Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Full Day's HansardDownload Full Day's Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Wednesday, 3 April 1957

Mr BURY (Wentworth) .- I rise to support this bill. There is one justification, and one only, for the Government's borrowing abroad, lt is that the capital which is injected into the Australian economy in the process expands the economy to that extent, and enables it to carry a larger load of debt. The debt thai has been incurred by the total borrowings from the International Bank is, in fact, well within the capacity of the Australian economy to carry, because that capacity has increased more than proportionately since those borrowings were commenced. The honorable member for Melbourne (Mr. Calwell) gave as his first reason why the Opposition opposes this bill the fact that such opposition is an article of faith. In so far as anything is an article of faith beyond reason and not to be subjected to reason, it is, of course, unanswerable in the opinion of its proponents. I suggest, however, that there is a vast difference between Australia in 1957 and the Australia of the early 1930's. It would be impossible to borrow from the International Bank for any prodigal purpose. One could sympathize with the reaction of those who said, in the early 1930's, that in the immediately preceding years debt had been incurred too lightly, and insufficient attention had been devoted to making sure that the investment which resulted from it was well placed. But these things change, and we have to be careful that articles of faith do not become just parts of archaic folk lore.

I shall deal now with the cost of this money, which is i per cent, less than the rate at which the Government could borrow in the Australian market, even after allowing for the special commission to which the honorable member referred. This commission is, in fact, the kind of arrangement that any prudent bank would make. It provides for bad debts, and bad debts arise not just because countries misuse funds, but also because they may be overtaken by world economic conditions in which they are no longer able so easily to service their debts.

The honorable member for Melbourne spoke of our credit standing overseas, and I can say that in the New York market, which I know well, it is second only to that of Canada, without excepting any

European country. The honorable member said that the goods that would be imported with money obtained by this loan could be made in Australia. Even if this were true, it would not touch the real significance of the loan. In fact the proceeds of the loan, as has been the case with the other loans, will be sold to individual importers in Australia in order that they may buy American goods. The proceeds collected thereby in Australian currency are invested in the loan programmes of the Australian Loan Council.

I shall now turn my attention to the goods in the hands of the private importers, which have to be imported for the purposes set out in the programmes attached to the loan agreement. The conditions precedent to an import licence being granted for this or any other import from the dollar area are, first, that such goods are not available in Australia, or are not available in sufficient quantity, and, secondly, that they cannot be purchased at a comparable price in countries outside the dollar area. All of the goods imported as the result of this loan have to run the gauntlet of that test.

Those who oppose this loan must face what must immediately be the consequences of discontinuing our borrowing programme in the United States of America. First, that programme supports between oneeighth and one-ninth of the Australian Loan Council's borrowing programme. If this source of capital disappeared it would be essential either to raise the money by other means - presumably by taxation, because as much as possible is already being raised by way of borrowing - or to cut down the Australian Loan Council's programme accordingly. The other side of the picture would reveal that Australia's imports, which have already been cut back to a far greater degree than is healthy for the economy, even when one considers the recent import licensing relaxation, would have to be further cut back, and we should in fact be able to import about £22,000,000 worth of goods per annum less than we are importing to-day.

The honorable member for Melbourne dealt with other ways of filling the loan. Any honorable member surely would agree that if we possibly could raise within Australia all the capital which could profitably be applied to investment in this country, we should not look outside it. But this is certainly not the case at present, nor was it in the recent past when a number of Commonwealth loans were filled by very undesirable methods. One has been the direct and indirect underwriting of loans by the Commonwealth Bank, to a very large degree to make up for lack of support in the bond market, the most inflationary action of which both this Government and the previous Labour government have been guilty and for which the rest of the community has had to pay.

Another argument of the honorable member for Melbourne was that we are now borrowing just to repay interest on previous loans. These things are, in fact, distinctly severable. Our previous loans are now represented by capital investment within Australia. Our economy is larger and stronger to that extent. We are better able to pay interest, and if we now did not continue to borrow we should have to invest less. It is true that the fact that we are borrowing and continuing to borrow means that, in a sense, these funds are being off-set against interest payments, but those interest payments already represent past investments which we should be able to carry. New loans, if well placed, represent future investment; and when they, in their turn, begin to mature, we shall be able to repay them. In fact, the load of overseas debt which Australia carries to-day is negligible compared with that of the early 1930's.

If we are to progress as fast as we might, we need all the capital we can possibly muster, both from here and from overseas. It is the natural counterpart of our immigration programme. In fact, if we could borrow £100,000,000 a year from overseas now, we might be able - in fact, we probably would be able - to manage our current level of immigration without inflation. But if this Government scraped the markets of the world and did everything possible, it would have no chance to raise more than a small proportion of the funds which could be applied in Australia to profitable investment outlets at the present time. The cost of the loans, particularly from the International Bank for Reconstruction and Development, is certainly lower than is the cost of successful private investment in Australia. Not that we should not encourage both; but, in fact, the 4i per cent, which we shall pay on this loan is very much less than are the annual charges in respect of a successful American concern operating in Australia. The rate of profit, for instance, of General Motors-Holden's Limited, whatever may be done with the proceeds ultimately, is certainly very much more expensive than is this form of borrowing.

During this debate a suggestion has crept in - it has not been said specifically - that there is some vast difference between borrowing dollars and borrowing any other currency. In this respect, our thinking needs to be brought up to date. If we take the three years immediately before the Suez crisis burst on the world, we shall see that the rest of the world, far from having a dollar deficit, had a dollar surplus. It is the countries which have not been able to restrain inflation which find themselves short of foreign currencies, dollars as well as other currencies; but those countries which have been strong enough and determined enough to arrest the process of inflation have, in fact, gained very large dollar reserves, particularly the stronger countries of Western Europe, lt is well to remember, too, that outside the sterling area the dollar is almost convertible currency, not always at the official rate, but at rates differing only slightly from it. Countries outside the sterling area can buy dollars with sterling, and I suggest that when we are thinking of borrowing dollars we should bring our thinking up to date and match it with borrowing elsewhere. In any case, Australia normally, year by year, has a surplus of foreign exchange earnings with the countries of the non-sterling area, and our surplus with these other countries, but for our support of the sterling area, would otherwise have to be cleared by the United Kingdom in gold or dollars. Our surplus in this other direction normally greatly exceeds our deficit with the dollar area, which we incur bilaterally. Therefore, sir, we should not be deterred from supporting this loan merely because it involves borrowing dollars. The final effect would be very much the same if we borrowed any other foreign currency.

There was another phrase used by the honorable member for Melbourne which struck me somewhat queerly. He said that we were treated as harshly as is any one else. Let us remember that the International Bank for Reconstruction and Development is an international, not an

American, institution. Indeed, I have been at the board when the United Stales has been outvoted, lt is an international institution, and an international institution necessarily must treat every one alike, so far as the terms and conditions of its loans are concerned. But, in fact, we are by far the largest borrower. We have been more generously treated than has any one else, and that is a reflection also of our almost uniquely good credit record.

There is one matter which has not been raised and to which 1 should like to refer. It is the question of these general loans as distinct from project loans, lt is probable that the board of the International Bank, which is looking increasingly askance at loans for general purposes, rather than specific loans for definite, set purposes, will limit our capacity in the future to borrow along general lines. This brings me to the point that, in future, we shall have to face the fact that if we want to borrow from the Internationa] Bank, we may well have to produce projects in detail, carefully surveyed, for the bank to finance.

Mr Jeff Bate - Such as the standardization of railway gauges, and works of that kind?

Mr BURY - That is an excellent example of the kind of thing which could be financed in this way. That would lead, of course, to serious State and Commonwealth problems. Any one who has had experience of the Loan Council and has had the job of trying to reconcile the jealousies of the States and their claims for projects to be carried out in one State rather than another realizes that that would be no easy task to face. We should prepare ourselves mentally to give some leadership in this respect, because if we want to produce projects on a scale big enough to warrant the raising of worthwhile amounts of capital from the International Bank in the future, there is no time to lose. We need the close co-operation of the State governments.

There is one field to which our thoughts and efforts should be turned immediately - that is transport. Most of the loans made to us so far by the International Bank have been for power or transport. Power is reasonably well provided for relative to transport, but we need large numbers of suitable projects, well engineered and capable of standing up to critical examination, in order to borrow money in the future.

I have no doubt that this loan will increase the capacity of Australia to bear overseas debt to a greater extent than the sum involved. Therefore, I support the bill.

Sitting suspended from 5.47 to 8 p.m.

Suggest corrections