From: brendan@otc.otca.oz (Brendan Jones)
Newsgroups: aus.politics
Subject: Australia's economic performance.  You'll be shocked.
Date: 16 Oct 92 08:43:09 GMT
Distribution: aus

This article on p.9 of the Sydney Morning Herald last Saturday (10 October)
is extremely interesting reading.  You may even learn something that is beyond
the scope of the 5 second pop-news grab.

Items in [bracks] are my own annotations.


OUR WORLD CREDIT RATING STANDS TO IMPROVE

By PAUL CLEARY

CANBERRA: The cost of servicing foreign debt has fallen dramatically in the
past three years, a trend which could help Australia to get a favourable
report card from international ratings agencies this year.

Although most Australians know how foreign debt has continued to rise from
$130 billion three years ago to $150 billion last quarter, few would realise
that the cost of debt servicing relative to Australia's export earnings has
fallen for three successive years.

As shown by the accompanying graphic [which I can't include, unfortunately],
the ratio of foreign debt payments to exports dropped from 21 per cent in
1989-90 to 16.4 per cent for 1991-92, the lowest servicing cost since 1985-86.
[at which time, may I add, Australia enjoyed a AAA rating from both agencies]

Leading international ratings agencies such as Moody's and Standard and Poor's
believe this ratio is one of the most critical ones in making an assessment of
a nation's ability to service its obligations.

These two organisations sent teams to Australia earlier in the year and are
now preparing their annual credit assessment.  The Moody's report is expected
in the next few weeks.

A favourable report would be important for the Labor Government, which is
struggling to convince the electorate that its economic reforms will
eventually pay dividends.

Both organisations have downgraded Australia twice, in 1986 and 1989, because
of what was seen as an alarming increase in Australia's debt and a continued
rise in the cost of servicing it.

It may seem paradoxical that foreign debt can continue to rise even in 
relative terms while the cost of servicing can fall during the same period.
However, this can be explained by continued growth in exports and falling
domestic interest rates.

Australia has had the fastest growth in exports of any industrialised country
in the past 10 years, spurred by the floating of the dollar and cuts in
tariffs.

Exports of goods and services have grown on average and in real terms by 8.1
per cent in the past nine years.

The ratio of exports to gross domestic product (GDP) has risen from 14 per
cent in 1983 to 24 per cent last financial year.  This improved export
performance has given Australia more foreign currency to pay for its 
borrowings.

The cost of servicing Australia's increased foreign debt has fallen, mainly
because of a sharp fall in domestic interest rates.

As interest rates at home fall, Australia can roll over existing obligations
at lower interest rates and new debts can also be negotiated at lower rates.

However, this trend has been a favourable influence only in the most recent
financial year, when the net amount of money paid to overseas investors fell
by $2.2 billion to $14.7 billion.

The net income deficit leapt from $12 billion in 1988-89 to $16 billion in
1989-90, and $16.95 billion in 1990-91.

--------------------------------------

For the doomsayers amongst us, I'd just like to emphasise the following
points:

* AUSTRALIA HAS HAD THE FASTEST GROWTH IN EXPORTS OF ANY INDUSTRIALISED
  COUNTRY OVER THE PAST 10 YEARS

  Our manufacturing sector, which we all know is rusting before our very eyes
  and has withered almost to the point of extinction, has increased its
  exports by 8% per year *each* year over the past decade, bringing in a total
  of A$11 billion dollars of export income in 1990/91.  It is now our second
  largest export earning sector.

* EXPORTS OF GOODS AND SERVICES HAVE GROWN ON AVERAGE AND IN REAL TERMS BY
  8.1 PER CENT IN THE PAST NINE YEARS.

* THE RATIO OF EXPORTS TO GROSS DOMESTIC PRODUCT (GDP) HAS RISEN FROM 14 PER
  CENT IN 1983 TO 24 PER CENT LAST FINANCIAL YEAR.


I'd strongly suggest we all stick these facts in our collective pipes and
smoke them, stop talking down the economy, and get it through our thick skulls
that Australia has performed remarkably well over the past decade, thank you
very much.  People just don't want to hear the good news, do they.

If and when Moody's upgrades our credit rating back to AAA, what will
Dr. Hewson and the believers in Armageddon say then??
-- 
Brendan Jones  | ACSnet:  brendan@otc.otca.oz.au               | This space
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