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Wednesday, 20 May 1970

Mr Kevin Cairns (LILLEY, QUEENSLAND) - I move:

After sub-clause (1.) insert the following subclause:

*(1a.) In the performance of its functions, the Corporation shall have regard to the current monetary policies of the Commonwealth and, in relation to the provision of assistance in a particular case, to the urgency of the need for that assistance and the importance of that assistance to the attainment of objects for which the Corporation is established.'.

The amendment is a very qualified one and I should hope that the last 3 or 4 lines of the amendment do not qualify out of existence provision for the Corporation to have regard to the current monetary policies of the Commonwealth. We are all aware, within recent years, of the increasing difficulties that exist in any system where monetary policy is to have a real effect, where money is to retain its value and where interest rates are to be at appropriate levels, of having too great a proportion of activities lying outside those fields for which there is some responsibility. This has been given significant point in the last report of the Australian Finance Conference. On page 2 of its report is a table which only confirms the existence of what we have known to have been the trend for a great number of years. There it is made perfectly clear that of the total estimated demand in Australia for what are known in this table as receivables, or for what are often judged to be factors operating on the credit market, the areas in which there is some responsibility for interest rates have decreased. For example, in the year from June 1968 to June 1969, the trading banks' responsibility for the credit market declined from 33.8% to 22.8%, but the responsibilities of the finance companies - the finance institutions, the fringe banking institutions - have shown a rise consistent with the rise they have shown over a great number of years. 1 am concerned that as this Corporation is clearly not to operate within the banking system, and as it will not be subject in its operations to banking control, it should at least have some due regard to monetary policy. Monetary policy, for the purpose of this amendment, is defined not in the narrow sense of current physical monetary obligations or output of the Commonwealth, but in the totality of quantitative monetary policies operating within the Commonwealth. I refer to such matters as total quantitative aspects of monetary movement, the total volume of money available, the variations in that movement, the rate of circulation of that money and so on. J would hope that the Corporation in its activities would not find itself in conflict with the current trend in monetary policies defined in that way. I would disagree with the Minister for Trade and Industry (Mr McEwen) on this point. There is an institution which has somewhat parallel activities to the Corporation, and that is the Australian Resources Development Bank. That bank in its operations is required not to operate contrary to or in conflict with current monetary policy of the Reserve Bank of Australia. If the Corporation were to operate in clear conflict with current monetary policy, if it were to operate out of phase with that policy, the matter of keeping interest rates on an acceptable level would be made unduly difficult.

If I may give an example: At the present time it is perfectly clear that there is a very tight monetary policy in this country, and that tight policy is being worked through the banking system. This policy has operated for some time, lt operated to a certain extent last year, and it is operating in a far tighter and more stringent way at the present time, and has done over the last 6 or 7 weeks. The present operations of that policy are having a real and clearly different effect in a quantitative manner on the total loans, advances and so on being made available in the community than would have been the case had such a policy not been operating. For example, if one consults the weekly statement on central banking business which is published by the Reserve Bank of Australia, and examines from the beginning of April to the present time the movements in the types of loans, advances and other assets for which banks are responsible, one would find that the movements have declined, not a great deal, but significantly. If in that situation a body such as this corporation were to lend in the market, as it will be able to do in a very significant manner, it could run counter to the current practice of monetary policy. In order to neutralise that effect monetary policy would have to be tougher, interest rates would have to be higher, or the quantitative withdrawing of money in the community might have to be more stringent. We know this. So it is in order to ensure that the operations of this Corporation will not be contrary to monetary policy that I have moved this amendment. I hope that the amendment will be accepted.

I am actually surprised in some ways that the Opposition did not seek to move an amendment of the kind I have proposed, as it is in conformity with an economic doctrine which it has practised for a number of years. We do not take it to the extremes to which the Opposition has taken its doctrine, but I would hope that, as I have taken that doctrine as far as it ought to be taken on this occasion, in a sensible manner, the Opposition will support the amendment. I hope, of course, that the Government will support it. I think it has value and I think it should be supported. But there is one other matter in relation to it which I would like to mention. This concerns the requirement for the Corporation to have an annual report. If the operations of Commonwealth monetary policy are to have any significant effect upon the phasing of operations of this Corporation details of its activities will have to be provided more often than once a year. We know very well that monetary policy can change radically over a period of 12 months, monetary policy being defined in the way in which 1 have defined it. So if we are to see that its operations are not out of phase with the current practice in the rest of the community, I think the Minister will agree there has to be some kind of check, some kind of data and statistics on what the Corporation is doing, provided if possible quarterly, certainly half yearly, but not yearly if we are to make this Corporation work. Having made that definition of monetary policy I hope the Government will accept the amendment.

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