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Thursday, 1 June 1972
Page: 2489

Senator Dame NANCY BUTTFIELD (SOUTH AUSTRALIA) asked the Minister representing the

Treasurer, upon notice:

(1)   Is the present international currency situation of vital importance to the Australian people; if so, what fields of Australian endeavour are most affected by it.

(2)   Are press articles about floating of the yen and devaluation difficult for the average person to understand.

(3)   Is the headline in "The Australian Financial Review' of 30th November 1971, stating that a currency crisis is near, a clear and comprehensible indication of the immediate situation; if so, will the Treasurer explain in equally plain language what the currency crisis is all about.

Senator Sir KENNETH ANDERSON (New South Wales) (Minister for Health) The Acting Treasurer has provided the following answer to the honourable senator's question:

(1)   As the Prime Minister announced on 22nd December 1971, the Government has decided to maintain the existing gold parity of the Australian dollar and, at the same time, to set the market rate for the Australian dollar on the United States dollar close to the bottom of the permissible per cent range about par.

This decision followed an agreement reached by member countries of the Group of Ten to realign their exchange rates. A number of these countries, notably Japan and West Germany, revalued their currencies upwards against previous parities while others, including Britain, retained their previous parities against gold. The United States dollar has been effectively devalued by 7.89 per cent against its previous gold parity. Based on current market rates, the change in Australia's effective exchange rate against the rest of the world, calculated by averaging changes in the rates of our principal trading partners weighted by the value of our transactions in goods and services with them, has depreciated slightly from its position early in the current financial year. In these circumstances, it is not expected that the currency realignment will have a significant impact on Australia's overall balance of payments performance or on the domestic economy as a whole. The Government recognised that some industries might be adversely affected by its decision, but taking all factors into account it considered the interests of the nation as a whole at the time would best be served by the action it took.

(2)   That would depend in part on the quality of the article in question.

(3)   The headline in question referred to the possibility of a resolution of the international monetary situation in the then near future. Up to that time I had made several statements on the international monetary situation. In particular, I made a statement on 28th October 1971, which I believe was a reasonably clear account of this complex subject, and which was tabled in the Senate on 3rd November.

In this period our immediate concern was that continuing uncertainty over the future exchange rates could have harmful effects on world trade and economic activity. The major currency realignment, involving a return to stable currency relationships, which followed the Group of Ten meeting in December 1971 has done a good deal to remove this threat. In particular. It has resulted in the cancellation of the United States import surcharge. The Government's decision on the exchange rate of the Australian dollar was announced by the Prime Minister in his statement on 22nd December 1971. In the longer term, the question of reform of the international monetary system will command our close attention.

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