Mr HAYDEN —My question is addressed to the Treasurer. I refer to the near record monthly private capital inflow for April disclosed today and the fact that 99 per cent of foreign investment approvals for the first half of 1980-81 were for takeovers of existing enterprises. Is it a fact that the huge volume and direction of this private capital inflow is blowing to pieces the Government's money supply target of 9 per cent to 11 per cent, is inherently inflationary and is applying substantial pressures for further interest rate increases? Is it a fact also that it is responsible for a large scale alienation of Australian ownership and control of established Australian industry? Furthermore, is it a fact that it is forcing significant revaluations of the Australian dollar and accordingly creating serious price disadvantages on competitive export markets for exports of Australian manufactured goods and farm products? Does he acknowledge that these effects are contrary to the best interests of Australian farm and manufacturing industries, stable economic management, and the promotion of the national interest? Will he therefore take immediate steps to haul back this damaging flood of foreign investment into a more manageable flow?

Mr HOWARD —The Leader of the Opposition has asked a very long and very important question. I will try to give it the detailed response that it merits. It is true that the most recent balance of payments figures have indicated a very large increase in the volume of private capital coming into Australia. It is true that that inflow contains a very high element of portfolio investment. It is equally true that all of the reasons for that very large increase can be a matter of conjecture. It has something to do with the existing interest rate differentials between United States domestic interest rates and Australian interest rates.

I do not accept the description that the Leader of the Opposition places upon this situation; that is, that it is blowing the Government's money supply projections to pieces. The most recent indications for the 12 months to, I think, March show that the growth in M3 is about 11.7 per cent. That is up by about 0.7 per cent on the previous month's figures but, as the honourable gentleman knows from his earlier experiences, these figures can fluctuate very wildly from month to month. It would be a fairly brave person who tried to put a precise figure upon the final outcome at this stage of the year because at this time of the year the external account is always the wild card so far as the money supply outcome is concerned. It appears that there was a stronger seasonal element in the most recent balance of payments figures than is normally the case. This is partly due to the fact that provisional tax payments are larger this year-by an estimated 30 per cent-than was the case a year ago and that they are being paid earlier. Some of the information from the money markets suggests that arrangements for tax payments have been made earlier than last year and that more funds have been brought in from overseas for those purposes.

As the honourable gentleman knows, all of the matters which bear upon the external account are interrelated and the conduct of exchange rate policy has an impact upon international competitiveness. Equally, of course, international competitiveness is a reflection of domestic success in controlling prices. To the extent that the external account is conducted in a way that reduces and does not increase the level of inflation, that has a beneficial effect on our international competitiveness.