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Thursday, 4 May 1961

Mr CREAN (Melbourne Ports) .- by leave - The Opposition expresses its great opposition to the stand that has been taken by the Government in connexion with this matter. Whilst it may be conceded that, in the event of temporary difficulties in our balance of payments situation there may be a case for recourse to the International Monetary Fund, we believe that Australia's balance of payments problem is of a more deep-rooted, permanent kind and arises from the internal activities of the Australian Government. In passing, I note that the Treasurer (Mr. Harold Holt) says himself that action is being taken at the moment not because of any real anxiety on the part of the Government that our first-line reserves will prove insufficient but because the normal seasonal trend of our overseas business will create extra calls on our reserves during the slacker part of the export season. If there were no real anxiety on the part of the Government, with our overseas funds still in the region of £ A .400,000,000, it is hard to understand why recourse should have been had to this fund.

It is hard to understand also why the 175 drawings that have been availed of are being taken out in a variety of currencies, in United States dollars, Canadian dollars, Deutsche marks, French francs, Italian lire, and Netherlands guilders, when the Treasurer says in the same sentence that all these currencies are readily convertible into any other currency.

Mr Harold Holt - The fund has a variety of currencies.

Mr CREAN - That is also true of the existing £400,000,000 reserves which we hold in sterling. That, too, can be converted into any of the currencies that have been drawn here. It would seem to me that there has been a different approach by the Treasurer in giving information to the Australian people, to that which he takes when giving information to the managers of the bank. I draw the Treasurer's attention to the document which he has asked us to consult and which is to be found in the library. It is the annual report of the International Monetary Fund for 1952. Appendix I. of that report, which relates to the use of the fund's resources and to repurchases, contains a statement by the then chairman which reads -

However, even at the outset I think it must be clear that access to the Fund should not be denied because a member is in difficulty. On the contrary, the task of the Fund is to help members that need temporary help and requests should be accepted from members that are in trouble in greater or lesser degree.

Mr Harold Holt - The thinking has moved on since then.

Mr CREAN - I am not arguing now about how the thinking has moved; I am merely quoting from a document that has been tabled. Attachment A to the Treasurer's speech is a letter dated 21st April, 1961, from the Secretary to the Treasury to Mr. Jacobsson, managing director of the International Monetary Fund, and reads in part -

We do hereby represent that the currencies are presently needed for making in such currencies payments which are consistent with the provisions of the Fund Agreement.

When honorable members consult, as they will have opportunity of doing when they get their copies of " Hansard " - I thank the Treasurer (Mr. Harold Holt) for his courtesy in letting us have a preview of the document - the memorandum which was submitted in association with this submission cataloguing the history of economic difficulties in Australia, it will be apparent that the responsibility for those difficulties must be laid at the door of the internal conduct of the Government of Australia. Page 1 of the memorandum draws attention to the deterioration in the balanceofpayments situation in Australia. It says -

Imports, which had been running at an annual rate of about £A900 million in the second half of 1959, rose to an annual rate of over £A1,100 million in July-December 1960.

Why did the rapid rise take place in the balance of payments situation and in the rise of imports from £900,000,000 to £1,110,000,000 between the end of 1959 and the July-December period of 1960? It flowed inevitably from the consequences of the removal of import controls by this Government in February, 1960. The memorandum continues -

Not only was there the normal rise in imports which was to be expected when output was rising rapidly, but, with many domestic producers unable to give early delivery,-

That is the local producers - purchases were turned to imported supplies even when those were dearer.

We in this country were told that the reason for the relaxation of import controls was that imports would be brought in which would be competitive with Australian industry, yet in this document we are told that imports have been made by Australian importers even when they were dearer. I think that goes to the very root of this problem. The deterioration that is taking place in our balance of payments stems in the first place from that decision of the Government. But the more interesting factors which are contained in this document, sent on 21st April, give indications of the future Budget policy of this Government in the next three or four months, which have not as yet been presented to this Australian Parliament. Again, I think that only serves to indicate once more that this Parliament is being treated with contempt by the Government of the day, because what is said in this document indicates that the Government intends to follow certain courses in the next few months.

I also ask honorable members to ponder on the validity of this statement, which was submitted in the memorandum -

The Australian Government wishes to promote the growth of the economy in an environment free from inflationary pressure and its general economic and financial policies will continue to be framed so as to maintain a balance between supply and demand.

Would any one suggest at the moment that the situation in the Australian economy is one of growth and that there is an antiinflationary circumstance in the community? We have the evil of unemployment associated still with inflationary tendencies and the reason for this is that the monetary and fiscal weapons which the Government is relying upon so far are inadequate to handle the problems in Australia. Those indirect instruments have to be buttressed by more selective and direct approaches. Yet, in the submission given to Mr. Jacobsson, the intention is to continue in Australia, and carry into the next Budget, which will be presented in August, with the sort of measures which have brought the economy of Australia to the position in which we find it. The memorandum also states -

In the field of fiscal policy the Government intends to make every effort to keep the growth of Government expenditure under restraint. It is envisaged that programmes for expenditure on development will be given a special bias towards expansion of exports.

Precisely what does that mean? The second proposition stated in this portion of the memorandum is -

Some action will be necessary in the June quarter of 1961-

We are now in that quarter - to assist the banks in meeting the severe seasonal pressures that will fall on them. Seasonal needs apart, however, the monetary authorities intend to keep a firm control over the liquidity position of the banks, with a view to limiting during the year ending June, 1962, the outstanding bank advances to a total that would be consistent with the maintenance of financial stability.

The monetary authorities, while having regard to the need for a reasonable degree of flexibility within the interest rates structure to meet changes in market conditions, do not .intend to take an\ action directed to a lowering of the general level of interest rates. It also remains the concern of the authorities as part of their overall responsibility for the control of credit to discourage, so far as lies within their power, any excessive flow of funds into financial institutions other than banks.

It is admitted that in some fields there is not the power so to act. The memorandum continues -

The Government has repeatedly stated and now re-affirms its intention not to re-impose restrictions on trade or current payments-

I ask honorable members to mark this - except in the event of a very serious balance of payments emergency necessitating a major shift in policy.

Finally, the memorandum states -

It is the view of the Australian authorities that, subject to what is said above as to changes in economic conditions, present policies, as indicated above, are adequate to restore domestic and external equilibrium in the near future. If further action were needed major reliance would be placed on fiscal and monetary measures.

I suggest that that is a gloomy forecast so far as the next few months in Australia are concerned - no relaxation of credit; the continuance of taxation on existing and possibly at higher levels and no attempt, if the balance of payments position continues to deteriorate, to grapple with the essential problem which is that too much imports are coming in, in terms of our export earnings, and coming in as this document suggests sometimes in such ways that they are dearer than what is available on the Australian market. This only shows, as we have said in this House over the last several months, that this Government is prepared to act by using monetary restraint and imposing taxation and allowing the wage earners to be the burden-bearers so far as its ills are concerned.

As I have said, there might be some case for a temporary borrowing if the circumstances were temporary; but all that the present action is doing is serving further to camouflage what has continued over the last five years so far as Australia's balance of payments situation is concerned. In the five years from 1955-56 to 1959-60- T take the figures from the November issue of the Reserve Bank of Australia's statistical bulletin - there was a deficiency in Australia's current accounts. That is .the difference between exports and imports, allowing for what we call " invisibles ". In those five years there was a deficiency of £755,000,000, and that deficiency was made up by direct investment in Australia, that is by foreigners digging into Australian industry to the extent of £450,000.000 and other borrowing, r.ot into new industry but flowing into old established Australian industry, at the level of £300,000,000. The net effect over that period appears to have been an increase of £80,000,000 in Australia's balance of payments.

As I have said, this camouflages very real difficulties which face the Australian economy at the moment. The central problem is our internal economy. The responsibility for this should be sheeted home to the responsible government. It is culpable for this deterioration. The Opposition considers that recourse should not have been had to borrowing from the International Monetary Fund. This course is being taken only because the Government is failing to face up to the economic realities of Australia in 1961. It is time that this position was clearly understood by the people of Australia. In conclusion, I say that it is to be regretted that more indication is given about Australia's future economic policy to a foreign organization than is given to the Australian Parliament.

Where is the economic survey, " Australia 1961 ", the corresponding issues of which have been made available to the Parliament in the last two or three years? Will it be brought in on Thursday night of next week, two hours before the House rises and too late for us to say anything about it? I suggest that it is time that the Government of Australia took the people into its confidence. That should not be done through surreptitious statements made in the press, at television interviews, or in the boardrooms of overseas banks. It should be done here, in the Parliament, so that the matter can be argued out here and the Government's sins pointed out to it. This is only a further indication of the errors of omission and commission of this Government.

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