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Thursday, 28 February 1985
Page: 327

Senator CHIPP —Will the Minister representing the Treasurer tell us how the Australian Reserve Bank will be able to control the borrowing, lending and investment activities of the 16 foreign banks that have been admitted to Australia? Is it not true that European central banks were unable to control the activities of Citicorp, which has been investigated by the United States Congress for illegal currency dealings and tax avoidance, and whose subsidiary Citibank is one of the banks the Government has allowed into Australia? How will the Government protect the deposits of ordinary Australians from decisions by these foreign banks to invest unwisely in Third World debtor nations, decisions which led to the near-collapse of the Continental Illinois Bank and threatened the financial stability of the entire United States banking system last year? Will the Government now submit to pressure from the existing Australian banks to deregulate home loan interest rates and the small overdraft rate, thus causing increases in interest rates charged to home buyers and small businesses? Finally, has the Government considered the effects of allowing 16 more potential currency speculators the right to speculate against the Australian dollar from within our economy at a time when the value of the Australian dollar has plunged and remains unstable?

Senator WALSH —In regard to the last point-I do not know whether Senator Chipp was here yesterday when I answered a question from Senator Watson-the Government made a decision in December 1983 to allow the Australian dollar to float, so that people who wanted to speculate against the Australian dollar would be speculating one speculator against another instead of speculating against the certainty that they could take the country to the cleaners by having the exchange rate underpinned for particular periods of time by the actions of the Reserve Bank. In that context it is worth noting that owing to the grossly irresponsible economic sabotage practised by the present Leader of the Liberal Party immediately before the 1983 elections, when he forecast that if Labor was elected there would be a massive devaluation of the dollar, $3 billion flowed out of the country, because the present Leader of the Opposition had sabotaged the economy for what he perceived to be political gain.

Senator Chipp —I am not interested in what he did. I want to know what you are going to do.

Senator WALSH —It would not do Senator Chipp any harm to do a bit of a study of the history of some of these events rather than grandstanding about every populist issue that he thinks he can squeeze a few more votes out of for the next election. A little more education and a little less grandstanding popularism by Senator Chipp is something which I commend to Senator Chipp.

The PRESIDENT —Order! I suggest that the Minister answer the question.

Senator Chipp —Tell us about your loyalty to your Leader. What about you making phone calls about your Leader?

The PRESIDENT —Order! Senator Chipp, you have had your go.

Senator WALSH —Ask me a question about that if you feel like it, but I am not answering that question now. I would welcome one. I invite you to ask me a question about that another day.

The PRESIDENT —Order! Senator Walsh, if you do not answer the question I will have to ask you to sit down.

Senator WALSH —Senator Chipp asked what policy the Government has to control the investment decisions of these banks. He apparently has not noticed that the Government has a deliberate policy of deregulating the financial system. In general, we do not believe that it is the role of the Government to control the investment decisions made by those banks. With regard to the possibility of currency being moved in and out of the country, almost all of the banks concerned, and specifically the bank Senator Chipp mentioned, Citicorp, through its merchant banking operation, already have the capacity to do that. To the extent, real or imaginary, that that is a possibility, the decision announced by the Treasury yesterday has made no difference.

Senator Chipp asked how the deposits of Australian depositors would be protected. The answer is through the prudential ratio, which from memory is 20 : 1; that is, $1 of paid-up capital is required for every dollar taken in deposits. In addition to that, the banks will be established not as branches of the foreign banks, but as Australian subsidiaries. Therefore, any exposure to bad debts which any of the banks may have because of their operations outside Australia will not affect their Australian subsidiary. The question of the housing loans I will refer to the Treasurer.