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Tuesday, 9 May 1961

Mr PETERS (Scullin) .- I wish to speak about a matter that I think is of the gravest importance. The chief official of the Australian Treasury went abroad recently and made arrangements with the International Monetary Fund for a drawing of £78,000,000 and a stand-by credit of £45,000,000. No one can deny that that was a most important financial operation. The Treasurer (Mr. Harold Holt) made a statement on the arrangements to the House on Thursday, 27th April. The statement was on a matter of such importance that there is no doubt it was prepared with the assistance of senior Treasury officials. There was no reason to believe that it was not to be the only statement that was to be made to this Parliament or to the people of Australia. It was remarkable for the things that it did not reveal. It did not make clear that the drawing was a loan bearing a service fee and interest. The conditions of repayment were not announced. How. when and where Australia would secure the money to make repayment was not stated. It is hard to believe that neither the Treasurer nor his officers thought that the Parliament or the people would desire details of this important transaction. Apparently the attitude was: The less the Parliament and the people know about this matter, the better for the Government.

On that Thursday evening, during the adjournment debate, I suggested that further information was necessary. The next day, Mr. G. K.. Bain, Director of the Sydney Chamber of Manufactures, said the borrowing highlighted the serious imbalance in Australia's external trade. He called on the Treasurer to say when Australia could make repayments to the International Monetary Fund. He asked on what optimistic assessment of the country's balanceofpayments position the Treasurer based Australia's ability to repay. On the same day, the Federal Director of the Associated Chambers of Manufactures, said Australia would have a trading deficit this year of more than £400,000,000 and he added-

Finally, the question we must all ask is: how and when will Australia repay this short-term borrowing of £78,000,000?

Members of the Opposition generally demanded more information. Then last Thursday, the Treasurer elaborated his first statement. He repeated the statement that he had made previously that the Government had no real anxiety that this £78,000,000 was necessary. It was being drawn from the International Monetary Fund because - and these are his exact words -

The Government believes it only prudent to put quite beyond doubt the strength and liquidity of our overseas resources in the period ahead.

The £78,000,000 is being borrowed. A service charge of one-half per cent, is being paid upon it together with interest of some millions of pounds, cot because the money is likely to be needed but just to be on the safe side. Our credit with the rest of the world, so the Treasurer says, is better than ever before. Why then should we not wait until we need this money before we borrow or draw it, and thus save the service charge and the millions of pounds of interest that are being unnecessarily expended merely to be on the safe side? The drawing of this money that might not be needed does not merely commit Australia to the payment of immense sums of money; it also obliges this country to adopt economic policies laid down by the controllers of the International Monetary Fund. These include the continuation of the credit squeeze, the balancing of our budget, the nonimposition of import restrictions and the preven tion of rising, costs generally. Those conditions are specifically and definitely stated in the memorandum. What a position this is! With the credit squeeze restricting, the expansion of both primary and. secondary industries, how can work be assured for our increasing population and for the migrants coming here? Further, the provision of homes and public facilities may be restricted and the improvement in our social services prevented. That social services will not be improved is certainly implicit in the balancing of the Budget. All these conditions are to be imposed in order that we may be able to pay our overseas debts; yet the Treasurer has the audacity to tell the House that the willingness of the International Monetary Fund to enter into arrangements such :\s these with Australia is proof of the soundness of the Australian economy! The more I learn of the arrangements made with the International Monetary Fund, the more I appreciate why the Treasurer has endeavoured deliberately to keep the people in ignorance of these details.

Will the arrangements entered into by the Government contribute in any way to the re-establishment of the timber and textile industries or of any other industry that has been damaged by either the credit squeeze or the flood of imports? Certainly not! Will they so develop any of our secondary industries as to make them big exporters? Certainly not! Will they do anything to enable Australia, in the near future, so to increase primary production that the total export income earned from this source will exceed what we have enjoyed hitherto? Again, the answer must be " No ". With the continuation of the credit squeeze no one but a lunatic would prophesy that, during the five-year period of this £78,000,000 loan, our exports will return to us hundreds of millions of pounds more each year than they do now. And that is what is necessary if the position is to be remedied. Even the Treasurer admitted, at the export convention that was held in Canberra a short time ago, that within five years we must increase our total export income by £250,000,000. If it does not increase by that figure, the only way by which we shall be able to pay our way will be to obtain more loans. When we seek those loans, will our creditors say: " You must balance your budget. You must not interfere with imports. You must prevent increases in wages, and you must prevent social services from becoming more costly " ? No, the terms imposed will be much harsher than that. They will resemble those imposed by Niemeyer and Professor Gregory who, during the depression period, visited Australia on behalf of the big financial institutions, and said that the Australian economy must be so moulded as to ensure first the payment of our overseas debt and, secondly, the safeguarding of the interests of the people. The first requirement was repayment of the overseas debt. lt is reported that the Commonwealth Government is looking around overseas for loans in London, New York and elsewhere, and that Australian State governments are endeavouring to secure the investment of overseas capital in Australia. If they succeed, our position will be alleviated temporarily, but only at the cost of greater difficulties in the future, and the not too distant future at that. What, then, should we do? The Treasurer said to-day that no reference had been made to the previous history of this Government, that no reference ihad been made to what he called the glorious period of the last eleven years. I have said before in this House that the complaint from whichthis country suffers is overspending overseas. I repeat that assertion now, andsupportit by referring to the story which is to be gleaned from a perusal of the official national income and expenditure papers presented to Parliament with the Budgets from 1952 up to the present time. Each year those documents have contained a Table V. headed, "Balance of International Payments on Current Account". Until 1957, the last item under that heading was, "Net increase in indebtedness to the rest of the world ". In 1957, its name was changed to " Surplus on Current Account ". There was a surplus as at 30th June, . 1957, but every year since then there has been a deficit on overseas trading, yet the item concontinuesto be, " Surplus on current account ". The heading, " Net increase in indebtedness to the rest of the world ", is a clear description of what is covered. " Surplus on current account " is not. That beingso,I shall use : theterm, " Net increase in indebtedness to the rest of the world ". In 1951-52, the net increase in indebtedness to the rest of the world was £579,000,000.

In 1953-54, it was £17,000,000. In In . 1954-55, it jumped to £259,000,000. By 1955-56, it was £238,000,000 and in 1957- 58, it dropped to £177,000,000. In 1958- 59, it increased to £187,000,000, and by 1959-60, it was £243,000,000. The total increase in indebtedness to the rest of the world for the years mentioned was £1,710,000,000. The only two years in which there were reductions in our overseas indebtedness were 1952-53, when the figure was £192,000,000, and 1956-57, when it was £90,000,000. The net total increase in indebtedness to the rest of the world in the period from 1951 to 1960 was £1,418,000,000 and, by 30th June, 1.961, that figure will be increased by well over £400,000,000. Thisfurther increase of £400,000,00.0 in our overseas indebtedness will not increase our capacity to meet our obligations overseas any more than did the increase of £579,000,000 in our indebtedness in 1951-52, nor will it increase our capacity any more than did the increases in any of the years that went to make the total of £1,418,000,000 up to 1960. The further increase of £400,000,000 in our overseas indebtedness will not lead to such an increase in Australian production as will make us any better able to meet our overseas indebtedness than we were before the additional liability was incurred. Therefore, I ask the New South Wales director and the federal director of the Chamber of Manufactures how we shall repay thatnew shortterm debt and all our other overseas debts. They can be repaid in two ways. First, we canreduce our spending overseas. The longer that we delay the reduction, the greater the reduction must become. That is obvious. Secondly, we can obtain new loans to pay off the old loans. The International Monetary Fund, when granting theloan of £78,000,000, laid down conditions that mean : a curtailment of our right to self-government.

Some time ago the Minister for Trade (Mr. McEwen) pointed out to the House that at least £600,000,000 worth of imports a year was essential for the maintenance of the industries that then existed and,of course, the preservation of the employment that those industries provided. He stated also that if that amount of imports was reduced there would be a corresponding reduction in industrial activity and an increase in unemployment. In other words, £600,000,000 worth of imports each year is necessary to provide employment. In 1960 our commitments overseas, in addition to our imports, amounted to £423,000,000. This amount represents invisibles such as freight, insurance, interest on loans, dividends and numerous other small items. Therefore, we must expend at least £1,000,000,000 every year to secure the absolute bare essentials for the maintenance of our industries. But our industries continue to expand and children leaving school and immigrants from other countries continue to seek employment, so the amount of our imports and the cost of invisibles continue to rise. The Treasurer faced up to this issue when speaking at the export convention which was held recently. He stated that within the next five years we must increase our exports by £250,000,000 annually.

It should be crystal clear to every one that, no matter what the International Monetary Fund authorities state, we cannot afford non-essential imports. We cannot afford a loan that has a condition providing for the free flow of such imports into Australia. What then should Australia do to prevent international bankruptcy? We should apply selective import restrictions. The Minister for Trade, by means of the Japanese Trade Agreement, has reduced our favorable trade balance with that country. He should arrange immediately to reduce the unfavorable trade balances that we have with the United States of America, the United Kingdom and other countries. Instead of reducing our favorable trade balance with Japan and saying, in effect, that although we are selling less to Japan than Japan is selling to us we shall nevertheless increase our imports from that country, we should say to those countries that are purchasing less from us than we are purchasing from them that unless they increase their imports from us we shall reduce our imports from them. We should do as Japan has done. We should submit investment money from overseas to a very close scrutiny and ensure that only so much overseas investment comes to Australia as is necessary for our development. We should not allow overseas investment which will be used to create competition for, and eventu ally to destroy, our existing industries merely for the sake of paying dividends to overseas investors. If there is to be any credit squeeze or direction of investments, it should be such as will provide for a channelling into primary production, home building and other industries of the monetary resources that we have in Australia. It should not be available for use in land and business speculation and for providing immensely high interest rates for hire-purchase organizations and higher dividends for investors who do not assist our real development in any way.

I regret to say that we must take stock temporarily of our immigration policy to prevent immigration adding to or causing unemployment. Taxation should be levied at a higher rate than at present on income derived from speculation, dividends and profits rather than on income derived from personal exertion.

These are some of the means by which our industries and our employment opportunities can be expanded to meet the needs of our increasing population and to maintain our solvency overseas. It is no exaggeration to say that this Government's policies have led to insolvency abroad and economic disaster at home. During the speech of the honorable member for Melbourne Ports (Mr. Crean) I heard interjections to the effect that he had said all these things before. Yes, we have said them before.

Mr Anderson - Year after year.

Mr PETERS - We have said them year after year. In 1950 I asked the Prime Minister (Mr. Menzies) whether it was not desirable, at a time when our export prices were higher than ever before and when our exports were greater in quantity than ever before, to protect and build up our overseas reserves rather than to dissipate them on the import of non-essential and luxury items. Through the years we have claimed that a period of prosperity is when a nation should become a creditor rather than a debtor nation. When a country has record crops and receives record prices it should not borrow overseas any money other than that which can be used to provide in this country the products that can be sold overseas to meet the instalments on the loan. Overseas borrowings are justified only if they produce something over and above the dividends that must be paid to the investors. When the value of the production resulting from funds raised by overseas loans is less than the cost of servicing the repayments of and interest on the loans, the borrowers are guilty of actions detrimental to the interests of Australia.

I issue a warning. I do not hesitate to say, although people may call me a Jeremiah, that this Government has continually trodden the road that leads to disaster, and disaster is now not nearly so far away as it was in the days when we who belong to the Australian Labour Party first raised this subject in this House. Disaster faces us because we resort to borrowing money in order to pay debts and interest on those debts instead of borrowing to buy goods and to produce wealth. Squandering or dissipating borrowed money on luxury goods is bad enough, but we are borrowing money in order to pay interest on and instalments of repayments of money that has already been frittered away.

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