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Thursday, 14 May 1970

Dr J F CAIRNS (LALOR, VICTORIA) - The honourable member will be able to read it in Hansard in the morning. He has my assurance that it is a table prepared recently by Sir John Crawford, but it is one that any person qualified in national income accounts and in statistics could prepare. What emerges from an examination of this table is that our imports and exports of material goods since 1948-49 have not behaved in a very unfavourable way. There have been years when our imports did not reach the level of our exports. There have been years when our exports of material goods exceeded our imports. But if honourable members examine the table, as I hope they will tomorrow, they will see 2 columns of imports and exports that do not diverge in any material sense or in any sense that would create any significant economic problem. They will then see, however, that there is a serious economic problem in our balance of payments. This is revealed by our almost continuous and serious deficit on current account. I think in only 3 years since 1948-49 have we not had a deficit on current account. This will be shown in the table.

The net result is that in every year since 1948-49 we have had a deficit of invisibles.

That deficit of invisibles - that increasing debt - that increasing obligation to pay out more than we are earning - is made up of invisibles of freight, insurance, banking charges, interest on loans, dividends and so on. From a surplus of $62m in 1948-49 - one of the few years in which there was a surplus - we have gone to a deficit of $1.0 14m in 1968-69. This increasing deficit has been made up only because we have been able to borrow against or sell Austraiian assets: only because we have a net apparent capital inflow each year which coincides with the balance of invisibles, lt would be useful to have incorporated in Hansard a diagram such as the one I have in my hand. From it we can see how the net capital inflow - a positive factor - rises through the years when the deficit on current accounts declines through the years. One tends to offset the other. Our problem is: How can we escape a little from the indebtedness on current account that this situation represents? Our only way of doing it so far has been by capital inflow. The total of capital inflow has risen from $270m in 1948-49 to $1,1 68m in 1968-69.

There are those who say that this is not a very serious matter because capital inflow has not risen disproportionately to gross national product, that it has not risen disproportionately to our capacity to meet the costs of this capital inflow. But it seems to me that we still need to note very carefully something which the Vernon Committee warned about. If we compare the volume of capital inflow with the volume of exports - and roughly speaking, it is only through exports that we are able to pay the costs of capital investment - we find that the greater it is the greater is the volume of capital inside Australia on which we have to pay. lt is not just a matter of the annual increment to that volume; it is the fact that every annual increment increases the volume of capital inside Australia and increases correspondingly the outflow for servicing that capital.

If in Sir John Crawford's table we can compare the net capital inflow with our earnings from exports, we find that in the 5 years from 1948-49 to 1952-53 net capital inflow represented only about 12% or 13% of our exports. In the period from 1956-57 to 1960-61, for instance, it repre sented 22% to 23% of our exports, and in the period from 1964-65 to 1968-69 it represented 30% to 40% of our exports. I took those three 5-year periods so as not to pick out any particular year which would give a less genuine comparison. The fact is that the inflow is growing in relation to our capacity to pay for it. Not only do we depend more on the money of other people; we depend more on their money as the years go by. Surely this is a matter that ought to cause men who enter this Parliament from business circles to hesitate, because it seems to me to be a normal business practice that the more you develop the less you should depend upon the money of other people. The more success you have in your own business the less you ought to be dependent on other people.

My argument is that if we have had success in running the business of the Commonwealth of Australia - we have had a lot of success in that respect although rauch of it has been quite unattributable to the Government - then we ought to be becoming less dependent on the money of other people. I think the statistics show that we are becoming more dependent on other people's money. Therefore the views expressed by the Minister for Trade and Industry in his speech can, I think, be strengthened and reinforced. The problem can be stated to be greater than he said. In my view he did not exaggerate anywhere.

There are all sorts of fantastic views about what might happen in the future, and J hope those views are right. The Minister in the Western Australian Government who is supposed to be responsible, from a public point of view, for development said recently that in 1980 the value of exports from Pilbara alone would exceed the value of the Australian wool clip. That might be ail right. I hope that forecast comes true. But if this is so the requirement of the Australian economy for imports will rise even more rapidly if the events of the last 20 years are repeated. And why should they not be repeated? With full employment, with people with money lo buy all the bits and pieces and odds and ends of an affluent society, of course it is going to rise even more rapidly in the future than it has in the last 20 years. It is not good enough to think in terms of this new mineral euphoria and to leave everything to the sort of free enterprise we have experienced in the past.

The next thing to look at is our reserves. If we have to face some kind of crisis then what sort Qf reserves do we have? In the table I have presented there is a column for the level of international reserves. The reserves can be defined sometimes a little higher than this, but there has sometimes been rather a tendency on the part of Treasurers, not only the former Treasurer who is now Minister for External Affairs (Mr McMahon) but even his predecessor in that office, to define our reserves a little optimistically and to assume that we could readily draw on reserves that we could readily draw on only in very good times. If we need our reserves then the times arc not good. The very fact that a country needs its reserves means that times are not good. To my mind there has been too much optimism from the gentleman who is now Minister for External Affairs and even his predecessor about this aspect. If we have regard to the reserve to which we have a right, and which we can get despite the say-so of any man, then the position is not so favourable.

If honourable members look at the table I have presented they can compare the level of international reserves with the level of imports. These two things are significant. It is through buying imports that we create a situation in which we might have to draw on our reserves. If we compare the level of imports with tha level of reserves we find that the situation has been moving very much against us. In the early period of this table, soon after World War II, we may have had an excess of reserves. They were about 90% of our import requirements in 1 year. They continued to be 90%, 80% or 75% for a long period. We were then and for some time in the hands of quite conservative Treasurers. The right honourable gentleman who then led the Australian Labor Party was a conservative Treasurer and the tradition that he helped to establish in the Treasury was conservative for some time. Our reserves in those days were about 90% to 75%; but reserves today are about 40% or less than 40% of our requirement for 1 year's imports.

Mr Jeff Bate - About 4 months.

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