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Wednesday, 3 April 1957

Mr O'CONNOR (Dalley) .- I am struck by the almost limitless enthusiasm of the Government members who have spoken to-night in support of this measure. I cannot help but contrast their attitude with that which they adopted a few weeks ago when this House was considering the provision of more money for housing. On that occasion, every conceivable argument was brought forward by Government members in an attempt to show that any money that was made available for housing, other than that which had been allocated, would tend to aggravate a condition of inflation. If Government members consider that the injection of additional money into the economy for the purpose of building homes will aggravate inflation, how do they justify increasing our overseas indebtedness by 50,000,000 dollars?

One cannot help but contrast the speech delivered by the Treasurer (Sir Arthur Fadden) when he introduced this bill with his attitude when he attends a meeting of the Australian Loan Council. When the representatives of the States are attempting to get from the Treasurer additional money to enable them to carry out capita) works, they are told that their works must be financed from Consolidated Revenue and that, as a consequence, the Treasurer will not make any loans available to them for their capital works. Yet he has attempted to justify this additional loan of 50.000,000 dollars. If it was the first dollar loan that this Government had secured, the attempt that has been made to justify the Treasurer's policy might have been convincing. But this represents the fifth approach that has been made to the International Bank for Reconstruction and Development. Including 9,000,000 dollars that has been secured for Qantas, our overseas debt has been increased by no less than 317,000,000 dollars during this Government's regime. No Government supporter has yet put before the House a positive statement as to how we are going to earn dollars to repay or reduce our overseas indebtedness.

The only way in which we are paying our way in the dollar area is, as has been proved by the honorable member for Yarra (Mr. Cairns), by borrowing additional dollars to pay back debts that we have already incurred. The honorable member for Corangamite (Mr. Mackinnon) was very optimistic when he said that if the United States of America would only purchase more of our wool our dollar problem would be solved. The problem is not so easy of solution as that prospect would indicate. America itself is in no need of our wool. It was only a few years ago that the Congress itself raised the tariff against the entry of Australian wool into America, and if the increase had become operative our wool would have been excluded from the American market. The tariff imposed by Congress was only reduced as a result of a veto by President Truman.

Knowing the pressure that is exercised in politics in America in relation to wool and knowing that the tariff imposed by Congress on one occasion was reduced only by presidential action, I fail to see how we can increase our dollar earnings from wooL When it is recognized that 70 per cent, of our earnings are derived from the sale of wool and wheat, it will be seen that we have a very limited and narrow field in which to earn dollars. But this Government has gone extensively into the dollar area and committed us to a debt which, 1 believe, we will not be able to pay. It has adopted the principle of borrowing further dollars te repay those that it borrowed previously. If that is sound finance, we have no worthwhile prospects.

I should like to contrast the present Government's approach to our sterling indebtedness with that of the Labour Government. It is perfectly true that, during World War II., we were able to reduce our overseas indebtedness. We should have reduced it even further if Australia's labour leaders at the time had not heeded the pleas of the United Kingdom authorises. I think the Chifley Government made available to the United Kingdom in grants no less than £50,000,000. It was suggested, during the term of the Chifley Government, that, since our overseas balances were so favorable, we might reduce our sterling indebtedness, but the United Kingdom Government asked Australia instead to make straight-out grants to it, and the Chifley Government agreed. That is in sharp contrast to the present Government's attitude. I cannot recall that, in its seven years in office, it has once done anything comparable to the acts of the Chifley Government between 1946 and 1949 in response to the requests made by the United Kingdom Government. I do noi think that the United Kingdom's financial problems have eased greatly since 1949. Indeed, the Mother Country now faces a number of problems with which it was no confronted then. It is faced with the problem of disappear^ markets and the loss of overseas investments. If the Chil1e\ Government could assist the United Kin- om just after we had emerged from a war, why has this Government not been able to afford help in the favorable years that it has experienced?

The introduction of overseas capital into A ustralia has brought considerable problems, notwithstanding the enthusiastic support of this Government and its adherents. lt appears to me that the Government's policy is " Boom or bust ". The capital being obtained from overseas is not being employed selectively, but is being allowed to gravitate where it will. In fact, one-third of the capital that has entered this country from Canada, the United States of America, and the United Kingdom has found its way into the manufacturing field. This Government, like any other, could easily face a recession. If one occurs, the policy of the present Government will accentuate its severity. We shall most certainly not escape it, but shall have to face it as best we can. Our troubes in 1930 were aggravated by our overseas indebtedness. We could not escape the impact of the depression, because it was world-wide, and our internal difficulties were intensified by the necessity to meet interest and other payments on our overseas capital indebtedness. The policy of the present Government is developing for Australia a problem that must be faced sooner or later. lt is not sufficient merely to introduce fresh overseas capital into the country. Indeed, one of the greatest difficulties that we have at present is the result of the uncontrolled influx of capital in the early days of development. A case in point is the capital indebtedness of the New South Wales railways, which pay interest charges alone amounting to £6,000,000 a year. The transport system of New South Wales is incurring a total annual loss of approximately that amount. The heavy financial burden represented by the interest paid by the New South Wales railways is a direct result of the influx of overseas capital that took place many years ago. It is frequently argued that the introduction of overseas capital will, of necessity, promote development and secure Australia's future, but the history of the developmental activities of the States does not bear out this assertion.

During the period from 1947 to 1954, private overseas investment in commercial enterprises in Australia increased by approximately 156 per cent., from about £244,000,000 to about £627,000,000. An increasing proportion of foreign investment in the private field has come from the United States and Canada. In 1 947, investment attributable to these two countries represented 16.2 per cent, of company investment in Australia. In 1954, it represented 21.4 per cent, of the total, in the same period, United Kingdom investment in Australian companies increased from £178,000,000 to £437,000,000, but the United Kingdom share of the total declined from 73 per cent, to 69 per cent, lt is interesting to note that, in the period between 1947 and 1954, £381,000,000 of private investment, as distinct from government loans, came from overseas - £259,000,000, or 68 per cent, from the United Kingdom; £94,000,000, or 25 pel cent., from Canada and the United States: and £28,000,000, or 7 per cent., from other countries. Dollar investment in Australia has increased considerably in recent years. This increase is due, in some measure, to the practice of ploughing back into industries the profits that they have earned. It is interesting to note how the profits of American-owned companies in Australia have increased. During the period between 1948 and 1951, the average annual profits of such companies increased from approximately £4,000.000 to approximately £13,000,000.

Overseas investment in Australia has created a number of difficulties, particularly by intensifying the problem of repayments. Although, temporarily, we have gained some benefit from dollar investment in this country, we are sometimes reminded that the policy of ploughing back profits into industry means that if ever the American investors wanted to take their profits out of Australia, our entire dollar earnings would be absorbed in paying interest and dividends. This bill will increase our dollar indebtedness and our general overseas indebtedness. Under the administration of this Government, the national debt for each head of the population has increased by one-third. Regardless of what Government supporters say, this injection of additional capital into the economy will have inflationary effects. I referred, earlier, to the statement by the Prime Minister (Mr. Menzies) that the provision of additional money for housing would increase inflationary pressures, and to his refusal to increase housing funds. It is interesting to note that he announced in the press the very next day that the Government proposed to spend an additional £50.000,000 in purchasing more modern aircraft for the Royal Australian Air Force. Nobody opposes the modernizing of our armed forces, but it is very unconvincing when having listened to the Prime Minister say in this House one night that no more money could be made available for housing one picks up the newspapers on the following morning and reads that an additional £50,000,000 has been made available for some other purpose.

I submit that this bill is of its very character inflationary. This country is being committed to something which it will never be able to repay. The bill does not secure the future development of this country. The truth is that at the present time we are borrowing to repay past loans. 1 have already referred to the loans that were secured at the beginning of this century, including those obtained by the States for their own development. In those days, the railways were just as important as any other form of transport is to-day. As a result of capital indebtedness the State railways are being run at a loss.

This Government must not only justify its proposed expenditure of dollars; it must also put forward some convincing argument about how we can earn dollars to repay the loan. I have already pointed out that wool and wheat account for 70 per cent. of our earnings overseas and that the Americans need not buy our wool. The only chance we have of getting dollars at the moment is for the Americans to purchase our wool in quantity. The tendency in America is against purchases of Australian wool because the Americans have a problem of their own and they will not permit Australian wool to enter the American market to the detriment of the local product. Therefore, I submit that something more is required than the limitless enthusiasm that Government members have displayed in supporting this bill. One cannot help but contrast their attitude on this occasion with their attitude a few weeks ago when they supported the Prime Minister's statement that no more money could be made available for housing.

Debate (on motion by Mr. Joske) adjourned.

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