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Wednesday, 7 September 1983
Page: 455

Mr HURFORD (Minister for Housing and Construction and Minister Assisting the Treasurer)(11.07) —I move:

That the Bill be now read a second time.

The purpose of this Bill is to enable Australia to consent to an increase in its quota in the International Monetary Fund, and to make the consequent payment. A country's quota in the IMF determines, as well as its financial subscription to the fund, its voting power in the Fund, its rights to draw from the Fund and its share in any allocations of special drawing rights-SDRs-by the Fund. From time to time the Fund reviews the levels of quotas in the light of developments in the world economy, the international monetary system and changes in the relative economic position of Fund members.

In March this year, in the context of the eighth general review of quotas, the Fund's Board of Governors approved a resolution proposing a 47.5 per cent increase in the aggregate level of Fund quotas to SDR90 billion. The resolution also proposed that 60 per cent of the overall quota increased be distributed among members in proportion to their relative economic positions in the world and 40 per cent in proportion to their existing quota shares. For this purpose, relative economic positions are measured by a set of formulae which take into account gross domestic product, the level and variability of current external payments and receipts and the level of international reserves. One consequence of this method of distribution is that percentage increases in quota proposed for individual members vary considerably around the aggregate quota increase of 47.5 per cent.

The quota increase will come into effect when members accounting for at least 70 per cent of existing quotas have consented to their proposed increases. Individual member countries wishing to consent to their proposed quota increases are required to do so by 30 November 1983 and, assuming the 70 per cent threshold has been reached by then, to pay the increase in full by 31 December 1983. As at 2 September 1983, 34 members holding 15.25 per cent of total Fund quotas had consented to their proposed increases.

The increase in Australia's quota proposed under the review is from SDR1,185 million to SDR1,619.2 million, an increase of 36.6 per cent. Clause 4 of the Bill approves consent to this increase. Australia's increase of 36.6 per cent is smaller than the average increase of 47.5 per cent. As a result, our share in total quotas will decline from 1.94 per cent to 1.80 per cent. This decline stems from the procedures adopted for distributing the overall quota increase. As I have mentioned, the procedures that have been adopted by the Board of Governors are designed to realign members' quota shares so that they more accurately reflect their relative economic positions. Since, in these terms, Australia's present quota share somewhat overstates our relative economic position in the world, we qualify for a smaller quota increase than the average. As provided for in the IMF Articles of Agreement and the eighth quota review resolution approved by the Board of Governors, 75 per cent of the additional quota subscription will be paid in Australian dollars and the remainder in SDRs and foreign currency.

Clause 5 of the Bill allows for part of the quota subscription to be paid in the form of a non-negotiable, non-interest bearing security as provided in section 7 of the principal Act. The Australian dollar component of the increase is to be paid in this way. The foreign currency and SDRs required to pay the balance of the increase will be purchased from the Reserve Bank; clause 6 of the Bill approves an appropriation for the purpose of acquiring foreign currency and the SDRs will be purchased under the standing appropriation of section 5A (6) of the principal Act. The purchase of SDRs and foreign currency from the Reserve Bank is a financing transaction and as such has no effect on Budget outlays or on the Budget deficit. The issue of the non-negotiable, non-interest bearing security has no effect on the Consolidated Revenue Fund. It is a promise to pay the Fund Australian dollars in the event that the Fund needs more of our currency than it presently holds. In that event, which is unlikely, there would be a call on the Consolidated Revenue Fund, but again, no effect on Budget outlays or the deficit.

The timing of the eighth general review of quotas was advanced considerably in the light of concerns about the stability of the international financial system. In supporting the quota resolution in March this year and by consenting to Australia's quota increase now, Australia will help augment the Fund's financial resources. These resources have been depleted by a high level of drawings from the Fund by its member countries, particularly over the past year or so. The increase in quotas, the Fund's principal source of resources, will enable the Fund to continue to provide temporary balance of payments assistance to members facing serious debt and external payments problems and to promote a stable international monetary system. Such stability is, of course, in Australia's interests. By supporting the quota increase, we will also increase our drawing rights and our entitlement to any allocations of SDRs, as well as protect our voting power in the Fund. I commend this Bill to the House.

Debate (on motion by Mr McVeigh) adjourned.