Aust, growth to be held at 4%—Keating

Press, 28 June 1989, Page 37

Aust, growth to be held at 4% —Keating

NZPA-AAP Canberra The Australian Treasurer, Mr Keating, says economic growth has to be held to around four per cent per year because of domestic capacity restraints.

He said in a speech to a “Financial Review” lunch in Sydney that the nation’s capital stock had been run down over the past three decades. “We now have found that we cannot grow at much more than four per cent per annum without straining the leash of our capacity and seeing demand spill over into imports,” Mr Keating said. The latest national accounts figures show economic growth as measured by changes in seasonally adjusted real Gross Domestic Product (GDP) rose 1.6 per cent in the March quarter for an annual growth rate of 5.4 per cent. Gross National Expenditure (GNE or demand) rose 3.2 per cent in the March quarter for an annual 11.3 per cent increase.

Excessive demand has seen a surge in imports and a blow-out in the balance of payments, with Monday’s new? of an sAustl.B3 billion (SNZ2.4O billion) current account deficit for May taking the cumulative deficit to

sAustls.99 billion for the first 11 months of fiscal 1988-89. Economists now expect the current account deficit will exceed sAustl7 billion for the financial year, ending this month, equal to around five per cent of GDP.

Mr Keating said Australia did not have to bring the current account back to zero, “but we do have to stabilise debt-to-G.D.P., which we believe obtains with a current account deficit of about 2.5 per cent of GDP.”

Mr Keating said the progressive tightening of monetary policy over the past 14 months “will, over time, moderate the present levels of investment, both for business and households, and promote household savings.”

He said the Government had tightened fiscal policy and would preside over a net Public Sector Borrowing Requirement next financial year approaching one per cent of GDP after a zero net PSBB in 1988-89. The Government had also held wages policy firm “despite the extreme pressures placed on it by the high levels of demand.”

“I reject absolutely the mindless comment that the Government is just sitting pat — sitting on its hands,” Mr Keating said.