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Wednesday, 20 March 1957


Sir ARTHUR FADDEN (McPherson) (Treasurer) . - I move -

That the bill be now read a second time.

The purpose of this bill is to authorize the borrowing of a sum of 50,000,000 dollars from the International Bank for Reconstruction and Development, in accordance with the loan agreement concluded with the bank on 3rd December, 1956. The borrowing of 9,230,000 dollars from the bank under the loan agreement of 15th November, 1956, to finance portion of the cost of new aircraft for Qantas Empire Airways Limited, is being covered by separate legislation. Our four previous loans from the bank, amounting to 258,500,000 dollars, which were raised between 1950 and 1955, have been fully used. Drawings under the fourth loan of 54,500,000 dollars were completed in December, 1956. This new loan, together with the loan for aircraft for Qantas, brings the total of our borrowing arrangements with the bank to 317,700,000 dollars.

This loan of 50,000.000 dollars will enable licences to be issued for further imports of a range of essential capital equipment from the dollar area. The issuing of licences has already begun and imports of this equipment under these and other licences still to be issued will commence later this year and continue during 1958.

The full texts of the new loan agreement and the loan regulations are reproduced in the first and second schedules to the bill now before the House.

The Government believes that a measure of external financial assistance is desirable if a satisfactory rate of development of Australia's economic resources is to be maintained. Although the bulk of the resources, both financial and material, required for our development is found locally, imported equipment of various kinds is essential for expansion and modernization in many fields. The larger part of these imports comes from non-dollar sources. There remains, however, some vital equipment which can be obtained only from the dollar area, and International Bank finance provides additional dollars to pay for part of this equipment.

Honorable members will be interested to hear me state a few figures which highlight the uses to which the earlier International Bank loans have been put, and which indicate the valuable contribution these loans have made and are still making to our economic progress. About 75,000,000 dollars, or almost one-third of the total, have been used for the purchase of tractors, agricultural machinery and earth-moving equipment for the improvement of farming techniques on existing farms and the opening up of new lands. Recent marked improvements in productivity in our primary industries have undoubtedly been due, in no small measure, to the increased supply of modern American farming equipment such as pick-up hay balers, combines, forage and other harvesting machinery and tractors.

Over 20,000,000 dollars have been allocated to the modernization of railways. A large proportion of this has been used to pay for components for diesel-electric locomotives whose operations here have resulted in big economies and improved services in the railways using them.

Import licences valued at almost 45,000,000 dollars have been issued for tractors and road construction equipment, and for trucks and components for the manufacture of trucks in Australia.

Expenditure on long-range aircraft and spares, both for our international and our domestic air service, has accounted for 35,000,000 dollars, and almost 30,000,000 dollars have been provided for plant for electric power production. The forestry and mining industries have been allotted almost 20,000,000, and an amount of about 35,000,000 dollars has been used to pay for a wide variety of equipment for the modernization and expansion of our manufacturing industries.

It should be mentioned that much of the bank-financed equipment is being used to assist export production, not only directly as in agriculture, mining and various secondary industries such as the iron and steel industry, but also indirectly by supplying modern equipment for the transport industries. There can be no doubt, also, that the Australian economy to-day is more efficient as a result of the goods paid for with International Bank finance. This new loan will ensure continued access by public authorities and private industry to that productive equipment and technique which is available, generally speaking, only in the United States of America and Canada.

The loan is for a period of fifteen years, and interest is at the rate of 4J per cent, per annum. Interest is payable half-yearly on the amount of the loan withdrawn and outstanding from time to time, and the interest charge includes the 1 per cent, commission which, under its Articles of Agreement, the bank is required to charge and pay to its reserves. A commitment charge of j- per cent, per annum is payable half-yearly on the amount undrawn from time to time, and accrues from 1st February, 1957. Repayments of principal do not commence until two and a half years after signature, the first principal repayment falling due on 1 5th

July, 1959. Payments of interest and principal will then be made half-yearly in accordance with an amortization schedule on a fixed annuity basis. The final payment will fall due on 15th January, 1972. Under the loan agreement, once the full amount of the loan has been withdrawn, and until amortization payments commence in 1959, interest will amount to 2,375,000 dollars, or £A.1,060,000 per annum from July, 1959, onwards, annual payments of interest and principal combined will amount to 5,200,000 dollars, or £A.2,321,000.

In general, the other clauses of the new loan agreement are similar to those in the previous loan agreements, each of which received the approval of the House; and the terms and conditions of the present loan to Australia are in line with those of International Bank loans to other countries at the time. The rate of interest, however, on similar loans now being made by the bank is 5i per cent.

As with previous International Bank loans, it is intended to pay the Australian currency proceeds of this fifth loan into the National Debt Sinking Fund. This is provided for in clause 6 of the bill, and clause 7 requires the National Debt Commission to meet repayments of principal to the International Bank as they fall due. In effect, therefore, the loan provides its own sinking fund. Payments of interest and other charges are to be met from the Consolidated Revenue Fund. This is provided for in clause 8.

Clause 9 exempts this loan from certain provisions of the National Debt Sinking Fund Act. This is necessary because otherwise the Commonwealth Government would be obliged to make normal Sinking Fund contributions.

Schedule 2 to the Loan Agreement describes the development programmes to which the equipment financed under the loan will contribute. It also gives examples of the types of equipment which will be financed out of the proceeds of the loan.

Although the goods to be procured have not, as yet, been precisely determined, an allocation of the new 50,000,000 dollars loan among the four programmes has been tentatively agreed with the International Bank. This tentative allocation, which may be varied with the agreement of the bank as the needs of importers become clearer, is as follows: -

 

As in our earlier loans, agriculture will receive a substantial share of the total. Although much of the equipment needed to develop new areas and increase output from existing holdings can be obtained either from Australian manufacturers or from suppliers in countries outside the dollar area, there are certain types of tractors and other farm machinery which have to be obtained from the United States and Canada. The loan will ensure that our producers do not suffer by lack of access to the latest technological developments in the agricultural machinery field. Tractors and logging equipment for the forestry industry are also eligible for International Bank finance.

As was the case in the fourth loan, transport equipment represents an important proportion of the total value of the goods to be financed under the present loan. I am sure that honorable members will readily appreciate the vital need to expand and improve transport facilities in a continent as large as ours, and with widely scattered centres of population and production. The road transport programme, for which an amount of 12,800,000 dollars has been tentatively allocated, includes not only equipment for the construction and maintenance of roads and bridges, but also trucks and components for their manufacture in Australia. The amount set aside for the railway programme will be used mainly to purchase components for the manufacture of diesel-electric locomotives in Australia.

An amount of 16,000,000 dollars has been tentatively allocated to the industrial development programme. This amount will cover the purchase of essential dollar capital equipment for the iron and steel, food processing, mining and engineering industries.

Investment in the manufacturing field is largely undertaken by private enterprise, and the development plans of private firms at any given time are in varying stages of formulation and execution. This has been recognized by the bank and, in order to provide a measure of flexibility, a fixed sum has not been allocated to each sector of this programme.

There will be no difference in operating procedures between the present and earlier International Bank loans. The Department of Trade has notified importers of the types of goods eligible for the licensing under the loan and, as I have already indicated, the issue of licences has begun. In general, equipment will not be licensed for importation against the loan if similar equipment is available from non-dollar sources at reasonably comparable prices and delivery dates. As in previous loans, importers will pay for the goods licensed through normal banking channels.

Once again this further loan shows the International Bank's appreciation of the need to continue the development of our resources. It also demonstrates the bank's confidence in the future of the Australian economy. Since the loan will be used for the further improvement of our productive capacity it cannot fail to yield benefits, as the earlier loans have done, of great value to us and I have great pleasure in commending this bill to the House.

Debate (on motion by Mr. Calwell) adjourned.







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