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4 Treasury Place, Melbourne, Friday 26 December 1997, 12 noon: transcript of doorstop interview [Australia's financial assistance to Korea]


TREASURER: ...(inaudible)... some further measures which have been announced by the Korean government to accelerate economic change and financial stability in Korea. The developed nations of the world including Australia have announced that they will be disbursing funds to aid the situation in Korea some time by the end of this year. It will be an extra $US8 billion of funds from countries including the United States, Japan and Australia which has made available $US 1 billion will be disbursing its share which is about a third of that. The money will be disbursed ...(inaudible) .... other countries, the International Monetary Fund and the World Bank to secure the financial situation in Korea and to help stabilise the situation there.

The money which Australia has undertaken to advance will be made available by way of loan, the loan will bear interest and the loan will be repaid once the Korean authorities have stabilised the situation in Korea. Australia is making this loan as part of an international effort because it is in our interests to stabilise the situation in Korea. Korea is a very important trading partner for Australia and to stabilise the financial situation and try and put Korea back on the path to stability and growth is very much in the interests of our exports and in the interests of the Australian economy.

JOURNALIST: Until now Treasurer, has the situation in Korea been underestimated by the other countries in the region?

TREASURER: Well look, the situation in Korea is serious, very serious. We have a situation where the government will have to deal with numbers of financial institutions which are shaky, a number of merchant banks which have already been closed, a situation where the currency has deteriorated sharply and a situation where international confidence has been affected. This is the largest bailout in world history led by the International Monetary Fund. We're looking at a fund now of up around $US60 billion and the developed countries of the world including Australia are making a second tier of finance available, finance in addition to the finance being made available from the International Monetary Fund and the World Bank. We're doing that in Australia because it is in our interests to secure the situation in Korea, an important trading partner for Australia. We will be making a loan, interest will be payable on that loan, but in return the Korean authorities will be undergoing very substantive restructuring designed to get their economy back on substantial growth.

JOURNALIST: In relation to the economy of South Korea how worried should Australian business people be about the situation?

TREASURER: Well, for Australian exporters who are exporting to Korea, as the economic growth comes off you would expect there will be less demand for some Australian exports. For some Australian exporters once the Korean economy continues production there will be opportunities. They will be the opportunities which will be created by cheaper Korean exports in the future. It won't all be one way, there will be adjustments both ways but on the whole, a downturn in Korea, and it's a very severe downturn in Korea, will have an effect on the Australian economy and will make it harder for our exporters in the future year. Now, for that reason, the Government is making this loan available along with the United States, Japan, the UK, France, Germany - all of the major industrial countries of the world - to try and secure the situation in Korea.

JOURNALIST: How likely is it, is it going to need a stabilising, it's been plummeting out of control...

TREASURER: Well look, this package was announced some time ago. There has been a drawdown by the IMF and the World Bank. This is the first draw down of the second tier of finance from the developed countries of the world including Australia. In return however, the Koreans have acknowledged that very substantial structural reform will have to be undergone. Now that's in relation to interest rate policy, in relation to exchange rates, in relation to opening up and liberalising their economy. These are going to have to be massive changes in Korea and there will be very substantial hardship in some quarters as a consequence of them. But if they can accomplish the changes and return their economy to stability its got long term growth potential and long term growth potential is good for Australia.

JOURNALIST: (inaudible)

TREASURER: Well the program which has been negotiated with the International Monetary Fund, the World Bank and the developed countries of the world is a very substantive program and all of those countries and the international organisations will be making sure that the program continues. These loans are being made available to put in place a program and further disbursements of the loans is conditional on the Korean authorities continuing to implement the restructuring which is required.

JOURNALIST: What would it mean for South Korea if these ...had not been put in place by the rest of the world?

TREASURER: Well look, the situation in Korea is very serious and that's why the international organisations and the developed countries of the world have taken these steps. This is their best chance and this is the largest package which has ever been put together and as a consequence I think we can have the assurance that what can be done is being done both by the Koreans and by the international community and as long as that program continues, the prospects of restructuring that economy will continue.

JOURNALIST: Are things that more serious than was first thought?

TREASURER: Things in Korea are serious, there's no doubt about that. There are real financial problems in that country and a measure of the seriousness of the situation is the seriousness of the response. This is the largest financial package which has ever been put together which is now being made available for Korea. It's not just the International Monetary Fund, it's the World Bank, the Asian Development Bank, the United States, Japan, France, Germany, the UK, ourselves - the major economies of the world are all bearing their fair share and Korea is engaging in its responsibilities, and if Korea continues with that program that is its best option during the situation.

JOURNALIST: What is Australia's total contribution?

TREASURER: Australia's total contribution is $US1 billion and this has been made available as a loan. It's the first part of that which has been drawn down now and subsequent parts will be drawn down as the program continues in Korea. Thanks very much.

JOURNALIST: (inaudible)

TREASURER: The total package is around $US60 billion, that includes about $US35 billion from international organisations and about $US23 billion from bilateral contributions from developed countries.

JOURNALIST: (inaudible)

TREASURER: Well Australia has announced it will be contributing up to $US1 billion. That's second tier finance.

JOURNALIST: (inaudible)

TREASURER:'s a significant player. The developed countries of the world are all making loans and we are one of the developed countries of the world which is making its contribution.