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Wednesday, 3 October 1956

Mr McEWEN (Murray) (Minister for Trade) . - I told the Leader of the Opposition (Dr. Evatt) earlier that I would be prepared to make some observations in this chamber before the debate on the Estimates of the present group of departments had concluded, on the administration of import licensing with particular reference to what is known as trafficking in licences. I think that, in order to put the matter in its proper setting, it is necessary for me, first, to make some general observations on the whole circumstances surrounding import licensing. The honorable member for Grayndler (Mr. Daly) has charged the Government with responsibility for the necessity for import licensing.

Mr Curtin - Of course the Government is responsible.

Mr McEWEN - I think that is right. 1 think it is, and I am proud of it - not of import licensing, but of the circumstances that have produced the necessity for it, because they are circumstances of unprecedented prosperity and confidence in the whole of the Australian community. It i3 only this situation of unprecedented prosperity, shared by the whole of the Australian community, that has produced the pressure, by people who have the capacity to pay, for imported goods. These people are exerting pressure because of their desire to expend the earnings that they have made in the present prosperous circumstances, whether they be from wages, salaries, businesses or from farming. They have endeavoured to spend a considerable portion of these earnings on imported goods. For instance, one of the factors that have produced the necessity for import licensing is the importation of 250,000 motor cars last year. Does the Labour party condemn the development of an economic situation which enables Australians to buy 250.000 motor cars in one year?

Not only does this situation of unparalleled prosperity exist to-day. but such is the confidence of the whole Australian community, including the business world, the farming community, State governments, municipalities and people who work for wages, that all are ready not only to spend their current earnings but also to pledge their earnings for subsequent years in order to borrow for the purpose of developing the country or of improving living standards.

Surely this is a situation that we have all aimed to achieve, lt is a wry paradox thai the very advent of this magnificent situation, which none of us would have dreamt five years ago was capable of being achieved, has brought with it the problem that now confronts us. The problem is one of a country, prosperous in its own land, developing at a tempo hitherto undreamed of. and in the course of development requiring imports, and finding itself unable to service this desired spending in overseas currency. The present -rate of importation has been exceeded only three times before in our history. One of these occasions was the year of the extraordinary wool boom, and the other two were in the subsequent years. We have import licensing of a rigidity that troubles a great many people - myself as much as most - but what we describe as rigid restriction of imports is, in fact, regulation of imports at an extraordinarily high level.

Our export earnings are also at an extraordinarily high level. I have claimed in this Parliament, and many times outside of it, that they are £100,000,000 a year more than they would have been but for the policy sponsored by this Government in the field of agriculture and pastoral activity and, in co-operation with the State governments, set in motion in 1952. As a result of the maturing of these plans, we are now earning this vastly greater sum annually. Our high rate of export earning is supplemented by a certain amount of overseas borrowing. This, for the purpose of extending our capacity to spend money on imported goods, is further supplemented by the high level of overseas investment in the private sector. This investment, running at between £80,000,000 and £100,000,000 a year, is added to our overseas funds and is, in due course, spent on imports. In addition, there is behind these current yearbyyear earnings a reserve fund which at the present time amounts to substantially more than £300,000,000. It acts as a cushion, and supplements our year-by-year export earnings. These are the figures of a prosperous, dynamic, expanding country which is developing in the public and private sectors. They are the figures of a community expressing its prosperity and confidence in the future through the indicator of imports on a scale never before known in this country, and seldom known in any other country in similar circumstances. That is the circumstance which has produced this situation, in which the imports desired by Australians outstrip their resources in overseas currency.

It is a simple fact that while, in my judgment and in the judgment of the Government also, it would be good business to supplement our overseas funds by a fairly substantial borrowing programme - and this after all, is normal business practice in a dynamic and expanding enterprise - the United Kingdom, our historic supplier of capital, has been, financially, tremendously drained by two great wars, and is no longer able to contribute to our capital requirements as before. The great and wealthy United States of America is, for reasons that I do not at this point criticize, unwilling or unable to provide for us the opportunity to earn in its currency the great volume of dollars that ought to go with sound borrowing in that area. We cannot, therefore, with confidence borrow substantially in dollars.

These are the elementary facts of the situation. What can be done about them by the Labour party or any one else? This sort of thing has occurred in other countries. It occurred in recent years in Brazil. That country was importing, as we are, at a heavy rate, but one day the Brazilian Government and the central bank had to say, "We are sorry, but we cannot pay for the things that we have imported or ordered. We will pay you as soon as we can, but we cannot pay you now ". We are not going to get into that situation. I do not believe that any honorable member would regard it as responsible government to allow Australia to drift into that situation. We are certainly not going to reach a stage where, through the fault of the Government, there will be doubt as to the holding of the exchange rate. In the circumstances, the only prudent course is to limit the drain upon our overseas earnings and reserves. That is why import licensing has been introduced. It is operated, for reasons that are implicit in what I have been saying, with a considerable degree of rigidity, but that rigidity is not expected to be permanent.

Much thought has been given to import licensing, but ten times as much has been given to means by which we can escape from it at an early date. The export drive and many other effects are an expression of our thinking in that regard. In the meantime, by limiting our expenditure, we are ensuring that we do not exhaust our overseas reserves. We are prepared to vary, and we do in practice vary, the rigidity of that limit as circumstances permit. As the price of wool - our greatest export earner - goes up or down, and as the rate of overseas investment rises or falls, so too, while there is at any one day a rigidity in our import licensing, there is at all times flexibility as to the amount of overseas funds that we are prepared to commit" through our licensing system.

The broad approach to import licensing has been to say that there are certain things which, for the well-being of this country, we must have in the quantities required. There is no need for me to describe them. They are the essentials of every-day life and industry and take in such things as tea, petrol, essential machinery, chemicals, rubber and the multitude of commodities that are essential to the modern community. These things come into the country to the extent that demand for them exists. They are regulated through import licensing for two purposes only. The first is to keep a record of the commitment that is entered into by Australia, and the second is to ensure that our import rate matches our usage and will not result in unjustified stocks being built up in this country. These items are imported, literally without restriction, under a subdivision of what is known as the administration section of the import budget.

Another group of slightly less essential items, is brought in under category A. I know that nothing is regarded as nonessential in a modern community. Honorable members will agree, however, that certain goods may be regarded as being less essential than others. I refer to everything from imported clothing, at the more essential end. down to exotic foodstuffs at the other end. These are category B items and the entitlement to import them is expressed by mean* of licences from quarter to quarter. Entitlement is based broadly on the fact that either the claimant has an old, established business or an essential usage, or an historic pattern of importation in these items built up over the years. I think I can say that 1 have heard no criticism of import licensing except as it affects category B items. Here we have the problem of the ordinary retail business, the department store, and the manufacturing establishment, all of which depend greatly upon category B items, which include paper and textiles. Sometimes the actual users of these things, the manufacturers, have never been importers. They depend for their supplies entirely upon those who hold a quota and exercise rights under import licences from quarter to quarter. To be quite frank, when import licensing first became necessary we had the high hope, which all would expect us to have, that it would not be of long duration. In the very nature of things, it extends over the entire range of Australian living, business activity and manufacturing, and to administer this terrifically extensive and complex activity requires very many men. I am confident that every one will agree that the Government should not have instantly built up a tremendously extensive permanent administrative structure to meet a phenomenon that it was hoped would pass quite quickly.

Now, as it shows evidence of being with us rather longer than we hoped - and, believe me, we shall get rid of it just as speedily as we can - steps are being taken to strengthen the administration of import licensing. When 1 tell the committee that there are constantly operating over 700,000 licences, covering perhaps several million items, honorable members will appreciate that it would be expecting too much to hope for complete perfection in every aspect of its administration. However, I will aim constantly at the best that can be done in the circumstances and will be prepared at all times to be guided by the experience of others and to amend what is being done if it can be demonstrated that amendment is justified. The department's current daily rate of inward correspondence in connexion with this matter is a regular 700 communications.

Mr Ward - Which shows what a mess the Minister has made of it.

Mr McEWEN - It makes it obvious that some little delay is inescapable; but we are quickly overtaking the back-log of unresolved issues in this connexion.

Mr Curtin - And it is about time.

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