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Tuesday, 29 November 1960

Mr HAROLD HOLT (Higgins) (Treasurer) . - I move -

That the bill , be now read a second time.

This bill seeks the approval of the Parliament for the borrowing of 2,000,000 dollars - £890;000 Australian - by the Commonwealth in the United States of America on behalf of the Australian National Airlines Commission. "The bill provides for an appropriation of the Loan Fund to enable the proceeds of the borrowing to be paid to the Australian National Airlines Commission. It also provides for an appropriation of Consolidated Revenue Fund to enable the Commonwealth to meet payments of principal and interest and of other charges associated with the loan. Similar amounts will be paid into Consolidated Revenue Fund by the Australian National Airlines Commission before the Commonwealth makes its payments to the lender.

The arrangements for the borrowing to which the bill will give approval are similar to those approved by Parliament in 1958. Then the Commonwealth borrowed 3,000,000 dollars- £1,300,000- on behalf of the commission for the purchase of the first Electra aircraft put into service by Trans-Australia Airlines. This time, the loan is from the Chase Manhattan Bank of New York, which arranged the 13,000,000- dollar loan for Qantas in 1958. As in the 1958 loan for the Airlines Commission, the Commonwealth will make the entire proceeds of the borrowing available to the commission on terms similar to those provided in the agreement entered into by the Commonwealth with the lender, which is annexed to the bill as the schedule.

Trans-Australia Airlines now operates three Electras. The first was financed by a loan from a group of New York banks, and received parliamentary approval under the Loan (Australian National Airlines Commission) Act 1958. The second was purchased by Qantas with the assistance of finance provided under the Loan (Qantas Empire Airways Limited) Act 1958 and was subsequently sold by Qantas to TransAustralia Airlines under the authority of the Airlines Equipment Act 1958. The proceeds of the present borrowing will provide part of the purchase price of the third Electra aircraft, together with related spare parts and equipment. The remainder of the purchase price has been provided by Trans-Australia Airlines from its own resources.

Negotiations for the loan were completed in New York in April, 1960. Following these negotiations, a loan agreement was drawn up and was signed by the Australian Consul-General in New York on 24th August.

Under the agreement the principal amount of 2,000,000 dollars- £890,000- is repayable in twenty equal quarterly instalments between March, 1961, and December, 1965. Interest is payable at 5i per cent, per annum on the amount outstanding from time to time. A commitment fee of i per cent, was payable on the full amount of the loan until it was drawn on 24th August. After that date, interest became payable at the full rate of 5i per cent.

The terms on which this loan was negotiated are comparable with the terms of aircraft loans negotiated in the United States at about the same time. Other provisions in the agreement are similar to those appearing in earlier agreements negotiated by the Commonwealth in the United States for borrowings to purchase aircraft for Qantas and T.A.A.

Under the authority of clause 5 of the bill, it is proposed that the proceeds of the borrowing will be made available to the Airlines Commission on terms similar to those of the original borrowing as laid down in the loan agreement. The Airlines Commission will consequently be responsible for payment to the Commonwealth of such amounts as it requires to meet its obligations under the loan agreement in respect of interest, principal and other expenses.

The borrowing of the 2,000,000 dollars is part of the Commonwealth's loan programme for 1960-61 and was approved by the Loan Council at its meeting in June last. Thus, before the loan agreement was signed, Loan Council approval had been obtained in accordance with the provisions of the financial agreement to the terms and conditions of the borrowing.

The Commonwealth is acting only as an intermediary in this loan, which will therefore involve no net call on Commonwealth's cash reserves. By acting as the borrower the Commonwealth has, however, made use of its own high credit standing overseas to obtain terms more favorable than the commission would have been able to secure had it arranged the borrowing directly.

I commend the bill to honorable members.

Debate (on motion by Mr. Crean) adjourned.

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