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Tuesday, 30 March 1965

Senator HENTY (Tasmania) (Minister for Civil Aviation) . - by leave - Mr. Deputy President, I wish to make a statement relating to a drawing by India from the International Monetary Fund, which took place yesterday. I should explain that for the first time Australian currency is being used in such a transaction and this, I feel, makes it a matter of some historical importance and of particular interest to the Senate. More precisely, Australia has made available to the International Monetary Fund Australian currency to the extent of £5.6 million - equivalent to 12.5 million dollars - as part of a drawing from the Fund by India of 100 million dollars in various currencies to assist it to meet balance of payment difficulties. This transaction has taken place under a stand-by credit agreed earlier this month between India and the Fund under which India would be able to draw up to 200 million dollars from the Fund in the next twelve months if this proves to be necessary. The Australian Government has already made known to the Fund and to the Indian authorities its willingness to make a further £5.6 million available should a further drawing be requested by India at a later stage.

I should explain to honorable senators that although we have made this amount of £5.6 million available to the Fund in the first instance in our own currency, the transaction will entail a reduction by an equal amount in our overseas funds, i.e., in our " first line " reserves. When countries draw a package of currencies from the fund they usually convert those currencies into the currency or currencies in which they normally hold their reserves. We adopted that course in respect of our own drawings from the Fund and India proposes to adopt the same practice and convert the Australian pounds into sterling. Accordingly, the Reserve Bank is transferring an equivalent amount of sterling to India in exchange for the Australian currency which India has received from the Fund. At the same time, by making our currency available in this fashion, we also receive an equivalent increase in our own drawing rights in the Fund. In effect, therefore, the transaction represents a transfer from our " first line " reserves to the " second line " reserves which we hold in the Fund.

On more than one occasion when Australia has encountered temporary balance of payments difficulties, we have drawn other members' currencies from the Fund - the last occasion being in 1961, when we made a drawing of £78 million. As I have already indicated, we have not hitherto made our own currency available to the Fund for drawings by other members. In selecting the currencies to be used in drawings, the Fund does not seek assistance from a member unless that member's balance of payments and reserves position is reasonably strong. Indeed, for many years after World War II, drawings from the Fund were made almost exclusively in United States dollars. In more recent years, however, the Fund has drawn extensively on the currencies of European countries - including smaller countries such as Spain and Sweden - and it has also drawn on the currencies of Japan and Canada. Naturally, it strengthens the Fund's ability to provide assistance to members if as many countries as possible make their currencies available for this purpose, and we" are very happy to meet the request which the Fund has made to us on this occasion.

I am sure that honorable senators will share my pleasure that, in our first venture into this field of international monetary cooperation, the country which is receiving assistance is India, a fellow member of the Commonwealth. It will be recalled that we recently made a gift to India of wheat valued at £3.75 million. Of course, had the Fund request been related to a drawing by some other country we would have wished to assist to the best of our ability, but we are very glad indeed that the country that is making this first drawing of our currency happens in fact to be India.

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