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Thursday, 9 December 1971
Page: 4386

Mr WHITTORN (BALACLAVA, VICTORIA) - J address my question to the Treasurer. In view of the Treasurer's contribution to the debate on the motion of no confidence last week when he said that the bulk of capital inflow this year was for loans to commercial enterprises in Australia I now ask whether Australian companies, either locally owned or substantially owned overseas, have been borrowing overseas in recent years simply because interest rates in Australia are too high?

Mr SNEDDEN - I do. .not think it is .' simply because of high interest rates in Australia. In reality interest rates in Aust tralia fit about in the middle of the interest rate spectrum of all countries in. the world. Very considerable differences in interest rates are found in other countries between the short-term market and the long-term market. There is a very much bigger difference between the low and high rates in other countries than there ls in Australia where interest rates tend to 'be in a closer band. But the' level of interest rates may well have been one of the" factors. For instance the interest rate in /Switzerland is quite low although access to that market is not easy. But inquiries.' .1 have made show' that' it is difficult to obtain money from overseas at a more advantageous interest rate than it can be obtained in Australia. The reason for the. borrowings overseas nas' been that there has been a . . greater demand for finance for development projects than we generate ourselves in Australia. The reason : for that is, of course, our rapid rate of growth. I think one of the major, reasons for the increase in borrowings was that there has developed over the last 2 or 3 years a , very marked improvement in the sophistication of the merchant banking area which has been able to make contacts with, overseas sources of capital, put the capital together and make it available to projects in Australia which, prior to that event, just did not have the expertise to use or the entrance into those overseas capital markets. They have now managed to achieve that and that is one of the major reasons for the inflow.

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