiation. It amazes me that he could see it in such a dark light. I think this One Nation package will inspire people to bear with their present pains in many cases and to develop hope and confidence and the surge of energy that is necessary if we are to get it off the floor and carry on effectively with the fight. It is not good enough to run tremendously expensive advertisements in the newspapers saying that privatisation will solve all our problems but fudge how it will solve the problems. The advertisements feature charming little girls and boys sitting in school and smiling people chosen by the advertising agency who look at one another as though privatisation is some sort of miracle that will solve all our problems. There is no dead set correlation between the degree of privatisation in various economies and its degree of success. There is no simplistic one-to-one relationship. Members of the Australian Labor Party are happy to look at any given situation and rationally assess whether privatisation is appropriate. From the Australian perspective, if Australia is to be one nation that is making a vigorous effort to deal with its economic problems, messages of hope should be projected that, though they may be a little optimistic, will inspire people to add to the significant effort being made so that Australia can achieve its aim. [Time expired.]
Mr ZAMMIT (Strathfield) [3.42]: Like most concerned people in Australia, I listened intently to the speech the Prime Minister made in the Parliament entitled "One Australia: a Vision for the Future". I must confess that when he had finished I felt very hollow. What I had hoped he would say he did not say. I felt his speech was a regurgitation of socialism in its purest form: when one is in trouble borrow money and try to buy as much time as possible. The following morning with the honorable member for Pittwater I attended a breakfast at the Sheraton at which Senator Button was one of the guest speakers. He spoke about the package in a rapturous mood. But when it was all over the guests asked Senator Button repeatedly what structural reforms and enterprise bargaining would occur and about the scandalous situation on the Australian waterfront. Senator Button could not reply to the questions. Will anyone in Australia trust Paul Keating's judgment and competence on his past record? The socialist philosophy regurgitated by Paul Keating has repeatedly said that only governments can provide the answers, are more important than individuals, families and businesses and can make better decisions than individuals and families.
Socialists would have us believe that all problems can be solved by governments, provided they are given enough power and taxpayers' money; that redistributing wealth is more important than creating it; that social progress can be achieved without economic progress; that services provided by governments are free and that uniformity and mediocrity are to be preferred over diversity and excellence. That philosophy has been downgraded throughout the world as people have thrown off the shackles of socialism and decided that the only way to go is the way that espouses the rights and the freedom of the individual and his right to go into business, make money and assist in the future upkeep of the country. In 1983 Paul Keating was appointed shadow treasurer. Almost immediately he said he did not want the foreign banks to enter Australia. After the election he changed his mind and allowed them to come into Australia. That was the time of the Bonds and Skases, who got the country into much difficulty and created many problems. In 1986 everyone issued warnings. Responsible business people and economists were saying, "Watch out; the speculative bubble will burst; the heavily indebted corporate sector will crumble". Yet Paul Keating did nothing, preferring a hands-off approach, which turned out to be catastrophic for Australia.
The end of 1986 was the year of the leveraged buy-outs and the junk bonds. Following the crash in 1987 Paul Keating panicked, as he will panic again soon. In an incompetent misreading of the Australian economy he encouraged the Reserve Bank to reduce interest rates. He overheated the economy to such an extent that he panicked again. The only way he could think of to pull it back was to increase interest rates for home buyers. Has any honourable member in this Chamber heard of interest rates of 18 per cent for families who are trying to buy a house? Total silence on the Opposition benches. After a year and a half of hearing about soft landings we have now had a crash landing. [Time expired.]
Mr CLOUGH (Bathurst) [3.47]: I have listened to both Government supporters who have spoken in the debate but so far have not heard a single word about how the Government will use the infrastructure funding it has been handed by the Federal Government. I take issue with the honourable member for Strathfield. He spoke about high interest rates of home buyers. The average home lending rate now is about 10.5 per cent. From HomeFund, the speciality of this Government, it is 15.9 per cent. The honourable member should not speak about interest rates unless he is willing to accept that the Government is screwing people who have bought homes through the HomeFund scheme at exorbitant interest rates. The New South Wales Government is moribund. It has no idea where it is going. If an asset is not tied down, the Government will sell it; if it is tied down, the Government will do its best to sell it also. I listened intently today to the Minister for Sport, Recreation and Racing and Minister Assisting the Premier. He went round the answers he was required to give to questions about what the State would pay for the privatisation deal.
I have in my office a video and material that must have cost something to send to me. The Government is wasting its time sending out that sort of rubbish. The people of New South Wales will take the Government's record into consideration when deciding whether the coalition parties are fit and proper to operate the State under their privatisation deals. I represent a railway area in a country electorate. There are four Government members in the Chamber putting forward the idea that they are attacking the Federal Government for what it has done. The Government has not picked up and run with the infrastructure improvements offered by the Federal Government to the State Rail Authority. Today we heard the disgraceful statement by the Minister for Transport that pensioners will not be permitted to travel at reduced rates on certain train services at certain times of the year because they are not paying enough. This is the religion of the New South Wales Government. It looks to making everything pay. If it does not pay, get rid of it. My electorate used to have a considerable railway component. The Government has cut the inside out of the railway system in the Central West and far western New South Wales. When the Prime Minister offered to improve the railway system by relieving the State Government of the responsibility to operate services between Sydney and Brisbane and between Sydney and Melbourne -
The honourable member for Lismore represents a country electorate. I have not heard him say a single word in defence of the railways in his electorate. He does not have the internal fortitude to stand in this Parliament and defend the railway people in his electorate. The Federal Government has given the State Government an opportunity to use the funds to be saved by not operating the rail service between Brisbane and Sydney and Sydney and Melbourne to do something for railway services in the Central West and the far western areas of New South Wales, but this Government has dropped the ball. Last Thursday afternoon the Minister for Agriculture and Rural Affairs issued a statement
to the effect that possibly Parkes will be affected by this option. I was lucky enough to read that press release early in the show and I replied to it. I give credit to my local newspapers which published the truth - my reply - and not the rubbish put out by the Minister for Agriculture and Rural Affairs.
The New South Wales Government has compounded the problems faced by the Central West and far western areas by putting pressure on Australian National Railways and Westrail to reduce the Indian Pacific service to one service a week. The Government is not looking at taking advantage of the infrastructure benefits granted to it by the Federal Government. The Federal Government has given the State Government an out by saying it will take over the passenger services on the eastern seaboard and giving the State Government the funds to use in other areas. However, the Central West and far western areas will get nothing. There is one Labor Party member at Bathurst and one at Broken Hill. [Time expired.]
Mr HATTON (South Coast) [3.52]: I welcome the opportunity to speak to this most important matter. I am disappointed with the reception given to the Prime Minister's package. Obviously there is room for debate but we, as Australians, ought to be talking the economy up, grasping the initiatives - no matter where they come from - trying to make these things work and get people back to work. The one certainty about economic policy and economic debate is that the economists get it wrong. On any performance assessment they should be sacked or disregarded. They are not magicians. Economic policy is a matter of choice, according to the philosophy one follows. For almost 100 years prior to World War II there was a marked cyclical pattern in industrial countries throughout the world - the boom and the bust, the crisis and the recession. After World War II there were between 20 years and 30 years of growth. The Keynesian approach of demand management worked, because the theory was that a cost-push, including wages and a demand push - in other words an excessive aggregate demand - fed inflation.
The extreme Keynesians on the one hand viewed unemployment as a product of deficient demand, and on the other hand as voluntary. One of the legacies of the Keynesian debate is that many people in Australia blame the unemployed for being voluntarily unemployed. From about 1973 to 1979 unemployment was right across the world. Unemployment rose. In debating policies on both sides we should not treat Australia in isolation. The argument in Australia is pitched in microeconomic reform terms, that if the microeconomics are right the macroforces in the market will work. In reality they were shown in the 1930s not to work. We must break the boom-bust cycle. This was done and shown to work in the United States of America during the depths of the Depression when the New Deal approach of Harry Truman did in fact turn things around.
There must be a marriage between private enterprise and government. There must be improvements in infrastructure and there must be responsibility in private enterprise - not in the deregulation climate set up by the Hawke-Keating Government where 16 foreign banks rushed in, competed with each other and enormous resources were wasted on takeovers and on real estate. The resources were not used for investment. The accord, the holding down of wages, did not work because the excessive profit was not channelled into proper infrastructure within business itself. Business had no discipline to do that. Business took the profits and made good use of them, but not for the nation's best interest. Business accepted the effective wage cuts but did not channel the profits into infrastructure. That does not happen in Sweden, Japan or in Germany. Industry in those countries accepts its responsibilities. Those industries share their
responsibilities in a wages policy and they re-invest. For example, Japan has an ongoing program of public works so that when things are good that program can be slowed down, and I instance the major harbour bed expansion in Tokyo. When things are bad money can be pumped into the economy and the wrinkles can be ironed out by putting money into infrastructure and getting people back to work.
I should like someone to tell me where in this debate is the consideration for the way in which small business will get its custom when the unemployment rate is 10 per cent and people cannot afford to buy or to invest. Something must break the cycle. For heaven's sake, let us not have this preaching about the Federal Government wasting $1 billion. What is the alternative? The alternative is to do nothing, to leave the economy on the floor, to leave unemployment at 10 per cent and hope that the macro climate is going to work. It did not work in 1930 and it will not work in 1992. I have every confidence that if all of us in Australia talk up the economy and encourage a policy of a backing a winner, those industries. [Time expired.]
Mr KNOWLES (Moorebank) [3.57]: The honourable member for South Coast obviously has hit the real nerve in this debate, which is how this country can go about establishing a mechanism to break the cycle of the boom-bust that has been inherent in our economy since before Federation. I find it extraordinary that during this debate members on the Government benches have spent considerable time speaking about the dangers of running the national account at a deficit, when for the past 92 years since Federation, with the exception of six years after World War II, the national account has run in deficit. This country has always run a trading deficit. It is a trading nation, a developing nation when compared with world economies. The honourable member for South Coast accurately said that there must be a degree of pump priming by Federal and State governments to demonstrate that there is a reason to invest in this country. With our interest rates in both real and world terms at low levels, such interest rates being capable of attracting investment, what is missing in our economy is business confidence. Clearly the infrastructure programs announced by the Prime Minister last week demonstrate the Federal Government's commitment to establishing a regime where there will be investment, whether it be Government led or not, to try to re-develop business confidence after the business excesses of the 1980s.
I make the point that on this matter of public importance there was the lead speaker, the Minister for Sport, Recreation and Racing and Minister Assisting the Premier, and the duty members of Parliament, but no member from the Government side representing the outer urban electorates such as Camden and Badgerys Creek, where infrastructure spending will be particularly relevant. The honourable member for Pittwater and the honourable member for Strathfield are fortunate to have infrastructure in place. It would be nice to be Ross Gittins who can sit back in trendy Glebe and have the luxury of writing his articles criticising infrastructure spending. He can walk to work down Glebe Point Road where he has government buses zooming past him, a couple of universities down the street, an olympic pool and three or four hospitals. In my electorate youth unemployment is approaching 30 per cent, waiting lists exist at every TAFE, health services are run down and underfunded, schools are overcrowded, transport problems arise because 60 per cent of the local workers migrate from my electorate to go to work.
Infrastructure is a valuable component of any strategy for national recovery. My electorate has benefited quite well, as has New South Wales. New South Wales has received a greater per capita share of the cut up of the $2.1 billion. Specifically, in the southwest is the Hornsby to Liverpool arterial road link at $25 million, the addition to
the freight line linking Campbelltown to Enfield. Also, the depreciation allowance for industry will mean that industries in my area will benefit from that additional infrastructure. Infrastructure in the southwest of Sydney is a fancy name for jobs. The Federal Government has attempted to stimulate growth and opportunities for jobs. It would be churlish of any government - in particular this State Government - which has done so much to dislocate the economy and reduce jobs in this State - to do anything other than acknowledge the efforts of the Federal Government. The honourable member for South Coast pointed out that infrastructure spending will prime the pump. We must move away from this reliance on the business sector to simply provide funds and hope for the best. Interest rates are down and so is confidence. The "one nation" economic statement will go a long way towards restoring that confidence and hopefully see greater investment in this country. It is hoped that it will recreate jobs, particularly in areas such as those that I represent.
Mr LONGLEY (Pittwater) [4.2], in reply: I thank honourable members for participating in this very significant debate. It is pleasing that members share concern about the importance of this statement. I wish to respond to comments made by a number of honourable members. The honourable member for Swansea said that I had failed to establish, in any particular, why growth is bad. Things can be readily misunderstood but I did not say growth is bad. Growth within appropriate limits is good. The question is not whether growth is good or bad but how it is paid for. The particular point I made was that growth under Keating as Treasurer was paid for at the rate of $75,000 foreign debt for every job he "created". That is the problem. The problem is not growth per se but how it is funded and where the money comes from to achieve that growth. Likewise, the honourable member for Swansea said that I had failed to substantiate why and how foreign debt would grow. Even in the economic scenario presented by Paul Keating, he said the current account deficit would worsen from 3.75 per cent of gross domestic product this financial year to 4.5 per cent in 1993-94 and by 1995-96 it would nearly be back to where it was this year. Clearly, the current account deficit is getting bigger and that means our foreign debt is getting bigger. I did fully substantiate that; it was in the economic statement itself.
The honourable member for Swansea went on to say that there was no riskless strategy. That is true. There is no such thing as a riskless strategy but this strategy is not riskless, it is reckless. This strategy is a gamble, and that is the problem. The honourable member criticised economic assumptions. This strategy is based on assumptions which are simply not believable. Because there is no such thing as a riskless strategy it is important that any reform undertaken is real reform with real jobs, not debt created jobs. Real microeconomic reform is needed. It must actually occur and not be the great long rhetoric we keep hearing from Labor governments and oppositions where nothing actually occurs on the ground. That is the problem. The honourable member for Swansea asked what better alternatives we were proposing. He actually got that one right. Of course the better alternative is the Fightback proposal of the Liberal Party-National Party Federal coalition led by Dr John Hewson. The Fightback proposal is comprehensive and real. It deals with that very question of where the money comes from, not this nonsense emanating from Paul Keating. The honourable member for Swansea said that the funding appears to be divided fairly between the States. At this stage that appears to be the case and New South Wales will be monitoring matters to make sure that does occur.
The honourable member for Bathurst said the Government did not specify how New South Wales would use these particular funds. That is in the substance of the statement by Keating so there was no need to reiterate that. New South Wales will be
by far and away in the best position to gain advantage from the economic statement. However, the cost will be high. That long-term cost is of great concern. The honourable member for Bathurst said that New South Wales was moribund. What could be further from the truth? New South Wales has just had its triple-A rating reconfirmed. It is one of only five States around the world which has had that rating reconfirmed. New South Wales has the lowest rate of unemployment, one of the lowest rates of inflation and has gone from being the highest taxed State in Australia under Labor to being in the middle rank. All those things demonstrate that New South Wales is by far and away the most dynamic of all States in Australia. The honourable member for Bathurst spoke about country rail and so on. I have been advised that with the Keating statement the Federal Government will completely kill off the Sydney, Lithgow, Bathurst, Broken Hill, Adelaide rail line as a result of the standardisation of the line between Melbourne and Adelaide. Indeed it will be the biggest single killing off of rail in the country line. It is important that those facts be noted clearly.
The honourable member for South Coast made a number of significant statements. He commenced by talking about the need to talk up the economy. There is a legitimate place for that, however, it is important that there be substance behind the rhetoric, behind the words. All too often throughout Keating's treasurership he was talking up the economy, so much so that the belief is that he has cried wolf once too often. The honourable member for South Coast also talked about economists getting forecasts wrong. I could not agree with any statement he made more than that one because economists very consistently get their forecasts wrong. It is precisely because of the truth of that statement that the heavy reliance of Paul Keating's statement on economic forecasts is so dangerous. He is making vast assumptions and relies on low inflation rates, high growth rates, wage outcomes and so on which are very unrealistic. It is precisely because of the comment by the honourable member for South Coast that any reliance on this statement is dangerous. As one of the commentators said, it will lead us into cloud-cuckoo-land. The honourable member for South Coast said that we cannot look at Australia in isolation exactly. That is so true a statement. It belies Paul Keating's trying to pretend that Australia can be isolated from the rest of the world and that we can have a growth rate that will be double that of our major trading partners. Australia cannot be looked at in isolation. We are a competitive world.
The honourable member for South Coast said that some people had said, he believed incorrectly, that if there were microeconomic reform there would be no need for macroeconomics. I agree with the honourable member for South Coast on that. When microeconomic reform proceeds - and it will proceed for some time - there will still be the need for macroeconomic targeting, controls and so on. That is still very much the case and no one at any point has doubted this, least of all those on this side of the House. He then talked about the need to break the boom-bust cycle. That is very true, but it must be underpinned by real reform. The boom-bust cycle is exacerbated by the fact that the Australian economy has so many inefficient parts locked up and unable to advance to world-best practice. That is what we must aim for. The boom-bust cycle can be dramatically lessened by having real and substantive economic reform. That is what we did not see in Paul Keating's statement. The honourable member for Moorebank talked about the need for a degree of pump priming. We need real investment from the private sector. Pump priming, at best, is only a very short-term palliative. It is imperative that we have real reform, and that is what we do not see in Paul Keating's statement. I commend the motion to the House.
Motion agreed to.
But there's one unstated assumption: that, one way or another, foreigners will go on happily financing our bloated current account deficit without ever losing confidence in the wonderful way we're running our economy. Now that's a brave assumption.