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Wednesday, 8 December 1976

Mr LYNCH (FLINDERS, VICTORIA) (Treasurer) -The decision that was taken yesterday on the advice of the Government's technical committee on movements in Australia's exchange rate was certainly not a panic decision. The movement in the exchange rate should not have come as a shock in any sense. People who perceive that decision as a shock fail to digest the implications of the statement that was put down on 28 November. As honourable members should recall, I emphasised then-I emphasise it again- that the exchange rate system would be administered more flexibly so as to avoid major shifts in the exchange rate. In this sense there necessarily will be a period of adjustment in which to learn to live with the revised basis. Obviously that process will take time. Most industrialised countries have lived with comparable systems over a period of many years. So far as Australia is concerned, we already have gained considerable experience since we adopted the trade-weighted system in September 1974.

Exchange rate movements do net have to be costly to the trader. As is well known, the risks of exchange rate changes can be minimised by using forward cover facilities that are available through the banking system. In that sense I emphasise to the honourable gentleman that the flexibility of the system ought to be understood and comprehended, even if that understanding or comprehension will take a little time, throughout the general community. There was no sense of alarm about capital moving into the country. I do not disclose the figures here, for the reasons I mentioned yesterday in response to a question asked by, I think, the Deputy Leader of the Opposition. In responding to that question, as honourable members will recall, I made it perfectly clear that the Government's arms of policy are available to monitor and control the situation as appropriate.

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