ECONOMICS: by News WeeklyNews Weekly
Foreign debt hits $255 billion
, June 17, 2000
Australia’s financial debt to the rest of the world has blown out to $255.5 billion. It is now equal to 41.8% of Australia’s annual output (Gross Domestic Product).
The Federal Government has used the sale of public assets to reduce its section of the foreign debt from $70 billion in 1996 to $27 billion today, and non-financial corporations have cut their foreign debt exposure to $51 billion.
However, since 1996, their contribution to the foreign debt has gone from $57 billion to $167 billion. It grew by a staggering $29 billion in the last six months of 1999.
Far from reducing the foreign debt, as promised in 1996, the Coalition has watched it increase from $194.9 billion to $255.5 billion today.
Australia’s foreign debt is the result of:
• the winding down of manufacturing industry leaving us heavily reliant on imported manufactures;
• the decline of our rural industries; and
• Australians saving far less than is demanded for investment purposes.
In 1996, The Economist magazine’s Economic Intelligence Unit clearly stated that Australia had no serious industry policy. Recently, Moody’s, the international investment rating’s agency, expressed concern that Australia’s “household savings ratio plunged to less than 1%, down from 6% three years ago.” Clearly, the Government has no savings policy.
The reality is that the economic policy agenda is now being set by the international financial markets to whom we are increasingly indebted.
That was made clear a few months after the Coalition was elected. In June 1997 Mr Howard addressed an International Monetary Conference in Sydney, that was host to top executives of the world’s largest 100 banks.
Before Mr Howard spoke, a former central banker and then chairman of the big US investment bank Goldman Sachs and Co., Mr John Corzine, most bluntly set out the what policies Australia needed to adopt it wanted to continue attracting foreign capital.
“There is no substitute for consistent, disciplined, fiscal and monetary policies ... We should not lose sight of the fact that for individual countries, chronic current account deficits are a symptom of a structural imbalance taking the form of over-consumption and under-savings.
“Commitment to privatisation, subsidy reduction, progressive tax policies, reduced public payrolls, pension reform ... will solidify credit worthiness, enhance competitiveness, and send welcoming signals to investors,” Mr Corzine said.
Until the Howard Government sets in place a serious set of policies to bring down the foreign debt, the course of action outlined by Mr Corzine will see the continued hollowing out of the middle class and the electorate’s disgust of our political parties will deepen.