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Wednesday, 3 April 1957


Mr CREAN (Melbourne Ports) .- In addressing myself to this measure, which is to provide for a loan of 50,000,000 dollars from the International Bank for Reconstruction and Development, 1 remind the House that, as the Deputy Leader of the Labour party, the honorable member for Melbourne (Mr. Calwell) has indicated, the Labour party opposes the bill.

Before the suspension of the sitting the honorable member for Wentworth (Mr. Bury), who has had some practical experience in this field, indicated that in his view Australia should borrow all the money it can, and whether it be from sterling sources or dollar sources seems, to him, immaterial. As I see it, this problem of borrowing from the International Bank cannot be severed from the whole question of Australia's dollar problem - and there is a dollar problem, as this bill evidences. We should ask ourselves why we should borrow these dollars from the International Bank. Why is the loan necessary? Ostensibly the loan is necessary because it is to be used to purchase certain goods, the identity of which is set out in the schedule, and which, it is stated, are to further the economic development of Australia. Nobody cavils at the statement that we need as much economic development as possible in this country. However, I suggest that we must, at least, be prudent in the way in which we go about these things.

As I see it, we cannot sever the borrowing of this loan from the whole dollar position as it faces the Australian economy. I should like to cite a few figures to indicate the kind of perspective in which, I suggest, this proposal has to be evaluated. The real crux of the matter is that Australia does not earn sufficient dollars on current account - that is. by the sale of goods to the dollar area - to pay for the goods that we are purchasing from the dollar area. Initially there is considerable imbalance between Australia's exports to the dollar area and its imports from the dollar area. That position can be seen in detail in a published statement emanating from the Commonwealth Statistician which gives the figures for trade for the year ended June, 1956. This statement shows that in that year, in round figures, we imported from America goods to the value of £A. 127,000,000, but exported to the dol.ar area goods worth, only £A. 73, 000,0 JO. So there was a difference, in round figures, of £A.54,000,000.

Now, that deficit has been bridged in two ways. It has been bridged by means of loans such as this, and it has been bridged also by investments by American concerns in Australian industry. 1 submit that this whole position needs to be looked at carefully before we can get it in its true light. One question we might ask ourselves is why, in the financial year 1955-56, when rigid import controls were supposed to be in operation, imports from dollar areas totalled £A. 127,000,000, which was the same figure as for the previous year, whereas on the sterling account, in respect of which also import controls were operating, the figure was £A.476.000,000 as against £A.520,000,000 in the previous year. There was a drop, on sterling account, of something of the order of £A.44,000,000 whereas the value of imports from the dollar area was unchanged from the previous year. It seems that import controls against sterling goods have been imposed more rigorously, as it were, than against dollar goods. At least that seems to be borne out by the figures that I have given. I think those figures also justify the feeling that we on this side of the House have that, so long as this Government can get dollars in any way at all. it does not very much matter to it how it does so if, overall, including both temporary and permanent things, our borrowings from and earnings in the dollar area are roughly balanced.

How has this balance been achieved in the last financial year? Again, the figures are published by the Commonwealth Statistician in a statement entitled, "The Australian Balance of Payments. 1951-52 to 1955-56 ", in which the imbalance that I have indicated is shown to be of the order of £-\.50.000.000. Added to that shortage on current account - and I suggest that this, too. is a significant problem - is another £A. 50.000.000 made up of what are known as invisible items, which include freight on imports from America amounting to £A. 18.300.000: profits and dividends remitte 1 to America, £A.l 1.410.0 0; and undistributed income accruing to companies incorporated in the dollar area, £A.17,000,000. I have selected only the most significant of those items. The three that 1 have given total £A.46,700,000. They are items that absorb additional dollars and bring the overall deficit at this stage to round about £A. 100,000,000. Now, that deficit of £A. 100,000,000 has been balanced by the £A.17,000,000 that I mentioned, left in this country as undistributed profits, by new capital inflows in 1955-56 amounting to £A. 19,600,000, by drawings during that year from the International Bank of £A. 17,900,000 in dollars, and by drawings from the sterling area dollar pool of £A.40,000,000 in dollars. These sums add up roughly to £A. 100,000,000 so, as far as the Government is concerned, the dollar problem is solved for that year. But solved at what cost? I submit that we are storing up for ourselves in this country a great many problems for the future. As has been indicated, basically we get dollars in this country from three sources. We get them from the sale of goods, we get them from loans from the International Bank of the kind we are discussing, and we get them from the investment of dollars by private firms in the Australian economy. At the moment the United States of America is the principal creditor nation of the world. I shall now quote some statistics for the year 1955 which appear in the August, 1956, issue of an American publication, " Survey of American Business published by the United States Department of Commerce. This particular issue contains an article which offers some rather interesting information about our own country. It is entitled "Growth of Foreign Investments in the United States and Abroad ", and begins -

United States private investments abroad continued to grow at a rapid rate in 19SS, increasing by 2.4 billion dollars to a year-end total of 29 billion dollars.

A billion dollars is, of course, a very large sum. When we match it with Australia's comparatively insignificant dollar shortage we tend to lose perspective. To America 50,000,000 dollars is not a very significant sum, but it is very significant indeed in terms of Australia's dollar requirements. The article gives some figures which show the very rapid growth of American private investment in Australia. In 1950 the aggregate amount of direct investment was 201.000.000 dollars. By 1951 it hail risen io 256,000.000 dollars; by 1952 to 310,000,000 dollars; by 1953 to 326,000.000 dollars; by 1954 to 393,000,000 dollars, and by 1955, the latest year for which figures are available, to 494,000,000 dollars.

The most significant movement has occurred in the last two years. Between 1953 and 1954 there was an increase of 67,000,000 dollars, and between 1954 and 1955 an increase of 101.000.000 dollars. These increases were made up of new investment, on the one part, and undistributed profits on the other. Of the increase of 67.000.000 dollars which occurred between 1953 and 1954, new capital accounted for 32,000,000 dollars and undistributed profits for 35,000.000 dollars. Of the undistributed profits 24.000.000 dollars was found in the Australian manufacturing field. Of the increase of 101.000.000 dollars which occurred between 1954 and 1955. new capital accounted for 62,000,000 dollars and undistributed profits for 39.000.000 dollars, of which 29.000.000 dollars reached the manufacturing field.

Details are also given, by categories, of where this American investment has gone in the Australian economy, lt seems to me that these figures also are very significant. Total investment had, by the end of 1955, reached 494.000,000 dollars. Of this, 237.000.000 dollars - or slightly less than half - was found in the manufacturing industries. Trade accounted for 26.000.000 dollars, other industries for 21.000.000 dollars, and mining and smelting for 25.000.000 dollars. The remaining 185.000.000 dollars was very largely devoted to I he petroleum industry.

A table of the earnings from this American investment is also given. These figures also seem to be significant. For 1955, the earnings on the American investment of 494 000.000 dollars totalled 64.000.000 dollars. That is a fairly g001 rate of return and of it, 48,000,000 dollars - even though the manufacturing investment was less than half of the total - came from the manufacturing field. 1 repeat, the earnings from ;i total investment in r, manufacturing of 237 00r> 000 dollars were 48.000 000 dollars. That would seem to indicate that the prices thu' ' ''fin" charged fo- products- - and I do not refer merely to those of

General-Motors Holden's Limited - are a little higher than one would think necessary for a fair return upon capital investment. Moreover, it is setting up a very critical dollar-shortage problem. A large part of these earnings is remitted to America in the form of dividends. It is quite true that a part is retained, or " ploughed back " into the Austraiian undertaking, but even this can at some time or other, subject to Treasury regulation, be remitted abroad.

The total is building up year after year. The figures continue to be significant, and can perhaps be matched one against the other. The earnings of American investment from 1950 to 1955 have run as follows: - In 1950, they were 27,000,000 dollars; in 1951, 36,000,000 dollars; in 1952, 33,000,000 dollars; in 1953, 51,000,000 dollars; in 1954, 60,000,000 dollars; and in 1955, 64,000,000 dollars, i repeat, 48.000.000 dollars of the 1955 figure came from the manufacturing field. We have reached a stage where undistributed, and remitted, profits are the two most significant items among the invisible - £28,000.000 last year of the total of £50,000,000. These sums, which are going out of the Australian economy, nullify a very high proportion of Australia's export earnings. Honorable members should keep in mind that Australia's exports to America are worth about £70,000,000 a year. The invisible items totalled £50,000,000 last year, and, as 1 have said, of this undistributed and remitted profits accounted foi £28.000.000.

I suggest that this is the kind of problem that is being ignored by this Government. It should face the matter squarely and ask, " Need we borrow these dollars in order to provide certain necessary things?" We challenge the Government's claim that a large part of these goods which at the moment are imported with the assistance of dollar loans - tractors have been given as an example - cannot be obtained from sterling or Australian sources. I know of Australian-made tractor equipment which cannot be sold. In my own electorate the firm of Malcolm Moore makes large earth-moving equipment. I went down there less than a month ago and found that they had hundreds of thousands of pounds' wo-th of it stacked in the yards. They say that they cannot sell it. Admittedly, as mentioned by the honorable member for Wentworth 1 Mr. Bury), one or me reasons is that the Australian product is, perhaps, C!00 or £200 dearer than lbs imported product. But there are a number of other things in Australia at the moment which are protected by tariffs and at which that charge could bc levelled. I suggest thai we must face up to the reality of the situation. Should we protect some of these industries rather than get involved in the morans of the dollar problem? It seems to me that the Government is not facing up to the implications that are involved.

I was interested, recently, to read in the April, 1956, issue of that very informative government publication. " The Quarterly Review of Agricultural Economics ", which, I think, is published under the aegis of the Bureau of Agricultural Economics, Canberra, an article headed " Direct Foreign Investment - Influence on Australian Balance of Payments ", by C. Dawson. Mr. Dawson came to this conclusion at the end of the article -

Far from reducing Australia's dependence on the rural and other established, export industries in paying for imports . . . direct foreign investment, unselectively welcomed, may well increase that burden.

The consequences of direct foreign investment on the balance of payments vary, of course, from industry to industry and from one undertaking to another. In the light of these considerations, Mr. Dawson stated -

Australia's present and prospective balance of payments position would appear to call for a policy of critical selectivity in the admission of and in the granting of assistance to direct investment from overseas.


Mr Anderson - Who said that?


Mr CREAN - This is in a government publication. I suppose that, at the beginning of it, there may be some proviso to the effect that it does not necessarily reflect the views of the Government. I do not know. I simply quote this. I suggest that honorable members may read the article afterwards with some profit to themselves. But at least the suggestion is that a large part of private investment from the United States of America has really picked the eyes out of investment opportunities in Australia. It has not come here on a philanthropic basis. It has come here as private enterprise to earn as much on its capital as. is possible. But Australia will pay the price in the next few years. I have already cued an example of large profits from manufacturing where, from an aggregate investment of 237,000,000 dollars last year, there was a net return of 48,000,000 dollars. It seems (o me that that is too high a price to pay for some of this investment which should have been more carefully chosen oi on which more restrictions should have been placed when it sought to come here.

This problem is causing concern not only in Australia. Apparently, it is also causing concern in Canada, a country which was cited with approval from the other side of the House before the sitting was suspended. As the result of certain criticisms of the inroads of direct private investment in Canada, an extensive inquiry was undertaken in that country. The result has been published in the form of a booklet. " Canadian International Investment Position from 1926 to 1954". I think the point is well made that the largest part of investment in Canada, taking all sources ranging from schools, hospitals and houses up to manufacturing industries, has come from resources in Canada. That is also true of Australia. Basically, the major pan of our aggregate investment has been found within this country and the amount that has come from overseas has tended only to be marginal. Because it is unselectively made and is more than unusually welcome to this Government, very little attempt is made to see that overseas investors are not picking the eyes out of investment opportunities here.

Basically, the majority control of a large part of Canadian industry no longer resides in Canada. I shall quote from a very radical publication. " The First National City Bank Monthly Letter - Business and Economic Conditions ", which is dated August. 1956. lt contains a digest or summary of the Canadian experience. It quotes a passage from the " Financial Post ", a Canadian journal, as follows: -

Most people have known that American participation in Canadian industry has been soaring since the war. hut few have realized the extern of foreign domination. ... In 1926 Canada controlled 65 per cent, of its manufacturing; in 1953 it was 53 per cent.; to-day it may be no more than half. In 1926 Canada controlled 62 per cent, of its mining: in 1953 it was 43 per cent.: to-day ir is probably lower still. Taking altogether petroleum (in all its phases), all mining and smelting and all other manufacturing, Canada in 1953 was just keeping ahead ot the United Stales in its ownership of those aspects of Canadian business. 1 suggest that the time has come when this Government should face up to this sort of problem and conduct just as system:.:1: on inquiry into the extent of control of certain phases of Australian manufacturing industry as has been conducted in Canada. The Government should inquire, particularly, into the petroleum industries. It is generally recognized by those people who adhere to what is called the Keynesian analysis of things that investment policy is very important indeed in regulating the whole economic tempo of a community and in preserving full employment.

The Australian Labour party stands fundamentally upon the continuance of full employment, but realizes thai the continuance of full employment is dependent on overall control. That is achieved through monetary, taxation and other methods. There must be overall control of investment policy. But we do not know how significant a sector of our potential investment field in this country is ours to control any longer. I submit that there is very good ground for setting up an expert committee of inquiry to examine the Australian international investment position, just as was done in the sister dominion of Canada.







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