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Wednesday, 12 September 1973
Page: 846


Mr CREAN (Melbourne Ports) (Treasurer) - I move:

That the Bill be now read a second time.

This Bill seeks the approval of Parliament to the provision of contractual guarantees by the Australian Government for overseas borrowings by the Papua New Guinea Government in foreign currencies not exceeding the equivalent of $A24m in 1973-74. The proceeds of the loans will be used by the Papua New Guinea Government to finance public works and services. Legislation to authorise the borrowings has already been passed by the Papua New Guinea House of Assembly. Last financial year the Papua New Guinea Government made its first overseas borrowings on the international capital market. This borrowing, which was guaranteed by the Australian Government under legislation similar to that now before the House, was for an amount of 50 million Deutschemarks - $A14m - repayable over 15 years and it carried an interest rate of 6.75 per cent per annum.

The Parliament has also on a number of previous occasions approved similar contractual guarantees by the Australian Government in respect of loans to Papua New Guinea from the International Bank for Reconstruction and Development and the Asian Development Bank. All borrowings by the Papua New Guinea Government, of course, carry a statutory guarantee by the Australian Government by virtue of section 75a of the Papua New Guinea Act.

It is proposed that arrangements for the borrowings for which this Bill provides contractual guarantees will be concluded during the course of this financial year. Several loan possibilities on overseas markets are currently being investigated by the Fapua New Guinea Government. The form of guarantee that is customarily required in international capital markets is similar to those that have been given to the International Bank for Reconstruction and Development and to the Asian Development Bank in respect of borrowings by Papua New Guinea from those institutions. The borrower and the guarantor would also both be required to give customary undertakings to the effect that interest payments and repayment of the loan would be made without deduction for taxes and would also be free of exchange control restrictions. The Bill accordingly provides for such undertakings to be given.

The Bill is purposely couched in general terms in respect of the currencies and the precise forms of the proposed borrowings so as not to restrict the Papua New Guinea Government's choice as to the particular overseas market or markets in which it finally decides to arrange the loans.

In present circumstances, it is expected that the overall cost of the borrowings by the Papua New Guinea Government will be somewhat less than the cost of borrowing for comparable periods from institutional sources in Australia. The provision of contractual guarantees by the Australian Government will materially assist Papua New Guinea in negotiating favourable terms for the borrowings as well as enhancing it? status as a borrower on overseas capital markets after it becomes independent. I commend the Bill to honourable members.

Debate (on motion by Mi Peacock) adjourned.







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