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Friday, 5 June 1970

Mr BURY (Wentworth) (Treasurer) - I move:

That the Bill be now read a second time.

It was estimated in the 1969-70 Budget that the Commonwealth would have a deficit amounting to $30m in the current financial year. At the time the Budget was introduced, it seemed probable that the amounts available from loan raisings in Australia and overseas and other financing transactions, which had amounted to $5 12m in 1968-69, would be more than sufficient to finance this estimated deficit.

In statement No. 4 attached to the Budget Speech, it was explained that prospects for raising loans overseas seemed poorer than in 1968-69 and that prospects for net loan proceeds in Australia were affected by the fact that redemptions would probably be substantially greater than in 1968-69. At the same time, it was pointed out that it was not possible to estimate in advance with any degree of assurance net loan proceeds or the change in the Treasury note issue, as this would be affected by developments during the course of the year. In the event, it is now clear that net loan raisings overseas will be a great deal less than last year and that, as a result of the high level of redemptions, so too will be net loan proceeds in Australia. In addition, largely as a result of monetary conditions, it seems likely that there will be a substantial decline in the Treasury note issue.

Although, on present indications, it appears that the deficit will be close to the Budget estimate, there is a possibility that the amount available from loan raisings and other financing transactions will not be sufficient to finance the deficit. The purpose of this Bill, which is in the nature of a precautionary measure, is to obtain authority to borrow from the Reserve Bank the amount required to complete the financing of the deficit in 1969-70, if this proves to be necessary, and to expend the proceeds of the borrowing for defence purposes.

The amount to be borrowed from the Reserve Bank is, of course, a residual. It is the net result of all receipts, expenditures, borrowings and redemptions under other legislation approved by Parliament. Even at this late stage of the financial year, therefore, with large amounts of revenue still to be collected and expenditures still to be incurred and with fluctuations still possible in the volume of Treasury notes on issue, it is not possible to forecast with precision the amount which it may be necessary to borrow from the Reserve Bank to complete the financing of the deficit. Consequently, this Bill follows the practice introduced in 1968 under which no specific upper limit is set to the amount which might be borrowed under the legislation. Instead the Bill seeks authority to borrow such sums as the Treasurer considers to be the likely maximum amount necessary to complete the financing of the deficit.

The borrowings for which authority is now sought will be made for defence purposes, and the proceeds of the borrowings will be applied to finance expenditure from the loan fund on defence services. The Bill is essentially a machinery measure to enable the Government to carry out policies approved under the various Acts authorising expenditure, the raising of revenue and financing transactions. In itself, the Bill does not authorise expenditures which have not already been authorised by Parliament. It provides for expenditure on defence services, which has already been authorised by Parliament in the Appropriation Acts, to be charged to the Loan Fund instead of to the Consolidated Revenue Fund. Provision for charging part of our Defence expenditure to the Loan Fund has been made in previous years when the net amount available from loan proceeds and other financing transactions has not been adequate to finance the deficit. I commend the Bill to honourable members.

Debate (on motion by Mr Crean) adjourned.

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